reinterpretation of china’s under-urbanization

Habitat International 27 (2003) 459483

Reinterpretation of Chinas under-urbanization:a systemic perspective

Li Zhanga,*, Simon Xiaobin Zhaob

aDepartment of Geography and Resource Management, The Chinese University of Hong Kong, Shatin, Hong KongbDepartment of Geography and Geology, The University of Hong Kong, Pokfulam Road, Hong Kong

Received 2 September 2002; accepted 28 October 2002

Abstract

Under-urbanization, dened as the achievement of a high industrial growth without a parallel growth ofurban population, can be plausibly viewed as a typical phenomenon of socialist economies and is widelyrecognized in the special case of China. This paper highlights the characteristics of Chinas under-urbanization and demonstrates system-related elements with specic linkages to the process ofurbanization. In contrast to the thrust of the extant literature on urbanization in the context of socialisteconomies, where industrialization strategies alone are taken as fundamental in explaining the nature ofChinas urbanization, we have focused, rather, on systemic characteristics to interpret Chinas under-urbanization.r 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Under-urbanization; Socialist system; State-biased development; China

1. Introduction

Chinas road to urbanization has been thought of as unique for it is neither identical to theparallel-urbanization experience of developed economies nor does it duplicate the over-urbanization situation found in many developing countries (Lardy, 1983; Ran & Berry, 1989;Lin, 1994; Lin, Cai, & Li, 1994; Young & Deng, 1998; Dong & Putterman, 2000). In developedeconomies the process of urbanization is generally closely connected with the level of economicdevelopment, especially the level of industrialization, while in developing countries increases inthe urban population have far outpaced economic development (Davis & Golden, 195455;Chenery & Syrquin, 1975). China has been widely viewed as a case of under-urbanization.

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*Corresponding author. Tel.: +852-260-964-75; fax: +852-2603-5006.

E-mail addresses: [email protected] (L. Zhang), [email protected] (S.X. Zhao).

0197-3975/03/$ - see front matter r 2003 Elsevier Science Ltd. All rights reserved.

PII: S 0 1 9 7 - 3 9 7 5 ( 0 2 ) 0 0 0 7 1 - 1

Under-urbanization, rst dened by Konrad and Szelenyi (1977) as the achievement of a highindustrial growth without a parallel growth of urban population, implies an irregular de-linkageof industrialization and urbanization. Though controversial to conceptualization (Ronnas &Sjoberg, 1993; Sjoberg, 1999) and hard to be assessed in full quantitatively, under-urbanizationcan be plausibly viewed as a typical phenomenon of socialist economies (Konrad & Szelenyi,1977; Ofer, 1977, 1980; Musil, 1980; Murray & Szelenyi, 1984) and has also been empiricallyobserved in post-1949 China (Cell, 1979; Orleans, 1982; Whyte, 1983; Ran & Berry, 1989; Ebanks& Cheng, 1990; Chan, 1994b; Yu, 1995; Tang, 1997; Song & Timberlake, 1996; Lin, 1998; Dong &Putterman, 2000). In both the pre-reform era and the period of economic transition, China hastried to restrict the magnitude of ruralurban migration and the number of people entitled to anurban citizenship, while its economic growth seems impressive. Despite very dynamic ruralurbanmigration recently, ofcial gures as well as academic estimates on urbanization level remain low(Zhang & Zhao, 1998; National Bureau of Statistics of China, 2000).Explanation of under-urbanization under socialism has drawn the attention of a number of

scholars. As Ofer (1977) hypothesized, under-urbanization in socialist countries was due, on theone hand, to a pushing-up industrialization strategy and, on the other, to efforts to cut down onthe costs of urbanization by using highly capital-intensive production techniques in manufactur-ing and highly labor-intensive modes of production in agriculture. He (1980) also showed thatsocialist development strategies together with historical legacies operated to bring about lowerlevels of urbanization relative to a given degree of industrialization. Fallenbuchl (1977) analyzedthe interrelationships between the changing levels of economic development and socialistdevelopment strategies in Poland, where the economic system was rebuilt in accordance with theSoviet model. He argued that under socialism one would expect a lower propensity to migrate intocities due to the promise of a greater degree of income equality, the maintenance of fullemployment, and more uniform levels of economic and social development across regions.In an attempt to understand the Chinese phenomenon of under-urbanization, past studies have

looked for explanations in policy choices based on Communist ideological preferences (Murphey,1976; Buck, 1981; Parish, 1987, to name just a few) or policy responses to the forging-aheadindustrialization strategy (Kirkby, 1985; Kang, 1993; Chan, 1994b; Solinger, 1999). Few studieshave made reference to, or analysis of, the institutional logic of under-urbanization in the contextof the Chinese economic system, though the role of that system has not been entirely neglected.Besides, many existing explanations are valid only for a given historical moment before theeconomic reforms. Their analytical frameworks cannot accommodate the changes which occurredin the reform period.The objective of this research is to revisit the question and to come up with a better

understanding for the persistence of under-urbanization in China. Unlike current interpretations,in which the Chinese experience is couched in ideological or economic terms, this research wouldopen up a new line of inquiry based on the institutional logic of an economic system that hashitherto shaped Chinas slow tempo of urbanization. The overriding argument is that under-urbanization is fundamentally constrained by the essential nature of the Chinese economicsystem, where public ownership, as one of the founding tenets of socialism, has been ambiguouslydened.Under the central theme of exploring the systemic impact on urbanization, the paper rst

highlights the Chinese characteristics of under-urbanization. It proceeds into a review of current

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L. Zhang, S.X. Zhao / Habitat International 27 (2003) 459483460

interpretations, which have largely inuenced the orientation of this work. This is followed by aninquiry on the underlying determinant of under-urbanization in China. Some concluding remarksare offered in the last part of the paper.

2. Chinas characteristics of under-urbanization

2.1. A question of under-urbanization

Data released by the statistical authority have shown that Chinas urbanization level hassteadily increased over time, though not without uctuations (Fig. 1). Compared with mostcountries, however, the level of about 36%, reported in the 2000 census, is still low, even though isthe highest in the history of the Peoples Republic of China (PRC). According to the statisticspublished by the Population Reference Bureau (PRB, 2001), 46% of worlds population lived inurban places by 2001. For most of the developed countries the current urbanization levels arehigher than 75%. The level in China is not only lower than the average level of developingcountries as a whole, about 41% in 2001 when China was excluded, but also lower than that ofsome socialist states such as Cuba (75%) and North Korea (59%). Table 1 shows that urbanpopulation grew at the rates much lower than, during 19651990, and closer to, in other times,those of non-agricultural employment. This suggests that many people have engaged in non-agricultural employment, but not an urban way of life. Though the denitional controversiesmight raise questions about the data comparability across time and countries, it can be arguablyconcluded that China, on the whole, has long been under-urbanized, despite the fact that itseconomy has experienced impressive growth and that ruralurban migration is increasinglyescaping state controls since economic reforms.

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0

5

10

15

20

25

30

35

40

1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000Year

Urba

niza

tion

Leve

l (%)

Fig. 1. Chinas urbanization level. Note: Data in year 2000 are obtained from the advance tabulation of the 5th

national population census, with zero hour of November 1, 2000 as the reference. Source: National Bureau of Statistics

of China (2001a, p. 200).

