China's Urbanization in The New Round of Technological Revolution, 2020-2050

China’s Urbanization in the New Round of
Technological Revolution, 2020–2050
Based on a major research project undertaken by a team at the Institute of

Market Economy of Development Research Center of the State Council, Peo-
ple’s Republic of China, a project which included extensive survey research,
and involved also many international scholars including researchers at the
World Economic Forum Research Center and OECD, this book explores the
possible future trajectories for urbanization in China. The book argues, draw-
ing on examples from around the world, that technological advances have a
huge impact on the exact nature of urbanization, and that institutions and
policies have a significant role too, institutional arrangements such as modern
education systems, patents and intellectual protection, and modern corporate
systems. The book goes on to assess how current technological advances are
likely to affect future urbanization and concludes by setting out how China
should seize the opportunities from new technological advances and the asso-
ciated transformation and upgrading of economic and social structures, and
coordinate the development of “technology, factors of production, industry
and institutions” as an integrated engine for high quality future urbanization.
Wang Wei, Deng Yusong, Niu Sanyuan, Wang Ruimin, Shao Ting, Zhao Yong
and Liu Xin are all researchers at the Institute of Market Economy, Develop-
ment Research Center of the State Council, Beijing, China
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78. China’s Urbanization in the New Round of Technological Revolution,

2020–2050
Impact, Prospect and Strategy
Wang Wei, Deng Yusong, Niu Sanyuan, Wang Ruimin, Shao Ting,
Zhao Yong and Liu Xin
China’s Urbanization in the
New Round of Technological
Revolution, 2020–2050
Impact, Prospect and Strategy
Wang Wei, Deng Yusong, Niu Sanyuan,

Wang Ruimin, Shao Ting, Zhao Yong
and Liu Xin
Institute of Market Economy (IME),
Development Research Center (DRC) of the State Council,
People’s Republic of China
First published 2024
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Names: Wei, Wang, author.
Title: China’s urbanization in the new round of technological
revolution, 2020-2050 : impact, prospect and strategy / Wang Wei, Deng
Yusong, Wang Ruimin, Niu Sanyuan, Shao Ting, Zhao Yong, Liu Xin.
Description: Abingdon, Oxon ; New York, NY : Routledge, 2024. |
Series: Routledge studies on the chinese economy | Includes
bibliographical references and index.
Identifiers: LCCN 2023054833 (print) | LCCN 2023054834 (ebook) |
ISBN 9781032663142 (hbk) | ISBN 9781032663173 (pbk) |
ISBN 9781032663180 (eb)
Subjects: LCSH: Urbanization--China. | China--Economic conditions. |
Technological innovations--China.
Classification: LCC HT384.C6 W447 2024 (print) | LCC HT384.C6
(ebook) | DDC 307.760951--dc23/eng/20240309
LC record available at https://lccn.loc.gov/2023054833
LC ebook record available at https://lccn.loc.gov/2023054834
ISBN: 978-1-032-66314-2 (hbk)
ISBN: 978-1-032-66317-3 (pbk)
ISBN: 978-1-032-66318-0 (ebk)
DOI: 10.4324/9781032663180
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by SPi Technologies India Pvt Ltd (Straive)
Contents
List of figures vii

List of tables ix
Foreword x
PART I
A historical review of technological revolutions and urbanization 1
1 Process, typical models, and inspirations of global

urbanization 3
2 Impact of technological revolutions on urbanization 33
3 The role of institutional policies in urbanization

and technological revolution 55
PART II
A new round of technological revolution and global urbanization 81
4 Background, traits, and trends of the new technological

revolution 83
5 Impact of the new technological revolution on economic

development 103
6 Global urbanization trends under the new technological

revolution 115
vi Contents
PART III
The new round of technological revolution and China’s
urbanization 131
7 Process, achievements, and issues of China’s urbanization 133
8 Impact of the new round of technological revolution

on China’s urbanization 163
9 China’s urbanization (2020–2050) in the new round of

technological revolution 180
10 Strategic path and policies for China’s high-quality

urbanization in the new era 191
Postscript 212
Index 216
Figures
1.1 Criteria for Defining a City 4

