China's 140 million farmer-turned migrant workers may benefit from the country's plans for reforming the urban and rural binary system to speed up its urbanization drive, 21st Century Business Herald reported on Wednesday.

The National Development and Reform Commission (NDRC), China's top economic planner, together with other departments, is studying new urbanization policies in hopes of helping rural migrant workers settle down in cities.

"There are 140 million migrant workers nationwide, and that figure can increase to 300 million, taking their families into account. If these people can afford to buy or rent an apartment to settle down in cities, the potential for expanding consumption is huge," an official with the NDRC told the newspaper.

"In the long run, some system and policy restrictions need to be lifted in order to urbanize migrant workers and expand consumption," the official said.

China's current policies make it very difficult for rural migrant workers to legally obtain permanent residence permit in cities.

Although since the early 1980s the surplus rural labor force started to shift to non-agricultural industries, the urbanization process lagged far behind.

According to the 2009 China Urban Development Report, from 2001 to 2007, Chinese cities expanded 70.1 percent in terms of area, but the permanent urban population only increased by 30 percent in the same period.

China's urbanization drive sped up in recent years, but it was more of the urbanization of land," said Wei Kai of the Chinese Academy of Social Sciences, who co-wrote the report. "Our industries were increasingly concentrated in cities, the urban land area was ever expanding, but we failed to see a mass migration of the population into cities."

Wei said such unbalanced development created China's unique economic structure.

Statistics show that although China has the production capacity to meet the demand of a country with a per capita income of US$3,000, the majority of its population, which is rural, only had an annual average income of US$700 in 2008.

As a result, China's economy has had relied heavily on external demand for a long time, he said.

The sharp decline in external demand since last year, due to the global economic slowdown, has taken a heavy toll on the country's economy. Now China has realized that it has to expand domestic demand to revive the economy.

"Economic stimulus plans must take a long-term perspective, and the urbanization of the rural population is one of the feasible choices," said Wang Jian of China Society of Macroeconomics.

If the country continues to follow the current economic structure, it would be increasingly hard for macro-control measures to exert influence, and there is also the possibility of overcapacity, he said.

The average urbanization rate for a country with a per capita income of US$3,000 should be around 55 percent, Wang said.

According to the report, by the end of 2008, China's urban population topped 600 million, with an urbanization rate of 45.7 percent.

"If China's urban population grows to two thirds of the total and the service sector expands to 50 percent of all industries, a long-term release of domestic demand can be created for the benefit of economic growth," Wang said.

On June 16 this year, Shanghai launched a new residence registration system, relaxing restrictions on non-natives who want to settle down in the metropolis.

(China Daily July 9, 2009)