L. Zhang, S.X. Zhao / Habitat International 27 (2003) 459483 461

2.2. State control and under-urbanization

Under-urbanization in China is, as scholars generally perceived, a consequence of urban-restricting policies with regard to ruralurban migration, especially in the pre-reform period.Before the reform, the regulation of domestic migration was carried out by means of practicescomparable to those for controlling international borders (Chan, 1996). Movement from villagesto urban areas was largely de-personalized. Ruralurban migration was organized and directed bythe state in accordance with its own needs and priorities.1 There was a so-called closed citynetwork, where a number of preconditions had to be met before one worked and resided in a city,particularly a big city (Chan & Zhang, 1999). The police was actively involved in overseeing themigration process (Dutton, 1992). The state possessed full rights to refuse to issue traveldocuments or to refuse to register a citizen at the abode of his/her own choice.State control does not simply take the form of a blanket prohibition and is not always outcome-

effective. First, the overriding intent of state control is to permit no more urbanization of peasantsthan necessary for the interests of the state, rather than to suppress any urban-ward migration.This amounts to saying that control by the state is not a purpose in its own right, but a means toensure its interests. In fact, the state permitted increasing ruralurban migration as the demandfor workers in the urban-based economies increased. In the history of the PRC, there have beenseveral waves of authorized migration into the cities. Second, while the system of controlscontinuously maintains, it is not evident that it has been consistently effective. Research onundocumented migration suggests that people seemed to be able to circumvent regulations incertain circumstances, but to what degree remains an open question (Yang, 1996). Under-urbanization obviously comes about in the context of stringent (on paper) but somewhatineffective (in practice) state controls.In the process of systemic reform and opening up, the Chinese economy is increasingly bound

to outside market systems. This raises questions as to the continuation of state control in the

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Table 1

Annual growth rates of urban population and employment (%)

Period Urban population Employment

Agricultural Non-agricultural

195265 4.72 2.34 3.41

196580 2.59 1.47 6.33

198090 4.66 2.81 6.77

19902000 4.27 0.8 3.39

Note: Data in year 2000 are obtained from the advance tabulation of the 5th national population census, with zero hour

of November 1, 2000 as the reference.

Sources: National Bureau of Statistics of China (2001a, p. 200; 2001b, p. 108).

1By state, we mean the structure of power consisting of the top leadership and the various agencies of the ofcial

bureaucracy, both Party and government, established for the protection and maintenance of society. The interests of the

state, therefore, represent the interests of that power structure, not the common interests of citizens living in a given

territory with internationally recognized political boundaries.


process of systemic reform and globalization. State intervention with regard to urbanizationduring the transitional period of the economic system remains signicant in various ways. Thoughstate regulations are now less intrusive and less effective in preventing rural people from movingto the cities, the state reserves its power to grant full urban citizenship and to limit the destinationsof peasants on the move (Zhang, 2000). The large number of temporary urban residents thesedays is a reection of concrete effort on the part of the state to control the urbanization process.2

Restrictions on the employment rights of rural labor in cities are another sign reecting that thestates continued attempts to exert controls over ruralurban migration. The practice of hiringpeasant labor for urban jobs has been codied in a series of regulations issued by variousdepartments of the central government since the economic reform (Table 2). The frequentmodication of urban administrative system has put a large portion of the rural economy andsociety under some forms of state control (Tang, 1997, p. 55). When it comes to an accounting forthe changes up to now, one would have a hard time concluding that urban migration in thecurrent transitional period, albeit on the upswing and more and more market-driven, is genuinelyfree from state control.Under-urbanization in China, in effect, also represents a seriously distorted relationship

between economic development and urbanization as conventionally understood on the basis ofWestern experience in several regards: notably the politicization of urban settlements and urbancitizenship, the discretionary terms of trade against agricultural products to generate economicsurpluses for state needs, and the biased allocation of resources in favor of state interests at theexpense of peoples interests as individuals.

2.3. Politicization of the size of urban population

In the Chinese case, the level of urbanization can be affected through administrativedesignations that spell out the ofcial qualications for urban settlements and for urbanpopulation (Zhang & Zhao, 1998). Urban status has to do with a settlements hierarchicalposition and prestige in the Chinese economic system as well as with the level of the statesnancial responsibility. Though the designation criteria are set down on paper, the rules as carriedout in practice vary widely. Politically, in all versions of the urban designation criteria, room isalways reserved for administratively important settlements regardless of size and other urbanattributes. Financially, urban designation is often linked to commitment made by the state. Citystatus can bring economic benetsbesides carrying a prestige factor which is hard to quantifybecause cities enjoy considerable advantages denied to other kinds of settlements. The fact thatthe state is reluctant to designate certain settlements and deliberately remove some from the urbansystem may arise from its desire to avoid its nancial obligations and to have greater exibility inuse of its resources. As a result, the number of urban settlements has uctuated periodically, onthe face of it because of changes in the designation criteria but mainly because of changes in thestates political and economic perspectives. Such irregularities in the working of the urbanclassication schemes can be seen as causes of serious distortion and devaluation of the count ofurban centers and of their populations.

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2Depending on the denitions used, the estimates of the stock of temporary urban residents from the countryside

vary from 33 to over 70 million by year 2000 (for example, see Ma & Xiang, 1998; Wu, 1999; Wang, 2000; Smith, 2000).


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Table 2

Policies concerning recruitment of rural Labor in certain urban industries since 1979

Issued date

(dd/mm/yy)

Issuer Document title

24/10/1979 Ministry of Coal Guanyu meikuang zhaoyong gongren ruogan wenti di

tongzhi (Provisions concerning some issues in the

recruitment of coal worker)

11/12/1981 Ministry of Coal Industry, State General

Bureau of Labor

Guanyu guoying meikuang shiyong nongcun xieyigong

bixu naru guojia laodong jihua de tongzhi (Circular on

undoubtedly bringing the employment of rural contract

labor of state-owned coal-mines into the scope of state

employment planning)

18/08/1982 Ministry of Metallurgical Industry,

Ministry of Labor and Personnel

Guanyu tongyi zhongguo huangjin zonggongsi zai

kuangshan jingxia jinxing nongmin hetonggong zhidu

shidian de tongzhi (Circular on approving the pilot

scheme suggested by State Gold General Company

concerning the system of rural contract labor in mine-

excavating enterprises)

30/06/1984 State council Guanyu Kuangshanqiye shixing nongmin lunhuangong

zhidu shixing tiaoli (Circular on the tentative regulations

for the application of the system concerning the

recruitment of rural rotating worker in mine-excavating

enterprises)

18/07/1984 Ministry of Labor and Personnel,

Ministry of Post and Telecommunications

Guanyu xiang youdiyuan he zhuduan xianwuyuan cong

nongmin zhong zhaoyong hetongzhi gongren de shixing

banfa (Tentative regulations for the application of the

system concerning the recruitment of contract mailmen

and wiremen from rural labor)

05/10/1984 Ministry of Labor and Personnel,

Ministry of Urban and Rural

Construction and Environmental

Protection

Guanyu guoying jianzhu qiye zhaoyong nongmin

hetongzhi gongren he shiyong nongcun jianzhudu

zanxing banfa (Interim measures for the recruitment of

rural contract labor and the employment of rural

construction team by state-owned construction

enterprises)

19/12/1984 Ministry of Labor and Personnel Guanyu jiaotong, tielu bumen zhuangxie banyuan zuoye

shixing nongmin lunhuangong zhidu he shiyong

chengbaogong shixing banfa (Tentative measures

concerning use of rural rotating workers and use of

responsibility workers in the goods loading and

transporting posts of transportation and railways

industries)