1.2 City Population and Urbanization Rate of all Continents (2018) 5
1.3 The Northam Curve 6
1.4 Share of Industry and Services in GDP (South Korea & Japan) 19
1.5 Urbanization Rate in Latin America (1950–2050) 21
1.6 The Proportion of Primary, Secondary and Tertiary
Industries Latin America (1965–2022) 22
1.7 Share of Employment in the Informal Sector in Argentina,
Brazil and Mexico (1980–2008) 22
1.8 Industrial Structure of Typical Countries with an
Urbanization Rate of 50% 28
2.1 Impact of the First Technological Revolution on
Urbanization and Urban–Rural Relations in Britain 50
2.2 Impact of the Third Technological Revolution on Urban–Rural
Relations 52
3.1 Changes in Barriers of the Service Industry in Major Developed
Countries (1998–2008) 66
3.2 Correlation between the Share of the Service Industry
in Total Added Value and the Degree of Marketization 67
4.1 Size of Real Economy Empowered by Artificial Intelligence
(100 million Yuan, 2018–2022) 91
4.2 Installed Power Generation Capacity Worldwide by Source
under IEA Policy Scenario 93
4.3 Outlook of Driverless and Intelligent Vehicles 97
4.4 Concept of MaaS System 99
5.1 Changes of Global Cross-Border Bandwidth 106
5.2 Share of China’s High-Speed Rail Passenger Trips in Total
Railway Passenger Trips (2008–2021) 111
5.3 Global Installed Capacity of Renewables (2009–2022) 111
6.1 Urbanization Rate of Major Advanced Economies (2018) 116
6.2 Urbanization Rate of All Continents 117
6.3 Urbanization Ratse of Major Asian Countries 118
6.4 Urbanization trend in Selected African countries 119
viii Figures
6.5 Proportion of the 300 Metropolitan Areas in Global Growth

(2014–2016) 120
6.6 Proportion of Nominal GDP, Employment and Population
of the 300 Metropolitan Areas (2016) 121
6.7 Proportion of Population by City Size 122
7.1 Changes of China’s Urbanization Rate: 1949–1978 134
7.2 Changes in China’s Industrial Structure (1952–1978) 135
7.3 Changes of Urbanization Rate (1978–1996) 136
7.5 Changes of urbanization rate (2000–2011) 138
7.7 Changes of Urbanization Rate (2012–2022) 141
7.9 Permanent Urban Residents and Urbanization rate
in China (1949–2022) 143
7.10 Urban Area and Built-up Areas in China 143
7.11 Number of Cities in Different Population Scale in China
(2000–2021) 145
7.12 Economic Density of City Clusters in 2018 and GDP
Growth from 1999 to 2018 146
7.13 Changes of Per Capita Living Space in Cities (1978–2021) 147
7.14 Urban Participants of Pension Insurance and Basic
Medical Insurance (1989–2022) 148
7.15 Average Urbanization Rate of Eastern, Central and
Western Provinces (2000–2018) 150
7.16 Features of Spatial Distribution of Population density in
Domestic and Foreign City Clusters (Unit: 10 thousand
people/km) 153
7.17 Local Governments’ Balance of Debt (March, 2018–March, 2023) 155
8.1 Cascade Effect of Online Shopping in China 164
8.2 Transaction Volume of China’s Inbound Cross-border
E-commerce (2012–2019) 170
8.3 China’s Contribution to the Growth of Global Consumption 170
8.4 China’s E-retailing Sales and Growth Rate (2007–2022) 172
8.5 Share of E-retailing in Total Retail Sales of Consumer Goods
(2007–2022) 172
8.6 Industrial Distribution of Chinese Unicorns in 2018 173
8.7 China’s Gini Coefficient, 1981–2015 177
8.8 Income Inequality Index and the Share of Inequality of
Opportunity in China 178
9.1 Average Urban Family Size 184
Tables
1.1 Three Stages of Urbanization and Corresponding Problems 7

1.2 Comparison of Industrial Composition of Large Cities 14
1.3 Contribution of the Service Industry to Economic Growth
(1980–2007) 14
1.4 Structural Change of Added Value of American Service
Industry (1950–2008) 17
1.5 A Comparison of Three Typical Urbanization Models 23
1.6 Technological Revolution and Urbanization 25
1.7 Governance Challenges in Typical Countries with
Urbanization Rate of 50% 29
2.1 Share of Different Markets in British Exports from the Late
17th Century to the End of the 18th Century 40
2.2 U.S. Venture Capital Investment in Internet-related Industries 42
4.1 Technical Parameters of the New Generation of Low-orbit
Internet Constellation 89
5.1 Industrial Chains of Representative Enterprises in the
Digital Age 105
5.2 Comparison of Industry 4.0 in Germany and the US Industrial
Internet 108
6.1 Growth in Urbanization Rate of Major Economies (2010–2018)
(Unit: %) 116
7.1 Population Density Distribution of Selected Cities in 2019 152
9.1 Growth and Structural Changes in 2020–2050: Baseline Scenario 181
9.2 The Share of Added Value in Major Developed Countries
(1997–2017): % 182
9.3 Forecast of Major Economic Indicators in 2050 in the Three
Scenarios 183
9.4 Evolution in Demographics and Family Structure (2020–2050) 184
10.1 The Indicator System to Assess the Quality of China’s Urban
Development 209
Foreword
With technological revolution came urbanization. Successive technological

