What's China's True Urbanization Rate?

Probably lower than what the statisticians say!

This is a repost of a Twitter thread from 14 Feburary 2024. It has been edited lightly for long-essay format, with a few minor wording changes.

If you ever get out of the big cities in China, you've surely passed through a Town, (镇) i.e., an administrative center of a rural area. Towns are a specific administrative unit falling between Villages and Counties, equivalent to Sub-Districts in cities.

A Town in Hubei Province near sunset

Towns are hubs for the nearby villages, so they'll have their own hospital, middle school, police station, shops, etc. They’re big enough to have their name on highway exits, but usually have only between 20k and 100k people. If you need a refresher on China’s administrative units, check my essay on the topic here:

With regard to the urbanization discusison, the key thing to know about Towns is that they are generally classified as “urbanized” in China, so their residents will count towards the national statistics of "urbanized" citizens. The standard here for determining “non-urbanized” is quite lenient, mostly focusing on the percentage of citizens within a certain unit engaged in agriculture.

Sanlifan Town in Hubei

As a result of this loose standard for urbanization, some fairly rural Towns may have a large percentage of their administrative population area deemed "urbanized".

But.

Clearly many Towns are far from what we might be commonly thinking when we describe an "urbanized" community.

The town marker for Sanlifan Town

If I told you: "As of 2024, China is 66% urbanized", are you thinking of places like the image above?

Or are you thinking about places like...Hangzhou? (image below)

So it's useful - or even necessary - to differentiate between high-quality urbanization and low-quality urbanization.

Hangzhou has an urbanization rate of 84%

This is particularly relevant when we consider Chinese urban centers that now see huge surpluses of unsold residential housing units. The untapped demand for housing in urban areas is not just non-urbanized citizens “moving to the city,” but also citizens currently already categorized as urbanized getting an upgrade to higher-quality urbanization.

Near-empty apartment towers in Hubei

Okay, let's make this less abstract. I took all these pictures recently in eastern Hubei. These Towns are all within the administrative area of Huanggang City, a mid-sized prefecture-level city on the north bank of the Yangtze River, slightly downstream and east of Wuhan.

Huanggang is a Frankenstein's monster of an prefecture-level city created in 1995 by chunking together a bunch of nearby cities and counties (some of them carved off from other cities and provinces) and designating a new seat of government (Huangzhou District).

According to the last census, Huanggang's total administrative population is 5.8M people, but that's super misleading. The "downtown" (Huangzhou District) has only about 500k people. The full administrative area of Huanggang stretches 100km north, east, and south of Huangzhou, with long streches of fully rural areas between the population centers.

Huanggang’s administrative structure

According to recent census data, Huanggang's overall urbanization rate is just 50% (lower than the national average of 66%). So, that means at least 2.9M rural residents. But knowing what we know about Huanggang's administrative makeup, we should surmise its "high-quality urbanization rate" is much lower than that.

Huangzhou District:

So...the place I visited recently was in Luotian County, a solid 60km from downtown (the lime green county in the map above).

Unsurprisingly, the citizens of Luotian County have little affinity for their far-off government seat created just a few decades ago. They’re technically part of Huangang City, but their ancestral identity is obviously going to be for Luotian County.

Fields in Luotian County

I drove to Luotian to try a local specialty cuisine (maybe I’ll do a separate essay about that) but also to explore. Along the way, I drove through several Towns. According to the census data, the Towns I saw are considered mostly urbanized, and so their populations are counted as such.

Downtown, basically

But surely most would agree that this is a relatively low level of urbanization. I think most Chinese would even still call this the "countryside". And it is.

This dusty one-streeter is Dandian Town. There's plenty of room for Dandian Town residents to upgrade to a higher level of urbanization, right?

Dandian town in late afternoon

But let's be serious: no property developer would build new residential housing in Dandian. No one is trying to move to Dandian, except maybe from the surrounding rural villages. If Dandian residents want an upgrade to a higher-quality urbanization level, they need to move out to find it.

This means moving to either the county seat of Luotian County (30km east of Dandian) or (even better) to the prefecture seat of Huanggang City (in Huangzhou District, about 60 km west of Dandian).

These are the places likely to be within budget for someone from Dandian Town. No relocation to Wuhan. No new beginnings in Shenzhen. A local relocation.

This pipeline is probably the most typical urbanization model for Chinese people living in low-quality urbanized areas like Dandian. Unless they strike it rich with a business venture or something, they can't even afford to go buy in Wuhan. So they'll upgrade by moving to downtown Huanggang (i.e., Huangzhou District).

We can even imagine the typical model of urbanization for Dandian Town migrant workers: They’ll leave in their early 20s, become part of that famous mass of Chinese migrant labor, work for a few years in a coastal city, perhaps in a factory, a retail outlet, or as a delivery driver, hoard their cash, return from that coastal city, (where they couldn't afford to buy property anyway) and finally place a down payment on a place in Huangzhou District. The vision of success.

Huanggang is surely equipped for them to do this. Like every other mid-sized Chinese city, its housing stock is currently massively oversupplied and empty. Driving through Huangzhou District in the evening, I could see many 30-floor towers with just 2-3 lights on in the whole building. The supply got way out ahead of the demand, that’s for sure.

Empty and half-finished apartment towers in Huanggang

But it's clear (at least to me anyway) who will live in these buildings someday: Not just the 2.9 million non-urbanized residents of those distant rural counties administered by Huanggang City, but ALSO the millions more from the low-quality urbanized Towns like Dandian who will be looking for an upgrade.

Now extend this logic nationwide. All the Towns of China hold something like 260 million people, according to recent census results. How many of those should be categorized as: "urbanized according to the census-takers’ loose definition but not really?" How many still hope to move to a real urban center? There's your latent demand for overbuilt housing.

Now clearly such a logical progression is at odds with government programs like “Rural Rejuvenation” or “New Countryside”, aimed at stemming or reversing the outflow of citizens from rural areas to the cities...

It is also at odds with the aspirations of the small cities, which are hoping to grow into mature urban centers themselves, not give up their population to the major metropolises…

This will be an interesting philosophical and structural conflict to observe in the coming years, as Chinese government planners seem to really value urbanization...and yet ALSO really want to "rejuvenate" the countryside.

Implementing the former would hollow out Towns; executing the latter will invigorate them instead.

But either way it goes, the nuances & dynamics of the "low-quality urbanized" Chinese Town in driving further population flows around the country must be appreciated for a coherent thesis on the big picture to form.

Is the sun setting on Dandian, or do its brightest days still lie ahead?