07/02/1985 Ministry of Labor and Personnel Guanyu dizhi kuangchang deng bumen zhaoyong

nongmin lunhuangong wenti de tongzhi (Circular on the

recruitment of rural rotating workers in the geology and

mineral resource industries)

10/11/1986 Ministry of Labor and Personnel Guanyu waishang touzi qiye yongren zizhuquan he

zhigong gongzi, baoxian fuli feiyong de guiding

(Regulations for the authorization of decision-making

for the employment, salary, and welfare in foreign-

invested enterprises)


The overall changes in the urban population may be, to a large extent, the result of the frequentredenition of urban administrative boundaries via territorial annexation and de-annexation, notthe result of ruralurban migration. During administrative reorganizations, many rural areas wereannexed by cities with a legislative basis but without a standardized form. This administrativeannexation of rural territory was constrained by different political and economic considerations atone time or another (Kirkby, 1985; Ma & Cui, 1987). No matter what the purpose, the boundariesof designated urban settlements were arbitrarily demarcated by the state, often involving theaddition and deletion of urban population.Urban population is not regarded as one population category based on residence and

occupation but is politically dened as a controllable social segment. In most cases, urbanpopulation ofcially refers to the non-agricultural household registration (hukou) populationonly. This ofcial denition, with its emphasis on the hukou status, de-emphasizes the signicanceof actual differences in occupation and place of abode between the rural and urban populations,respectively. The hukou treatment of the urban population allows the state to manipulate urbancitizenship to its own advantage in order to maintain loyalty or to redress the grievances of certaingroups who are perceived as essential to national development. The political conferment of urbanstatus trumped economic rationale in the process of urbanization. The actual size of the urbanpopulation, showing itself to be more than a simple addition of statistical feats, never trulyreected the economic need for a shift of the labor force from agricultural to non-agriculturalsectors in the drive toward industrialization.

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Table 2 (continued)

Issued date

(dd/mm/yy)

Issuer Document title

13/02/1987 Ministry of Geology and Mineral

Resources, Ministry of Labor and

Personnel

Guanyu dizhi kuangchan bumen gaige laodong zhidu

wenti de tongzhi (Circular on some issues concerning the

reform of employment system in geological and mineral

enterprises)

05/10/1989 State council Quanmin suoyouzhi qiye linshigong guanli zanxing

guiding (Tentative provisions for the administration of

temporary workers in the state-owned enterprises)

25/07/1991 State council Guanyu quanmin suoyouzhi qiye zhaoyong nongmin

hetongzhi gongren de guiding (Provisions for the

recruitment of contract peasant workers for state-owned

enterprises)

02/11/1992 General Ofce of Ministry of Labor Guanyu guanche quanmin suoyouzhi qiye zhaoyong

nongmin hetongzhi gongren de guiding zhong youguan

wenti de fuhan (Response to some issues concerning

implementation of provisions for the recruitment of

contract peasant workers for state-owned enterprises)

17/11/1994 Ministry of Labor Nongcun laodongli kuasheng liudong jiuye guanli

zanxing guiding (Tentative provisions for the

administration of cross-province employment of rural

labor)


Whatever their size and importance for the urban economy in the reform period, personsholding agricultural hukou but engaging in non-agricultural activities and regularly residing inurban areas have been ofcially excluded from the urban population. They are forced to remain inthe category of urban temporary population and are also given little likelihood of acquiringurban hukou despite their de facto urban occupation and domicile. The exclusion of certain partsof the de facto urban population from the states tally of urban population is not statisticallyaccidental, but rather follows from the states concerns with regard to urban citizenship (Solinger,1999). It is the citizenship question that has caused the Chinese experience with trying to dene theurban population to deviate from international practices whereby urban populations are normallytallied on the basis of actual occupation and de facto place of abode.

2.4. Resource generation and allocation, and under-urbanization

Chinas under-urbanization can be associated with, moreover, questions of resource generationand allocation. The historical experience of developed countries shows that the economicdevelopment process and accompanying urbanization represent a structural transformation froman economy dominated by agriculture to one dominated by non-agricultural activities. Therefore,it is generally believed that the agricultural sector needs to make a net transfer of resources, bothcapital and labor, to other sectors in the processes of economic transformation and urbanization.Two crucial issues in the Chinese context of resource transfers to be singled out are the terms oftrade offered by the state in its seizure of the resources required for industrialization and the owof resource spending geared to achieve the paramount state interests.Through its use of discretionary revenue extraction, the state rapidly expanded its investment

on non-agricultural sectors (particularly on military-related industry and on state administration)in the past decades.3 On the basis of an analysis of the scissors pricing mechanism (underpricingagricultural products relative to industrial products) to which the state had recourse for nancingits industrialization, it has been argued that this kind of resource transfer did not necessarilyfavor a high rate of urban employment, regardless of the magnitude of the seizure of resourcefrom the agricultural sector (Zhang & Zhao, 2000). When resources were articially extractedfrom the agricultural sector and diverted to manufacturing sectors, investment policies favoredthe unbalanced expansion of industry. The structural change in terms of output values seemedimpressive. Simultaneously, however, various constraints were created to limit the role ofagriculture with regard to changes in the structure of employment. Ironically, it made agriculture,a rickety foundation for any development strategy in predominantly agricultural societies, anobstacle rather than a spur to industrialization. Conversely, the policy of underpricingagricultural products had little effect on declines in the proportion of the total labor force thatwas engaged in agriculture.Looking at the key areas of state expenditures, it would seem that the state had used up its

limited resources at the expense of civilian interests (Zhang & Zhao, 2001). Signicant spendingon the military and on bureaucratic organizations had drained a substantial portion of itseconomic and human resources. This pattern of resource mobilization and allocation, rooted in

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3The means of resource extraction and the patterns of resource allocation and their impacts on Chinas urbanization

have been intensively examined elsewhere. For example, see Zhang and Zhao (2000), Zhang and Zhao (2001).


the needs of the system, has sufced to maintain generally high rates of industrial growth at theexpense of civilian interests and has led to a relatively comprehensive industrial structure with anemphasis on heavy industry. However, such a strategy has certain features which clashed sharplywith the resource endowments and capacities in China. It exacerbated employment problems witha low level of non-agricultural job creation in the Chinese labor-surplus economy. This wasassociated with a low demand for urban labor and thereby produced a less than positive impacton urbanization during the process of structural change. It is also easy to show that the pace ofurbanization tended to be determined more politically than economically by politicizing theacquisition of urban residence rights (Zhang & Zhao, 2001, pp. 518520). The diversion ofresources by the state contributed relatively little to the promotion of urbanization.The various kinds of evidence we have presented should sufce to demonstrate that Chinas

under-urbanization is characteristically linked to state control on the one hand, and state-biaseddevelopment patterns on the other. It can be argued that the underlying logic and the drivingforces that have led to under-urbanization in China should be conceptualized in terms of thejuxtaposition of indispensable state control and of state-biased development inherent in itseconomic system. Before we elaborate this argument, let us rst review many ne studies that havebeen devoted to the explanation of Chinas under-urbanization.