revolutions have triggered upgrading and evolution of industries, thereby rede-
fining how humans produce and live, empowering the rise of cities, and accel-
erating urbanization worldwide. The current technological revolution, defined
by digitalization, intelligence, green technologies and integrated innovation,
has sown the seeds of novel industries, lifestyles and business models. It prom-
ises profound impacts on global economic and social development and a new
pattern of global urbanization.
Over the past four decades of reform and opening up, China has seized the
strategic opportunities brought by the industrial upgrading and relocation of
developed economies, proactively participated in the global division of labor,
and achieved the largest and fastest urbanization the world has ever seen. In
2022, China’s urbanization rate reached 65.2%, a miraculous accomplishment
in the human history. The confluence of ongoing technological revolution and
China’s high-quality urbanization unlocks a window of opportunity for C hina’s
modernization. Only by seizing the opportunity, can we narrow the gap in
development and stay current with the times. To excel in the fierce international
competition, we must harness the technological revolution, optimize the top-
level design for high-quality urbanization, and coordinate various drivers
including “institutions, factors of production, industries, and technologies”.
China’s Urbanization (2020-2050) in the New Technological Revolution -
Impact, Prospect and Strategy is the fruit of a flagship research project con-
ducted by the Institute of Market Economy of Development Research Center
of the State Council (DRC). It is both forward-looking, innovative and practi-
cal. Drawing attention from Chinese academia and government, and winning
recognition of international organizations and research institutions such as
OECD, World Economic Forum, World Bank, and African Development
Organization, it exerts influence on the deliberation of the urbanization agenda
both at home and internationally.
DRC is a high-end Chinese think tank. Our mission is to conduct in-depth and
future-oriented research on key and challenging issues with systemic and strategic
Foreword xi
significance for long-term economic and social development. By constantly pro-

ducing high-quality research results, we support the Chinese g overnment to make
informed decisions, communicate China’s development stories, and help the
international community better understand our country.
Prof. Long Guoqiang

Vice President
Development Research Center
June 8th, 2023 Beijing
Part I
A historical review of
technological revolutions
and urbanization
One of the greatest inventions in history, city bears the best hopes of mankind.
It not only offers the main venue for people to get together, but also the center
of economic activities and technological innovation, the hub of transporta-
tion, trade, and information flow, and the best platform for public and private
services. Historically, urbanization is the process where the population and
economic and social activities shift towards cities, the way of life and work
changes, economic structure evolves, and social governance keeps improving.
Urbanization in its modern sense started in tandem with technological revo-
lution, thus being propelled by technological advances. Since the 18th century,
humanity has witnessed three technological revolutions, each of which has
triggered systemic and fundamental transformations in production and tech-
nology, nurtured a series of industries, greatly boosted productivity and effi-
ciency, and turned clusters of emerging industries to magnet for factors of
production such as labor, land, and capital. They have not only reshaped
industries and upgraded the economic structure, but also significantly fueled
urbanization. Urbanization is characterized by continuous policy reforms
and innovations. Industry upgrading, underpinned by technological revolu-
tions and the industrialization and commercialization of their outcomes,
requires systems and policies that accelerate the accumulation, relocation and
optimization of factors of production. As a result, unremitting impetus can
be generated to fuel and cluster emerging industries, promote city develop-
ment, and provide institutional groundwork for constant innovation of cities
and future technological iteration. This closes the loop from technological
revolution to industrial revolution, paving the way to a new round of techno-
logical revolution, including the rise of emerging industries, system reforms
and policy innovations, accumulation of factors of production and clustering
of industry, and a higher level of competence in development and innovation
via urbanization.
DOI: 10.4324/9781032663180-1
1 Process, typical models, and inspirations
of global urbanization
One of the greatest inventions in history, city bears the best hopes of man-
kind. It is not only the center of economic activities and technological innova-
tion but also the hub of transportation, trade, and information flow, providing
the best public and private services. A retrospect of urbanization highlights a
process characterized by continuous accumulation of population in cities,
evolution of economic structure, and improvement of social governance.
Since the inception of the first industrial revolution, urbanization has been
gathering momentum. However, the pathway, level, and quality of urbaniza-
tion vary significantly among regions. A clear understanding of the evolution
of urbanization and the path of urbanization in typical countries can help
identify the general pattern and provide inspirations for China’s urbanization
in the new era.
1.1 Definition of urbanization
Urbanization is a complex economic and social process with the focus of eco-
nomic and social development shifting from rural area to cities. Factors of
production such as land, labor, and capital have continuously concentrated in
cities. So have production and lifestyle (The United Nations, 2018).
Definition of cities varies from one country to another, measured by their
administrative division, demographic traits (population size and density), eco-
nomic traits, and urban characteristics (Figure 1.1). Of the 233 countries and
regions in the world, 121 adopt administrative criteria to distinguish cities
from rural areas. Fifty-nine of them, including China, take administrative divi-
sion as the only criterion. Another 108 countries and regions use the size or
density of population to define cities, of which 37 use demographic traits as the
only criteria. However, there is a huge difference where the size of population
is measured as a criterion, with some defining a settlement with more than 200
people as a city, while others adhering to a bottom line of 50,000 people. For
example, the United States defines a city as an area with more than 2,500 resi-
dents, whereas in Greece, a city is defined as an autonomous region with more
than 10,000 inhabitants in its population center. Thirty-eight countries and
regions use economic traits as part of the criteria to define a city. Sixty-nine
DOI: 10.4324/9781032663180-2
4 A historical review of technological revolutions and urbanization
140
121
120
108
100
Number of criteria
80
69
59
60
40 37 38
20
8 12
0
Administrative Size and density Economic City facilities Unclear
division of population characteristics
As part of the criteria As the only criterion
Figure 1.1 Criteria for Defining a City.

