Economic effects of the urbanization process in china

Abstract

Objective: The aim of the paper is to present and combine selected aspects of China's economic development: The agricultural reform, the household registration system, internal migration, and urbanization. Its further objective is to test the hypothesis that urbanization positively influences the economic growth in China whereas the hukou system has a negative impact on growth. Research Design & Methods: The main method chosen for verification of the hypothesis is the critical analysis of existing literature of the topic. Some basic statistical analysis is also used. The relationship between variables is tentatively explored with correlation analysis. Findings: The hypothesis positing the beneficial influence of the urbanization process on economic growth in China may be verified positively. This occurs through the increase of productivity in the rural areas, the increase of the internal demand, and the utilization of labour surpluses. The hypothesis positing the negative effects of the hukou system on the economic growth can also be confirmed. Through limiting the free flow of migration, the hukou system lowers the pace of modernization and efficiency of the agricultural sector and also decreases the quality of the human capital by depriving people of social care. Implications & Recommendations: The urbanization process requires a fair amount of control and planning if it is to be considered one of the most important factors in Chinese economic growth. A reform of the hukou system is also crucial. Naturally, further research is needed. The suggested fields of analysis are as follows: The restraints of the continuous rapid economic growth in China, the relation between the accelerating urbanization and the income level, and the regional income disparity. Contribution & Value Added: The paper adds to the literature by combining concepts and presenting them as one multidimensional problem.