3. Extant interpretations

The extant literature on the logic of Chinas under-urbanization can be crudely divided into twogenerations of thought. The rst generation, known as the rural-bias school, prevailed beforethe early 1980s. It saw the Chinese pattern of limited urbanization as a by-product of anti-cityideology (Salaff, 1967; Murphey, 1976; Lewis, 1971; Chen, 1972; Kojima, 1987; Buck, 1981;Jameson & Wilber, 1981; Parish, 1987). The second generation, categorized as the urban-biasschool in this paper, viewed the restricted urban population as a consequence of developmentstrategies that favored the industrial/urban side (Kirkby, 1985; Kang, 1993; Chan, 1994b;Naughton, 1996; Solinger, 1999; Liu, 1999). To date, the notion of the urban-bias school iswidely read and inuential.The rural-bias school held that the ideology of anti-urbanism or pro-ruralism was heir

to the rural essence of the Chinese Communist Party (CCP) and represented a Marxist analysis ofantagonistic class contradictions between city and country. It was noted that the CCP had deeppeasant roots4 and that the Chinese communist revolution was historically the last of many ofrural-based peasant rebellions (Lieberthal, 1995). It was instinctive for this peasant party, afterhaving seized power, to aunt its ruralist sympathies. From the perspective of ruralurbanantagonism, the traditional ruralurban relations embodied various forms of urban dominanceand exploitation (Harrison, 1972; Murphey, 1974; Ma, 1976; Nolan & White, 1984; Prybyla,1987). The countryside was politically ruled, economically exploited, and culturally oppressed forthe benet of the city. The city was seen as a political center where ruling elite would impose lawonto peasants, an economic center where rural taxes would be collected and agricultural surplus

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4 In the initial period of the CCP takeover, over 90% of the members were of peasant origin and most of the leaders

came from peasant stock (Lieberthal, 1995).


would be absorbed, and a parasitic center of consumption where capitalism could take shape.Since the Communist revolution was rural-based and reected rural interests, the urbanexploitation of the countryside could not be tolerated and urban consumption was to besuppressed. It was the task of socialist construction to eliminate ruralurban antagonisms and toreform city functions. A low rate of urbanization was an outcome of anti-urban ideologicalpreferences. Maos famous article On the Ten Great Relationships, his notable articulation ofthe need for the simultaneous development of industry and agriculture, and his goal ofultimately eradicating ruralurban differences were all mentioned as theoretical grounds for therural-bias school. Empirical evidence to illustrate the stance of anti-urbanism included thereduction of agricultural taxes, rural industrialization, the development of pro-agriculturalindustries, and the relocation of urban intellectuals and young people to the countryside under thebanner of political slogans handed down from above (Chen, 1972; Bernstein, 1977; Ma, 1977).5

For a certain historical period, the concept of anti-urbanism offered a ready explanation for theurban hiatus in China. Nonetheless, this school was ultimately discredited by its misconception ofChinese development strategies, as evidence gradually appeared of urban-bias policies and theirimplementation in practice.Contesting the notion of anti-urbanism, a group of scholars, mainly Kirkby and Chan, came up

with a different perspective on the complexity of the urbanization process in the context ofsocialist industrialization strategies. This school of thought, addressing the notions of urbanbias6 and economizing on urbanization costs,7 rejected the ruralist interpretation as amisreading of the nature of Chinas development strategies and suggested an economic ratherthan an ideological interpretation. They argued that urban bias represented a realistic descriptionof crucial economic policies with regard to sectional interests in China. Those policies includedcity-based industrialization (Kirkby, 1985; Kang, 1993; Chan, 1994b; Liu, 1999), a scissors gappricing system (Oi, 1993; Naughton, 1996), and favorable measures to protect the privileges ofurbanites (Chan, 1994b, 1996). Taking into account the impact of the industrialization favored bythe state, this school viewed urbanization primarily as a cost incurred in the pursuit of thatindustrialization. It proposed that it was the socialist industrialization imperative, whichattempted to maximize industrial output while simultaneously maintaining urban manageabilityand minimizing urban costs, that provided the rationale for government urban-closed and

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5For instance, well-known political slogans for mobilizing urban residents to the countryside were constructing a

new socialist countryside and abolishing the three major differences (between manufacturing and farming, between

city and country, and between manual and mental labor).6The notion of urban bias has a long history, dating from the 1920s when policymakers in the Soviet Union

considered agricultural/industrial as well as rural/urban relations in the context of socialist industrialization. It was a

deliberate choice among possible answers to the question of how industrialization was to be nanced from the

standpoint of the central planners (Bideleux, 1987). The terms of trade between rural and urban products were policy-

biased in favor of the urban formal sector. In the non-socialist context, the idea was put forward by Lipton (1977) to

explain why poor people stayed poor in underdeveloped countries. It is dened in terms of resource allocations that are

both inequitably and inefciently pro-urban and, at the same time, in terms of institutions and policies that are against

agriculture. There are different institutional requirements, consequent upon the pursuit of urban-bias policies in the

socialist and non-socialist countries, respectively.7 Economizing on urbanization costs was rst raised by Ofer in his study of the structural change in socialist

economies. He argued that the choice of economizing on urbanization costs was one requirement for maximizing

industrial investments and therefore for fast industrialization (Ofer, 1974a, b).


urban-restricting policies.8 The existence of the rigid hukou system to control spontaneousmigration, the ofcial or quasi-ofcial revelation of wide inequalities between rural and urbanareas, and discriminatory policies against agriculture and the rural population were offered asstrong empirical evidence in support of urban-bias arguments.Despite their profoundly different handling of specic research questions, there were indeed

some points of commonality between the two schools in theorizing why pervasive industrializa-tion came with a low level of ruralurban migration and relatively slow urbanization. Bothschools explicitly recognized that free ruralurban migration had always been unacceptable inChina, which meant that the role of state control on urbanization was crucial in anyunderstanding of the Chinese experience. They agreed on the critical importance of theconicting relations between industry and agriculture, and between town and country inexplaining Chinese urbanization. Specically, both made much of a strict and antagonisticdivision, created and maintained by severe institutional and administrative measures, between cityand country. Therefore, neither disagreed about the signicance of resource misallocation amongthe various economic sectors in shaping Chinese urbanization. They suggested that thediscriminatory policy decisions acted like a weighted dice to tilt economic and social advantage(particularly with regard to scal demand and resource allocation) toward one side against theother.9 By looking at the pattern of inter-sectoral conict, they inferred that the process ofurbanization in socialist China was a function of underlying development strategy. And nally,they emphatically related the role of the state to any explanation of urbanization in China.Judging from their focal areas and regardless of their convictions, we can conclude that bothschools were trying to come to grip with the critical issues of socialist urbanization: that of directstate control and the role of the state, the choice of development strategies, and agriculture/ruralas opposed to industry/urban relations. To be sure, their studies, respectively, have offeredthoughtful insights with regard to slower urbanization in China.One inference, from the review of prior studies, is that the process of urbanization is, in general,

historically and socially embedded in specic political and economic systems. As they came todevelop their own conceptions, both schools recognized the uniqueness of the Chinese experienceunder socialism and the irrelevance of Western theories for interpreting the Chinese case. Mostof the inuential urbanization theories are based upon an analysis of market-based capitalism.Since markets have been mostly absent from pre-reform China and are still seriouslyunderdeveloped even now in the current transitional period, meaningful interpretation is

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8These policies, as Chan (1994b) pointed out, included tight control of ruralurban migration, rustication of urban

residents to the countryside, restriction of the urban dependent population, intensive use of the urban infrastructure

and limited expansion of the service sectors.9For instance, both schools agreed that the patterns of urbanization in China were strongly related to the differential

allocation of resources between industry/city and agriculture/countryside. But a controversial aspect of the debate

between the two schools was the extent to which agriculture had provided capital funds for industrial accumulation and

for urban development, and the desirability and the ability of policy intervention to accelerate the rate of this

accumulation by trying to manipulate the direction and magnitude of the ow of the agricultural surplus. While the

rural-bias school emphasized resources into the countryside from the state through the invisible account (for

example, large government subsidies to the agricultural sector on the input side), the urban-bias school maintained

that, in the sectoral allocation of government investments and in resource extraction, the agricultural sector was largely

sacriced. This argument was often supported by claims that agriculture had made its contribution in the form of

underpriced agricultural products sold to the state for nancing the non-agricultural sectors (Lardy, 1983).


