City chickens and country eggs

AS IT adjusts to the end of its run of sustained, double-digit rates of annual economic growth, China is staking a great deal on the idea that growth and urbanisation are linked. It has made continued urbanisation a pillar of the governments long-term strategy for rebalancing. But policymakers who put so many of their hopeful eggs in the this basket must also consider a vexing chicken-and-egg question: is it urbanisation that causes growth, or is it the other way round? In a paper released in July, two scholars argue that the direction of causality likely runs from growth to urbanisaton, rather than vice versa.

There are caveats galore about their findings, especially as they relate to China. The scholars, Anett Hofmann of the London School of Economics and Guanghua Wan of the Asian Development Bank,House members want California egg measure removed from farm bill,seek not only to determine the impact of economic growth on urbanisation, but also that of industrialisation and education. And, while they seek and find indications that growth causes urbanisation, they do not themselves investigate the reverse sort of causality. They leave off noting instead that attempts to identify a causal effect of urbanisation on growth have so far been unsuccessful.

More relevant still is the fact that China is not betting the farm, as it were, on urbanisation. True, some influential figures have hinted at the belief that it might be sufficient as a spur to future growth. For instance Zhang Liqun, of the State Councils Development Research Centre, recently said that “the growth momentum gained from the processes of industrialisation and urbanisation alone will support the country’s steady growth.”But the senior leader most closely identified with the idea is the current prime minister, Li Keqiang, and he has outlined a more nuanced position. Elaborating his position in an article published in May in a theoretical journal of the Communist Party, Qiu Shi (here in Chinese), Mr Li wrote that China is experiencing exponential urban growth which will spur investment and consumption and play a significant role in expanding domestic demand.

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