Source: 2018 The United Nations. World Urbanization Prospects 2018.
refer to urban facilities, such as paved streets, water supply system, drainage, or
electric lighting, as part of the criteria. For example, in Nicaragua, a city is
defined as an administrative center with paved streets, electric lighting, and
more than 1,000 inhabitants. There are 12 countries and regions that do not
have clear criteria yet to define a city.
Box 1.1 A List of Features of Cities
Archaeologist Vere Gordon Childe makes a list of features that are

unique to cities based on the concept of urban civilization.
1. The size of population. The number of residents is larger than that

of any period in history.
2. The structure of population. Specialization of occupations (accom-
panied by a shift away from the original agricultural order) means
that full-time administrative staffs and craftsmen can be employed.
3. Public capital. The advent of public capital can help build iconic
public buildings and support professional artists.
4. Records and precise science. The need to preserve records gives rise
to written texts and mathematics, both of which are closely associ-
ated with urban civilization.
5. Trade. Trade not only drives urban innovation, but the networks it
forms have become landmarks of urbanization.
Source: Paul L. Knox, Linda M. McCarthy. Urbanization:
An Introduction to Urban Geography. Beijing. Publishing
House of Electronics Industry, 2016.
Process, typical models, and inspirations of global urbanization 5
It should be noted that the term “townization” is mostly used to express

similar concepts in China. According to section 2.0.6 of the Standard for Basic
Terminology of Urban Planning of the People’s Republic of China (GB/T
50280-98), released on August 13, 1998 and effective on February 1, 1999,
urbanization is defined as “the historical transformation of human production
and lifestyle from rural to urban areas, a process characterized by the reloca-
tion of rural residents to cities and the continuous development and improve-
ment of cities”. It is also known as “townization” and “metropolitanization”.
Therefore, we regard “urbanization” and “townization”1 as identical concepts
in nature, except for the fact that “townization” puts emphasis on “towns” as
important vectors for the relocation of rural population and industrial devel-
opment. For the convenience of discussion, “urbanization” is used uniformly
in this book.
In 2018, the global urban population reached 4.22 billion, with an urbani-
zation rate of 55.3%. Among them, Asia had the largest urban population of
2.266 billion, but its urbanization rate was only 49.9%. North America, Latin
America and the Caribbean, and Europe ranked the highest with urbanization
rate of 82.2%, 80.7%, and 74.5%, respectively. Africa was placed at the bottom
with 42.5% (Figure 1.2).
Over the past 200 years, urbanization has been one of the most persistent
and significant global trends, with the world’s urban population doubling to
1.75 billion between 1950 and 1980. The proportion of urban population to
the world’s total population increased from 30% to 39%, meaning that 4 out of
every 10 people worldwide lived in cities. The world’s urban population grew
more rapidly thereafter. In 2008, for the first time in history, the number of
urban dwellers surpassed that of rural dwellers, reaching 4.2 billion, 55% of the
25 90.00
22.66
80.68 82.17 80.00
20 74.45
68.17 70.00
City population (100 million)
Urbanization rate (%)
60.00
15
49.86 50.00
42.52 40.00
10
30.00
5.48 5.53 5.26
5 20.00
2.99
10.00
0.28
0 0.00
Africa Asia Europe Latin America & North Oceania
the Caribbean America
City Population (Left vertical axis: 100 million) Urbanization Rate (Right vertical axis: %)
Figure 1.2 City Population and Urbanization Rate of all Continents (2018).

Source: The United Nations. World Urbanization Prospects 2018.
world’s total. By 2050, 68% of the world’s population is expected to live in cit-
ies (The United Nations, 2018).
1.2 Stages of urbanization
In the millennia of agricultural society, the vast majority of the population
engaged in farming and lived in the countryside. Located sporadically in the
vast span of farmland and villages, cities served as the centers of administra-
tion, religious faith, defense and trade, and their residents only accounted for
a fraction of the total population. Urbanization in its modern sense only began
after the 18th century industrial revolution and the successive industrializa-
tion, marking the greatest historical change in human society.
Ray. M. Northam, an American scholar on urban geography depicted urban-
ization as a flattened S curve and proposed the “urbanization curve”2 in 1979
(Figure 1.3). With two points of inflection at 30% and 70%, the curve divides
urbanization into three stages, namely the initial stage with low level and slow
speed of urbanization (<30%), the acceleration stage with rapid assembly of
population in cities (30%–70%), and the advanced stage with decelerated or
stagnant growth of urban population after a high level of urbanization (>70%).
Generally speaking, the drivers, industrial structure, and corresponding
issues of urbanization vary across the three stages (see Table 1.1).
The initial stage begins when the urbanization rate exceeds 10%. During this
stage, industrialization gathers steam. Light industry becomes the main driver
of economic growth and urbanization. The share of industry in the whole
economy rises rapidly, whereas that of service industry grows at a lower rate.
Thirty percent of urbanization rate generally marks the beginning of the
acceleration stage mainly driven by heavy industry, a process that lasts until the
Figure 1.3 The Northam Curve.