impossible without serious scrutiny of the non-market nature of the Chinese economic system.The critical issues addressed by current notions might suggest, implicitly at least, a logical relationbetween the evolution of the Chinese economic system and the process of urbanization. Therefore,we propose an analysis of the socialist ownership relations, the dening basis of socialist economicsystem, as a starting point for our analysis.In line with this perspective, one could argue that any theory to explain processes and outcomes

in socialist countries should take into account the institutional logic specic to the socialisteconomic system. The role of the socialist state in development and in the choice of developmentstrategies should be seen in terms of the changing requirements of specically socialist ownershiprelations, not simply as a reection of state preferences. Similarly, urbanization patterns should beseen as having been fundamentally shaped by the de-personalized character of Chinese propertyrelations. As the two schools have acknowledged, direct state control and the rush toindustrialization have largely determined the rate of Chinese urbanization. However, statecontrol and development strategies cannot be understood apart from the socialist economicsystem in China. The logic of state control and the absence of markets were rooted in deeperinstitutional necessities. So was the forging-ahead development. By the same logic, any changesin the forms and intensity of state control and in development policies should be linked to changesin the nature of the underlying economic system. From this standpoint, our interpretation ofurbanization in the Chinese context shares the view of those institutionalists who treat thefunctional interaction between the state and property rights as decisive in any attempt atunderstanding the important issues underlying the ongoing development process (North, 1990;Eggertsson, 1990). Chinas under-urbanization, in effect, is interpreted not merely as the result ofgood or bad government policy but as the outcome of a series of urbanization checks inherent inthe contradictions of the Chinese economic system. Those contradictions (such as a disconformitybetween advanced property relations and a backward economy, and conicts between stateinterests and civilian needs, see discussion below) had functioned as constraints on the policypriorities in the rst place. Those variables (state control, resource spending, unbalanced ruralurban relations, etc.) commonly identied in current literature as having negatively affectedChinese urbanization are to be re-conceptualized, in our analysis, within the framework of theinstitutional necessities of the Chinese economic system.Arguably, the processes of urbanization cannot be understood without accounting for the

economic system as determined by the characteristics of property relations. The role of propertyrelations is fundamental in that constraints are imposed on the formulation of developmentpreferences and an institutional foundation is provided for the implementation of designateddevelopment choices. This does not mean that other forces are without inuence, but their role isperceived as secondary.10 As Kornai (1992, pp. 8788) argued, the socialist system differs rst andforemost from the capitalist system in having replaced private ownership with public ownership.Given that the role of the state could be dened as an automatic consequence of socialist propertyrelations, state-biased development, which determines the basic shape of the Chinese politicaleconomy, is, therefore, a rational product of state ownership dominance. In this context, it isunderstandable that state interests are paramount in the formulation of development policies,

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10This would be controversial to many. Few would argue that property relations are unimportant, but there would

not necessarily be agreement on the weight we have assigned them.


overriding all other interests. Again, state-biased development was not just a by-product ofbureaucratic ambitions but was a result of the socialist ownership relations in China. State-biased development privileged military-orientated industry over the civilian sectors, pushedquantitative industrialization ahead of qualitative economic progress, production over consump-tion, political priorities over economic rationales, and autarchic tendencies over relations with theworld outside China. These stylized aspects of state-biased development were all associatedwith and are joint products of the Chinese economic system. Many characteristic aspects ofstate-biased development, such as rapid industrialization, unbalanced resource allocationbetween the agricultural and the industrial sectors, and their impact on urbanization, have beenintensively examined by the prevailing urban-bias school (Chan, 1992, 1994a; Liu, 1999). Buttheir discussion has been largely focused on the role of the state on urbanization in conjunctionwith industrialization strategies. Our interpretation attempts to extend the narrow connes of theexisting hypothesis that the urbanization process in China is perceived as a function of socialistindustrialization alone.

4. Chinese economic system and under-urbanization

The Chinese economic system, broadly dened, is comprised of a group of political andeconomic elements that are congured in such a way as to express and serve the specic goals ofthe CCP.11 In classical terms, these include a structure of power characterized by one-partydominance under the organizational principle of democratic centralism, Marxist ideology,domination of public ownership of the means of production, centralized bureaucratic processes ofdecision-making, planning mechanisms for economic activities, administrative mobilization andallocation of resources, and other institutional mechanisms of bureaucratic control. An intensiveself-industrialization, or so-called socialist growth strategy, viewed both as means fordemonstration of the superiority of socialism and for building a defensive capacity againsthostile powers, was also an integral part of the Chinese system.12 Within the system, there is a lineof causality that forced organic growth of the whole. Based on the Marxian critique of capitalismand on the experience of the Soviet Union, the Chinese state, to begin with, erected its publicownership system by revolutionary actions and dened a conguration of property rights itdeemed compatible with the given political structure in order to survival politically andeconomically. The specication of the public property relations then reciprocally determined therole of the state in the course of economic development. All those systemic elements, of course,change over time, partly as numerous and complex interactions among them and partly as a

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11Because this is not the place to survey the voluminous literature on socialist systems, the Kornai (1992) framework

for analyzing system changes in socialist countries will be taken as representative for the purpose of this study.12The socialist systems and socialist growth strategies, although extensively described in the literature, are usually

treated separately. Few actually discuss in detail the relationship between system and strategy, with the exception of

Kornai (1992), so far as we know. In the literature, socialist growth strategies generally refer to the common,

ambitious goal of socialist regimes to stimulate economic development. Socialist economic system is narrowly dened

as centrally planned. In this study, growth strategy is seen as integral to the system because it is largely dictated by

systemic needs and implemented by substructures such as the system of central planning, though the growth strategies

clearly interact with other systemic elements to shape the entire system.


function of changes in the Partys perspective on itself and on development. Changes in the systemcan be observed through changes in the structures of ownership and in the mechanisms ofresource allocation as well as in growth strategies. However, public ownership remains as a core ofthe system.

4.1. Socialist ownership relations and under-urbanization

The essence of Chinese socialist identity is to be seen in the public ownership of the means ofproduction. In accordance with the ideas of Chinese socialism, new productive relations, whichrequire a socialist transformation of the private ownership of the means of production, are crucialpreconditions for a new socialism society. Socialist transformation is to serve not only as apolitical foundation for such a society but also as a preoccupation of the radical industrializationstrategy pursued by the Chinese state. Thus, socialist transformation was put at the top of thedevelopment agenda in the early days of the PRC and was completed within a relatively shortperiod (by the end of the 1950s) by various expedients. These included tax imposition, controls onprices, and limitations on the sphere of activities. Private businesses and industrial rms weremade to accept state leadership in a system, which, at rst, amounted to state capitalism. Then,state capitalism was turned into socialism.Socialist ownership relations matter because of their role in the rationalization of state control

of urbanization. The essential of urbanization control in socialist China was intrinsically rooted inthe non-market nature of traditional public ownership system, where the means of productionwere publicly owned by people on paper but, in fact, belonged to none of them, and where theenforcement of various property rights was centralized. This conguration made the Chinesesystem of public ownership of the means of production only titular, characterized as undividable,non-pecuniary, and inalienable in actual practice. Undividable means that the means ofproduction cannot be separated out for possession by individuals. Non-pecuniary refers to thefact that no actual monetary value is attributed to productive properties. Inalienable meansthat no production properties can be obtained from, or be placed on, the market. Thus,traditional public ownership made for an absence of legitimate markets that could function insocial and economic activities as a mechanism for intervention and constraint. Were there noother external control mechanisms to replace the market ones, individuals would be free to act inaccordance with personal preference without taking collective concerns into account. In itsrestriction of private property rights and of market operations, public ownership, in practice, wastantamount to state or government ownership because, from the standpoint of any givenindividual, public ownership was meaningless. Without binding rules as dictated by unambiguousproperty rights, the state logically must control and take responsibility for all kinds of decision-making in lieu of market regulations. State control restricted, more and more, the role of themarket. The bureaucratic apparatus of economic control sprang up and spread everywhere(Kornai, 1992). In the case of ruralurban migration, the state had absolute power to decide whohad the right to move and under what conditions. The non-market control mechanisms for ruralurban migration can be identied under three categories: rules and regulations, central planning,and political indoctrination. These control mechanisms heavily curtailed the autonomy ofindividuals. From the perspective of property relations, it is evident that, in the absence of privateownership and the decentralization of property rights, the state must institutionalize, not as a

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matter of bureaucratic irrational preference but of necessity, non-market control forces in everycircumstance. The processes of urbanization are inherently subject to direct state control.Another inuential role of underlying ownership relations in explaining the slow pace of

Chinese urbanization lies in the rationale of state-biased development as a logical extension ofthe ambiguously dened public ownership system. Unlike state control acting so as to encroachdirectly on individual autonomy, state-biased development translated party-state priorities intomaterial terms that transcended economic justications. It made the growth in industrial outputfar exceed the growth in the capacity to absorb ruralurban migrants. That public ownership ledto such a development pattern can be justied on two empirical grounds: the overall orientation ofdevelopment and the political and economic abilities whereby the state was empowered tofacilitate state-biased development.The logical relationship between public ownership and state-biased development can be

understood most readily against the historical background that the establishment of publicownership was, almost without exception, linked to underdeveloped economies. Although Marxdeveloped a historical framework for predicting the triumph of socialism over capitalism, hecontributed little to guide what development strategies a socialist country should adopt and how asocialist country could achieve success in economic development. Marx, furthermore, did notclearly foresee that socialist economies might arise in nations that were considerably lessdeveloped than the leading capitalist nations he had in mind. To Marx, the historical evolutionfrom primitive societies to communism represented an inevitable progress of society from lower tohigher stages of development. Capitalism, characterized by evils stemming from private propertyand from a class structure based on private ownership and inequality (Marx, 1891), would bereplaced, in turn, by socialism and communism. Both Lenins and Maos versions of socialismstressed the feasibility of making socialist revolution in backward economies, particularly in pre-capitalist or less-developed capitalist countries. In fact, most socialist revolutions succeeded andsocialist relations of production came to be established in countries where the economy had beendominated by a backward, under-productive agricultural sector, and a weak, underdevelopedindustrial sector without basic heavy industries (Kornai, 1992). Once, the private ownership ofproductive means had been forcibly replaced by public ownership, however, the question ofdevelopment goals and strategies arose immediately with little in the way of theoretical guidelines.The paradox between the Marxist assumption with regard to the superiority of socialist

ownership and the relatively uncongenial reality socialist ownership found itself embedded inlimited the development choices open to decision-makers in socialist countries. Superiorsocialist ownership, as a Marxist given, implicitly created both political and practicalrequirements for socialist economic development. The partisan emphasis on the superiority ofsocialist state limited, at rst, by its backward agricultural economy generated a political need forforced industrialization. To protect the socialist foundation of public ownership, to demonstratethe superiority of the socialist system, and to guarantee the socialist state legitimacy, it wasnecessary for socialist countries to catch up with advanced capitalist countries as soon as possible(Po, 1964). Since socialism was ideologically antagonistic to capitalism and was therefore isolatedin a capitalist-dominant world, priority had to be given to the development of military powerindependent of unfriendly international markets. Industrialization efforts on the part of thesocialist state were essentially driven by a concern for self-preservation. Twin considerations ofsurvival and self-sufciency required that the pattern of economic development in socialist

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countries, at least in the initial stages, be skewed toward yielding a high rate of growth, a largeconcentration of military power, and a low risk of international interference. In a closed,agriculture-dominated economy this meant, in effect, an emphasis on military-oriented heavyindustry, largely nanced by agriculture.13 The Chinese choice of accelerated industrializationunder socialist ownership relations was dictated not only by the fact that public ownership inChina had been built upon a backward economic base, but also by a Marxian vision that thesocialism was superior to the capitalism.Why state-biased development is relevant to the public ownership system can also be

explained by the unrivaled state power that came as a result of the public ownership to carry outits development strategy. Ambitious development goals, however good as expressions of thepreferences of the socialist state, need supporting mechanisms to guarantee fulllment. From theperspective of property relations, state power in a socialist economy is not to be understood as anintrinsic entitlement but as an authority derived from an ambiguously dened publicproprietorship. Since indivisible and inalienable public property relations became, in practice,equivalent to state or government ownership, the state empowered itself to create the institutionalpreconditions for political and economic control and to override the conicting interests of civilsociety. The property acquired by the state is a key constituent of the state power. The geneticpolitical system determined by the dominance of state ownership is a state dictatorship. Theproletarian dictatorship is endorsed in every version of the Chinese constitution. Nonetheless, theproletarian dictatorship is a matter of rhetoric, not of fact, since, naturally, the proletariat as awhole cannot exercise a dictatorship. Its dictatorship must be enforced by a suitable representativebody. While the workers/peasants as the collective working class are, in theory, the hegemonicclass in China, the CCP is actually the vanguard of the working class. So the proletariandictatorship, in effect, amounts to a party/state dictatorship over social and economic initiatives.This dictatorship can politicize the development process by undermining personal freedom andany economic rationale as necessary.From the standpoint of the economy, the mechanisms of state control, arising from the

ineluctable necessities of the socialist ownership system, provided institutional supports for theprioritization of rapid industrialization. The fact that public ownership was ambiguously denedallowed the legitimization and the empowerment of the states monopoly position by the de factoreplacement of public ownership with state ownership. All economic issues, from investment toconsumption, were the business of the state, not the market. The state, rather than the market,determined which sectors were to expand rapidly or were to be given low priority and how surplusvalue might be generated. With the dominance of state ownership, the state can also establisheconomic institutions for the arbitrary accumulation and for the bureaucratic allocation ofresources in line with its needs and interests. For instance, the state can arbitrarily generate

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13According to the Marxist economic law of expanded reproduction, the larger the portion of resources devoted to

the production of investment goods, the faster the rate of growth as measured by total output. Socialist economists

believe, moreover, that there is strong correlation between the share of total resources that an economy devotes to

heavy industry and the capacity of that economy to manufacture military hardware (Gregory, 1970). In a closed

economy dominated by agriculture, the creation and accumulation of crucial capital for industrialization can be

achieved only by the adoption of terms of trade unfavorable to agriculture and ratios biased toward production at the

expense of consumption. The more ambitious the industrialization goals, the more dependent the industrial sector on

the agricultural sector at least in the initial stages of industrialization.