Table 1.1 Three Stages of Urbanization and Corresponding Problems
Stages Level and Speed of Drivers of Industrial Structure Problems/Trends

Urbanization Urbanization
Initial Stage 10%–30% Light industry Agriculture is the Poor infrastructure

Rural population moves mainstay, Urban mortality rate is
slowly to cities supplemented by even higher than in the
light industry rural area
Intermediate Acceleration period 30%–50% Heavy and Dominated by heavy Traffic congestion,
Stage driven by Rural population moves chemical and chemical housing shortage,
industrialization rapidly to cities industry industry environmental
deterioration, and
suburbanization
A period driven by 50%–70% Producer and The service sector and Improved urban
the service Urban population consumer emerging industries infrastructure and
industries and keeps growing though services gain an upper hand sanitation, loss of
emerging by a lower speed development momentum
industries due to the decline of
legacy industries
Advanced Stage Over 70% Informatization, Dominated by service
City population grows globalization, and high-tech
slowly or stagnates and innovation industries
Source: DRC IME.
urbanization rate reaches 50%. As more people migrate to cities, the division
of labor gets more specialized, and the production methods become more
complex. With growing demand of urban residents for various types of ser-
vices, and of industrial sectors for intermediate services, the service sector
moves to a fast track for the generation of value-added and gains importance
in economic growth. At this stage, urbanization is increasingly dominated by
the service sector and emerging industries. It should be noted that this period
is critical as the quality of urbanization diverges at the watershed of 50% of
urbanization rate. Accelerated urbanization turbocharged by heavy industry
usually features urbanization rate between 30% and 50%, where industrial
development attracts rural population to cities to fuel rapid urbanization.
However, the accelerated development comes with a series of problems such as
traffic congestion, housing shortage, and environmental degradation. When
urbanization rate reaches 50%, cities gradually rely on the service sector for
development. At this stage, institutions and policies are essential to the quality
of urbanization, if they can promote urban infrastructure, sanitation, quality
of life, and the development of high value-added service industries and emerg-
ing industries.
Urbanization rate above 70% heralds the advanced stage. In this stage, the
economic structure continues to be dominated by the service sector. High val-
ue-added service industries and high-tech industries remain the leading agent
of urbanization.
1.2.1 The initial stage of urbanization
In the millennia of agricultural society, the vast majority of the population

engaged in farming and lived in the countryside. Located sporadically in the
vast span of farmland and villages, cities served as the centers of administra-
tion, religious faith, defense and trade, and their residents only accounted for
a fraction of the total population. Urbanization only started when the urbani-
zation rate reached 10%. The initial stage of urbanization was characterized by
the flow of rural population into cities, attracted by textile industry and other
light industries. While the number of cities and urbanite increased, urban
infrastructure lagged behind, with poor sanitary conditions and a higher mor-
tality rate in cities than in the rural area. Urbanization at the initial stage was
relatively slow. During this period, the layout of cities was mainly determined
by endowment of coal and other energy reserves and access to railroad and
other transportation facilities. Proximity to energy reserves or easy access to
energy by convenient transportation became an important prerequisite for
industrialization.
The United Kingdom has been the pioneer of urbanization in its modern
sense. The Industrial Revolution in the 18th century brought about fundamen-
tal changes in production methods and productivity, transforming the scale of
industries and creating huge pockets of population. Revolution of the textile
technology was the prelude to the Industrial Revolution. Machines replaced
manual labor, doubling productivity. In 1764, the British engineer Hargreaves