economic surpluses by constructing a pricing system not determined by the law of supply anddemand and by the efcient resource allocation but by its needs for nancial accumulation andthe mobilization of resources. The state can minimize the resources devoted to the sectors it needsleast and divert massive resources to the sectors it needs most. The overwhelming mobilization ofresources would be unattainable without the dominance of state ownership. Overall, the statecould enforce its demands in accordance with its own interests by a minimization of theconstraints imposed by private ownership that might instinctively emphasize greater economicrationality and produce conicts to state-required development. It might seem that, under thedominance of state ownership, state bias would be guaranteed by several facts. First, statepolitical dictatorship was legitimized. Second, the property acquired by the state was a veryimportant constituent of the state power. Third, the means of production were employed in theinterests of the state. Fourth, the state possessed absolute authority and discretion over thedisposition of resources. It would be impossible, in the absence of preponderance of stateownership, for the state to achieve the needed accumulation and planned allocation of resourcesfor its own purposes.Thus, the relationship between the ownership setup and economic strategies determined

that the patterns of development were very much biased in favor of the state, especially inpre-reform China. The state took upon itself the ultimate authority and discretion toinstitute development and resource distribution very much in its own interests. Financial owswere mostly directed to generate resources as needed and any surplus was siphoned off to favoredsectors, all in the best interest of the state at the expense of any other economic rationale and ofcivilian interests. The link between the state and economic development had becomepathologicalthe interests and continued well-being of the state itself were intertwined withthe maintenance and reinforcement of state-directed development and of high levels of resourceextraction. Under-urbanization was unavoidably associated with state-biased development, asoutlined earlier.

4.2. Economic reforms and urbanization

Some elements of the Chinese economy have undergone reform since the late 1970s because ofthe lackluster economic performance resulting from intrinsic systemic problems. Behind theofcial gures of high growth in agricultural and industrial gross outputs driven by highinvestment were economic inefciencies, deciencies in supply, an acute imbalance between heavyand light industries, and an extremely slow growth of per capita income, both rural and urban. Asdocumented by Chen (1990, p. 2), out of a total of 600 billion yuan capital investment madebetween 1958 and 1978, one-third was wasted because of mistakes in planning, one-third wasnever translated into productive capacity, and only one-third had any real practical result. Duringthe period 19701978, the national income produced by per 100 yuan of xed assets was 35 yuanon the average, similar to the level of the early 1950s. Rural income at constant prices was largelystagnant, rising from 103 yuan per person in 1957 to no more than 113 yuan per person in 1977.Eight hundred million farmers had only 76 yuan annual income per person, and 25% of them hadless than 50 yuan and less than 3000 catties of raw grain per person. The wages of state workershad remained virtually frozen for the 20 years after 1960. These domestic problems, together withthe new perception, on the part of the leadership, of the international environment and of Chinas

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role in the world, gave impetus to reforms of the Maoist economic system (Chen, 1990; Gao,1998).Economic reforms were initially couched primarily in terms of eradicating inefciency within a

basically unchanged system. Nonetheless, reforms have created a series of sequences that havegradually altered the institutional base of state control and undermined the states despotic powerover the path of development. The original idea of the reform was to decentralize the previoussystem of centralized control, offering more decision-making autonomy and material incentives tolocalities and individuals, in the hope of improving overall efciency and of invigorating thesocialist economy. Material incentives were introduced in line with these initial intentions. This inturn created appreciable changes of once centralized property rights and partial abandonment ofthe centralized control, though there had been only timid moves to transform the ownershipanatomy. It also created growing consumer pressures on readjusting the ratio between investmentand consumption, after years of having suppressed consumption, and, therefore, the balancebetween heavy and light industries, which had favored the former since the early days of the PRC.Given a necessary link between material incentives and market forces, the introduction of materialincentives, in effect, generated changes not only in the structure of the economy but also in its day-to-day operations. A variety of modications of the earlier economic institutions, from thedifferent kinds of incentive contracts, at one time, to the more recent various risk-bearingschemes, were promoted. Market forces have gradually led to the restructuring of the nature ofChinese economic system and nowadays have more and more inuence on the course of economicdevelopment. To be sure, the state capacity to regulate ruralurban migration has dwindled andstate control over urbanization is no longer all-inclusive. Changes in development strategies arecreating new channels of ruralurban migration that is driving up urbanization.As the Chinese economic system becomes more and more marketized and migration is more

and more a matter of individual initiative in the transitional era, one is forced to raise questions asto the similarities and differences between the new patterns of Chinese urbanization and those inestablished market economies, and to the relevance of Western migration and urbanizationtheories to the Chinese case. In other words, would systemic changes lead to the end of under-urbanization, as Szelenyi (1996) predicted?At the micro-level, there seems to be some evidence in China to support the arguments of

various Western theorists who assume migration behavior to be mainly motivated byeconomic rationality based on personal knowledge for perceived realities. Many studieshave suggested that a variety of incentives, usually referred to as push and pull factorsin accordance with neoclassical macro-economic theories, have been largely responsible forthe extent of ruralurban migration in todays China. These factors include, above all, therelative lack of opportunities and the pressure to nd a way out of the huge pool of surplusrural labor and income and social disparities between one region to another, as well asbetween city and country. Migrants are self-selected with regard to their demographic andsocial characteristics. Most ruralurban moves in the reform period are initiated by personalor family decisions, either for income maximization or risk minimization. A given individualscultural background and social network play a signicant facilitating role in ruralurbanmigration, which is what is postulated by network theories. It is easily observable thatmigrant laborers in the Chinese urban labor market are sharply segregated in the variousinstitutional settings they come into contact with (Chan, 1996; Wang, 1997) and that occupational

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and social subgroups are emerging among them (Ma & Xiang, 1998). The situation of migrants inChina resembles those of undocumented workers in Western cities as adduced in one oranother Western theory of social segregation. The impression seems justied that Chineseurbanization will nally fall into line with the patterns found in other market economies and thatWestern theories, by implication, will be somewhat applicable.Despite the fact that Chinese urbanization in the new era exhibits many similarities to

corresponding phenomena in other market economies undergoing similar processes, at the macro-level it also manifests unique features that are the resultant of holdovers from the old system andsystemic change introduced under the rubric of economic reform. One cannot view thetransformation of an economic system over time without taking into account its initial state. TheChinese economic system is evolving with the persistence of the old political structures and theirsocialist labels. Despite considerable changes, the Chinese economic system has preservedimportant socialist components. As of now, at least, a diversity of property forms cannot bedeveloped outside the framework of public ownership. The national economy over the past twodecades has operated within an institutional environment where preexisting bureaucraticregulatory mechanisms have only been partially demolished but effective new market mechanismshave not yet taken root. The curious mixture of socialist and market elements in the Chinesesystem is such that only selected features of Western models are readily applicable. The causalfactors underlying the current patterns of urbanization in China, as a result, are rather unlikethose to be found in ordinary market economies.There are, of course, many good reasons the implementation of economic reforms in China has

been somewhat slow. There are always forces for keeping the status quo, above all, to forestall anychallenge to established interests. The Party/state had been accustomed to playing a powerful role.Substantive economic reform requires turning authority over to managers and to impersonalmarket forces and a concomitant reduction in the powers of Party bureaucrats. In a real sense,therefore, it is difcult to fully transplant market mechanisms into a planned system. In addition,the Party wants to minimize the risk of political unrest. The need for stability means that anyreform must balance the interests of the various groups who might benet disproportionately. Thecombination of a still relatively underdeveloped economy with the huge size of the populationmakes the state reluctant, in practice, to indulge in restructuring of its economic system at theexpense of social stability. Taking these factors into account, one can expect that thetransformation of the Chinese economic system will proceed only incrementally rather than inone radical step. In this context, the ongoing transformation has maintained the legitimacy ofstate control and limited the possibilities of untrammeled development.One can nd evidence to support a persisting inuence of the old system alongside the expanded

role of marketization in the urbanization process. The coexistence of both hukou and non-hukouurban migration in the reform period is an example to illustrate the strong likelihood that plan aswell as market factors are at work (Chan, Liu, & Yang, 1999). The substantial socioeconomicdifferences associated with these two types of migration suggest the need for caution with regardto the explanatory power of Western theories in the Chinese context. This peculiarity has leadsome to recommend a disaggregated, dual approach to the study of the processes of migration andurbanization in todays China (Chan, 1999; Chan et al., 1999). This is an attractive approach, forit appears to be more realistic than the more usual aggregated approaches. Nonetheless, it mightbe difcult to jump from the plane of observable phenomena in contrast to a more general theory

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of Chinese urbanization from the standpoint of a single political and economic regime underwhich ruralurban migration is neither wholly plan-driven nor wholly market-driven.It is also less clear, judging from what we have seen so far, that development has moved

decisively away from the earlier state-biased pattern. But it is fairly evident that state-directedinuence on development is proving far less malleable in reality than in theory. Though not asstrong as before, the function of the state with regard to the economy is not all that different frompre-reform days when it comes to deciding development priorities and regulating the direction ofdevelopment, a fact reected by the perennial failure to streamline government bureaucracy (Liu,1998). Economic growth, still characterized by quantity rather than quality, has not changed somuch in nature as in magnitude (Gao, 1998). Financial ows are mainly directed by governmentat various levels, though no longer fully managed from the central government and not necessarilyoriented in favor of heavy industry. Banks, as nancial agents of the government, still conductmore activities driven by top-down policy than purely commercial business. Key economicresources are controlled by government bureaucrats. Another new round of the reform startingfrom the late 1990s is again forced into a pattern of incremental experimentation in the absence ofany way to draw upon the practical experience of other transitional economies. It is hard topredict, on a priori ground, whether the entire economic system will be remade on the Westernmarket model and how far development will end up diverging from the earlier pattern. It will beyears, if not generations, before we can conclude whether under-urbanization, once closely relatedto state-biased development, would nally end.

5. Concluding remarks

This study seeks to understand Chinas under-urbanization after 1949 in terms of thefundamental characteristics of the Chinese economic system. In contrast to the thrust ofprevailing explanations, where industrialization strategies alone are taken as fundamental inexplaining what we nd evolving through time, we try to understand the patterns of urbanizationunder the constraints of the Chinese socialist system. We have attempted to demonstrate how theeconomic system acts as an important determinant of urbanization in China. We believe that thetrends and patterns of Chinas urbanization in the entire trajectory of development, especiallysince the economic reforms, cannot be meaningfully explained by referring only to the contents ofdevelopment strategy. Instead, the processes and consequences of Chinas urbanization can beproperly understood when the systemic characteristics are comprehensively examined. Our work,of course, is not to impugn the credibility of the established hypothesis, but rather to link it up toa broader perspective for the formulation of a comprehensive theory of urbanization undersocialism.We have viewed state control and state-biased development as two coherent and interrelated

features of the Chinese economic system. To build up socialism, China went through arevolutionary transformation when it was still at a low level of economic development. While thechange brought about a new system, it created appalling destruction at home and was centeredaround adversaries abroad. Restructuring necessitated state controls and resulted in state-biaseddevelopment, carried out by means of a planned economy with high growth rates in industrial andmilitary output. Urbanization was inevitably impacted in the process.

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We have perceived that the states role in development is fundamentally constrained by thenature of the Chinese economic system where the public ownership is decisive. Socialist ownershiprelations affected urbanization by legitimizing, empowering, and materializing state control andby initiating state-biased development. Therefore, the pace of urbanization was essentiallyshaped by the nature of the system and not simply by the states intention to slow urbanization.Policy choices were constrained, in fact, by the nature of the system and should not be judged onlyon the grounds of what the leaders wanted. Under-urbanization was an inevitable butunintentional outcome of other converging choices with regard to ownership relations.Our approach for interpreting Chinas under-urbanization should serve to stimulate the

formulation of a theory of socialist urbanization applicable both to the regime of classic socialismand to the current period of economic reform. Current explanations represented at least aplausible story of some economic policies and the political economy of sectional interests atdifferent moments historically, but the story that had described seemed not to be consistentlyrelevant to the PRC reality over a whole development course. While addressed rst to the pre-reform system and the early decades of urbanization in China after 1949, the approach establishedhere should be also valid in any attempt to understand the determinants of Chinas urbanizationin the ongoing period of transition and beyond. During the current reform era, state controls andstate-biased development have persisted, although weakened in degree and changing in form.Nonetheless, the new features of urbanization in post-reform China have to be seen as bound upwith the legacy of the pre-reform system. Our approach allows for the impact of systemic changeson the level and characteristics of urbanization. A full understanding of the evolution of Chinasurbanization in the reform era is therefore likely to prove elusive, if not impossible, withoutadequate consideration of changes in systemic characteristics posited in this paper.Looking ahead, there are areas for further research. First, there is a clear need for continued

study of the systemic characteristics of the Chinese economy because this is crucial to anyunderstanding of urbanization on a case-by-case basis. The impact of such characteristics, ingeneral, has been somewhat neglected, particularly in the context of socialist and transitionalregimes. As urbanization is a major feature of economic development and modernization, it islikely to be affected by any systemic factors involved in these processes. Two prominent elementsof the Chinese system, state control and state-biased development, which dictated signicantpatterns of constraints and politicized the urbanization process, are still felt to this day, asdemonstrated in the foregoing discussion, though the specics inevitably vary from time to timeand from place to place. Chinas economic system as a whole has been halfway between a plannedand a market nature. The effects of continuity and change in the context of state control and state-biased development on urbanization in the transitional period merit further studies.Second, the Chinese experience needs to be placed in a comparative perspective to enable us to

see points of similarity and dissimilarity between the system in China and that in other economies.The Chinese road to urbanization as affected by the systemic transition invites such a comparison.But a common fallacy in China studies is to try explaining the Chinese case in terms of Westernconcepts without a careful analysis of systemic differences. Comparisons between China and theother so-called socialist countries, on the one hand, and between China and the West, on theother, are woefully inadequate, yet they are taken for granted, just the same, in much of theliterature. Thoroughgoing interpretations of the contrasts and comparisons between Chinese andWestern or other non-Western economies are still scarce. In the absence of a suitable comparative

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perspective, the picture of urbanization in China would be notably incomplete. A betterunderstanding of the Chinese experience and a better basis for policy formulation in the futurecannot get along without a proper account of the differences among the causal factors underlyingwhat, at the rst sight, appear to be observable similarities.

Acknowledgements

This paper is a partial product of the project Reconsidering ruralurban migration in Chinasupported by Mellon Seed Grant, Center for Studies in Demography and Ecology, University ofWashington and Chester Fritz Fellowship, Jackson School of International Studies, University ofWashington. We would like to thank Professor Kam Wing Chan, University of Washington, forhelping to think through issues of this paper.

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Documents

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