invented the “Spinning Jenny”. In 1769, Arkwright invented water frame.
Since the new device can only operate with a fall in water stream, spinning
mills based on a division of labor and cooperation began to replace family
workshops. Watt’s invention of steam engine made it possible for the first time
to mechanize the entire textile process in factory, further empowering the
development of factories and assembly of population. When each depart-
ment of a large factory was located within 1/4 miles from the power center, the
steam engine reached its peak efficiency. Each spinning machine or loom must
be driven by a central steam engine via shafts and belts. The more concen-
trated the large equipment was, the greater power efficiency would be achieved.
A factory could hire up to 250 people. Factory owners provided housing to
save commuting time and extend working hours. The number of city dwellers
grew with new factories at the center. 10 such factories, together with their
component workshops and service facilities, could constitute the backbone of
a boomtown. Larger cities and towns, in turn, provided a well-organized labor
market for industrial development, offering factory owners more flexibility to
adjust their staff according to market demand, hence effectively cutting
labor cost.
Natural resource endowment, location and transportation directly deter-
mine the distribution of industries and the development of cities at the initial
stage of urbanization. In the early days of the Industrial Revolution, water-
powered textile machines could not operate during the dry season. But coal-
fired steam engines can operate in all weather conditions. Factories could
produce year-round if they were close to coal mines or could obtain coal
through affordable transportation. The most important endowment for a city
to assemble industrial facilities and population was direct connection to coal
production sites.3 Industrial centers emerged around coal fields or in valleys
connected to coal fields by rail, such as Lille in France, Ruhr in Germany, and
the British industrial area with Birmingham as its center.
The Industrial Revolution gave birth to a new type of city—industrial city,
which was not less meant for military, political or trade purpose than for the
production and sale of goods. Industrial development required exactly what
cities could provide: hardware facilities such as factories, warehouses, stores
and office buildings, transportation networks, large labor markets and con-
sumer markets. Meanwhile, industrialization altered the skyline, internal struc-
ture and functions of cities. Raw materials and finished products were
transported mainly by train, turning railroad transportation into a catalyst for
urban development.
By the 19th century, urbanization driven by the Industrial Revolution and
industrialization rippled beyond the United Kingdom. European countries such
as Germany and France, as well as North America, embarked on the initial
stage of urbanization. By 1840, urbanization rate in the United States reached
10.8%. During this stage, the number of cities soared in the world. In 1800, only
5% of the 1 billion world population lived in cities. By 1850, however, the
proportion reached 16%, with 900 cities each home to 100,000 residents and
above. Thanks to the massive inflow of European migrants and the export of
primary products such as agricultural produces and minerals, some countries in
Latin America also entered the initial stage of urbanization. By 1925, urban
population reached 25% of the total population in Latin America.
In 2018, more than 20 countries in the world, mainly in Asia and Africa,
were still in the early stage of urbanization. For example, urbanization rate was
only 13% in Burundi in Africa, and below 20% in Niger, Malawi, and Sri
Lanka, etc.
In general, the early stage of urbanization was defined by the increasing
number of cities. Among innumerable villages, only those privileged with easy
access to resources or transportation were urbanized. While the number of
cities increased rapidly, their internal structure was not optimized, with rela-
tively monotonous functions and limited scale of individual cities.
1.2.2 The intermediate stage of urbanization
Cities enter the intermediate stage of urbanization characterized by fastest

expansion after their urbanization rate reaches the 30% point of inflection. In
this stage, large population migrate to cities thanks to the heavy and chemical
industry boom. The secondary industry dominates the national economy,
while the tertiary industry that provides productive services and consumer ser-
vices also flourishes. Improvement of urban infrastructure, technological pro-
gress and better sanitation bring about a new model of population growth with
high birth rate and low death rate. Urban population grows rapidly in tandem
with the expansion of urban area. Urban population stands for 60%–70% of
national or regional total. This acceleration stage can be subdivided into two
periods by the 50% watershed.
1.2.2.1 The accelerated period dominated by heavy and chemical industry

(urbanization rate between 30% and 50%)
When urbanization rate is between 30% and 50%, the development of heavy
and chemical industry attracts a large number of rural migrants, and the sec-
ondary industry becomes a dominant sector of the economy.
In 1800, with an urban population above 30% of its national total, the
United Kingdom entered the accelerated stage. By 1851, its urbanization rate
had exceeded 50%, making it the first country to become an urbanized society.
However, it was not until the advent of the Second Industrial Revolution in the
1870s that countries such as Germany and the United States caught up with
the development of heavy industry and entered the accelerated stage.
In terms of industrial structure, iron and steel, machinery chemical and
other sectors of heavy industry replaced light industry as the mainstay during
the acceleration period. After the 1870s, the invention of generators and elec-
tric motors, and the emergence of long-distance transmission technology
propelled the rapid development of electrical industries. Electricity has since

been widely used in production and daily life. The advent and dissemination of
internal combustion engine enabled the automobile and aircraft industries to
take off, and fueled the rise of the oil industry. The chemical industry was an
emerging sector in this period. Starting from the 1880s, chemicals such as
ammonia, benzene and synthetic fuel were extracted from with coal. Plastics,
insulating substances, synthetic fibers and smokeless gunpowder were also
invented and mass produced. The new technological revolution forced the
United Kingdom, the first industrialized country, to upgrade its economic and
industrial system and factory equipment at a higher “menu” cost. However,
Germany, the United States, and other late-comers of industrialization man-
aged to overtake the United Kingdom by improving factory equipment at a
faster speed and a lower cost. In the 1950s, Japan, South Korea, and other then
developing countries started to adopt heavy industrial technologies with finan-
cial and technical aid from the United States to make full use of their compar-
ative advantage in labor force. They enjoyed over a decade of robust growth
with urbanization accelerated by industrialization, and quickly surpassed the
50% point of inflection.
By 2018, Asia and Africa were still in the accelerated period of urbanization
driven by industrialization, with urbanization rate still below the 50% thresh-
old, at 49.9% and 42.5%, respectively.
1.2.2.2 A period dominated by the service industry (urbanization rate between

50% and 70%)
Fifty percent of urbanization rate indicates that an area has become an urban-
ized society. The productive and consumer services begin to flourish, attracting
more rural people to cities. Urban infrastructure and sanitation begin to
improve substantially.
Industrialization in Britain preceded its urbanization, as industrial develop-
ment attracted a large number of rural people to cities for a living. But there
were no precedents to go by for urban construction. Governments had little
experience. Urban housing was so scarce that industrial workers flocking to
cities lived in makeshift shelters or ramshackle farmhouses provided by fac-
tory owners, with not less than four people crammed into a single room.
Sanitation was also very poor. Garbage was dumped everywhere. Drainage
was a luxury. Foul smell pervaded the air, turning settlements into breeding
grounds for cholera and other infectious diseases. The mortality rate in the
cities even exceeded that in the countryside, and infant mortality rate was
particularly high. Poor infrastructure curbed urban development. In the
1840s, London saw the rise of the “model dwelling” movement, where chari-
table organizations such as the Metropolitan Association for Improving the
Dwellings of the Industrious Classes (MAIDIC) and the Association for
Improving the Living Conditions of the Working Class took the lead to
improve housing for the working class. They built model houses that met
minimum legislative standards in architectural structure, amenities, and liva-

bility, and leased them to workers at the lowest possible rental (up to 5% of the
construction cost). More than 30 model housing companies were set up by
developers. Considering the high externality of infrastructure and persistent
short supply resulting from sole reliance on the private sector, the government
stepped in. In the 1860s, the British government stared to provide low-interest
(4%) loans to charitable housing agencies to finance the building of model
houses. This partially relieved overcrowding and improved sanitation in central
London. During this period, Britain and Germany began to improve public
sanitation facilities in cities. They renovated sewer systems, installed pumps,
built ditches and covered drains, so that waste water and excrement can be
drained under the ground. Houses were mandated to provide sewers and toi-
lets. In 1848, the world’s first regulation on public sanitation was enacted in the
United Kingdom.
By 1950, the overall urbanization rate had exceeded 50% in major developed
countries such as the United Kingdom, Germany, and the United States,
marking the start of the second phase of accelerated urbanization. Trams and
private cars greatly extended the commuting range of city dwellers, leading to
a wave of suburbanization in some developed countries. Although the suburbs
still relied on city proper for employment and shopping, they offered lower
density in residence and better living conditions. It took about a century for the
United Kingdom, the United States and other developed countries to move up
the scale of urbanization from 30% to 70%.
Latin American countries had also reached 70% in urbanization by the
mid-1970s through the implementation of import substitution strategies.
Oceania is already at the end of service-dominated phase with urbanization
rate of 68.2%.
In general, the intermediate stage of urbanization is characterized by a shift
from the increase in the number of cities to the expansion of urban areas. In
the first half of the intermediate stage, the division of labor within cities begins
to deepen. The manufacturing industry further develops, becoming the pri-
mary engine of national economy. The number and scale of cities increase
rapidly. But urban governance is also challenged by rapid urbanization. After
the 50% watershed, urbanization enters the second half of its intermediate
stage. Urban infrastructure and sanitation continue to improve, cities gradu-
ally gain more functions, and their carrying capacity is significantly enhanced,
facilitating the expansion of urban scale and gradual optimization of
their layout.
1.2.3 The advanced stage of urbanization
Urbanization rate above 70% suggests that cities have entered the advanced
stage of urbanization. Globally, developed cities with urbanization rate over
70% are generally driven by tertiary industries, especially knowledge-intensive
high-tech industries. Their population growth takes on a new pattern of “low
birth rate and low death rate”. Urban population grows slowly or even stag-
nates. Urban–rural differences are blurring and regions are increasingly inte-
grated. At this stage, the main driving force of urbanization is globalization
and the third technological revolution represented by information technology.
The information technology revolution has amplified regional disparities.
Enterprises can allocate resources and organize production across borders,
and a new division of labor among cities has emerged across the world.
Since the 1950s, the third technological revolution rolled out in the United
States and other developed countries. The information industry originating
from the microelectronics revolution has established presence in both hardware
and software and replaced the energy-intensive heavy chemical industry as the
new pillar of developed countries. The information technology revolution has
also made large enterprises more flexible with siting and production organiza-
tion, and the “time-space compression” effect of new technologies such as just-
in-time manufacturing has strengthened comparative advantages of specific
regions. Removal of spatial barriers has amplified the nuanced differences
among regions in land and labor costs. Division of labor in these industries has
quickly taken place worldwide, with cities in the United States and Western
Europe adopting an industrial structure dominated by high-end manufactur-
ing and services, and heavy chemical industry and labor-intensive industries
relocated to developing countries.
Multinational Corporations (MNCs) have become an important force for
industrial transfer and urban development. New York, London, Tokyo, and
other metropolises have become magnet for MNCs, gaining international
influence and building up high-end service industries as the pillar of the local
economy. With growing scale and complexity, MNCs have to outsource major
functions to specialized service providers. Yet talent pool and information
archive that are essential to the provision of financial service, legal service,
accounting and other specialized services can only be found in world-class cities.
Large cities in the industrial revolution era were mainly traditional manu-
facturing centers. But modern metropolitan areas, in particular world-class
cities, tend to host clusters of service providers, especially those of productive
services. The service sector continues to expand its contribution to economic
growth and employment (Table 1.2).
In the United States, Japan, and other countries where urbanization enters
a stable stage, contribution of the service sector to economic growth exceeds
60% and keeps rising. Among them, contribution of the service industry to
GDP growth in the United States increased from 79.3% in 1980s to 81.6% in
1990s, and jumped to 83.1% between 2000 and 2007. The share in Japan was
63.5% between 1980 and 1990 before surging to 102.5% between 1990 and
2000. Though the figure dropped to 78.9% between 2000 and 2007, Japan
remains highly dependent on the service sector (Table 1.3).
It should be noted that although Latin American countries, measured solely
by the benchmark of 70%, also entered a stable stage of urbanization in the
mid-1970s, most of them fell into the middle-income trap, as they failed to
Table 1.2 Comparison of Industrial Composition of Large Cities: (Unit: %)
City Year Added value of the Proportion of

service sector as a employment in
proportion of GDP the service sector
New York 2005 88.4 90.4

London 2004 89.1 89.8
Paris 2003 84.6 82.8
Frankfurt 2002 83.7 86.7
Tokyo 2005 85.7 80.8
Seoul 2005 73.0 66.4
Singapore 2004 66.4 76.1
Hong Kong SAR 2004 87.6 84.8
Source: China Service Economy Report 2009 (Shanghai University Press, 2010), edited by Xian Chen.
Table 1.3 C
ontribution of the Service Industry to Economic Growth (1980–2007):
(Unit: %)
1980–1990 1990–2000 2000–2007
The United States 79.3 81.6 83.1

Japan 63.5 102.5 78.9
Brazil 37.9 32.4 51.9
Source: World Bank database.
adapt to the new wave of global division of labor and to shift timely from
import substitution to export-driven growth. Their ordeal was compounded by
declining industrial competitiveness and populist distribution policies.
Governance issues accumulated in the intermediate stage, such as housing
shortage, infrastructure bottleneck, urban unemployment, and poverty have
remained uncured in the stable period of urbanization. Brazil, for example,
had an urban population of over 70% in the late 1970s. But the share of infor-
mal employment in cities was high. Its service sector was relatively underdevel-
oped, contributing to less than 40% of economic growth, which didn’t reach
50% until the 21st century.
Box 1.2 How and Why Large Cities Are Advantageous?
Large cities have outstanding advantages in all three micro mechanisms

of sharing, matching, and learning.
Sharing: The sharing of large, indivisible goods and facilities, the shar-
ing of diverse benefits, and the sharing of individual specialization gains
from a deepening division of labor make cities more productive. In the
case of the deepening division of labor, for example, the increase in the
number of workers increases output by a greater proportion, which is not

because additional workers are able to take on new tasks, but it allows
existing workers to focus on fewer tasks. The more workers focus on the
same task, the greater their dexterity. A worker does not have to switch
tasks, which can save time and facilitate mechanization, thus saving labor.
Matching: The higher population density in large cities and the con-
centration of highly qualified people improve the quality and opportuni-
ties for matching, reducing the possibility for specialized skills or assets to
be “hijacked”. Some people with higher skills and knowledge can only
play their roles to the fullest in cities or even large cities. Generally speak-
ing, the agglomeration effect makes the labor force in cities grow faster
than the number of enterprises, intensifies the competition in the labor
market, and helps enterprises to reduce costs.
Learning: Large population aggregation also facilitates face-to-face
exchanges, knowledge spillover, and innovation. It also contributes to the
spread of skills and ideas.
Source: Handbook of Regional and Urban Economics, Vol. 4,
Cities and Geography, edited by J. Vernon Henderson and
Jacques-Franço, Beijing, Economic Science Press, 2012.
Another prominent feature of the advanced stage is the formation and

development of city clusters. When urbanization rate reaches about 50%, city
clusters begin to emerge. Larger enterprises and industries make cities more
attractive to rural migrants, rapidly driving up the number and scale of cities.
After urbanization rate exceeds 70%, city clusters take shape. Nearly every
well-known metropolitan area (such as the Great Lakes region in the United
States, London-Birmingham-Liverpool-Manchester in the United Kingdom,
Tokyo-Nagoya-Osaka in Japan), including the Yangtze River Delta and the
Pearl River Delta in China, started to emerge when urbanization rate was
around 50%, and generally took shape when urbanization rate exceeded 70%.
1.3 Comparison and lessons of urbanization paths of typical countries

A retrospect on the urbanization paths of typical countries can divide them
into two categories—those that have successfully achieved high-quality urban-
ization and those that have failed to do so, measured by whether they can sus-
tainably achieve industrial upgrading and move to the advanced stage of
high-quality urbanization. The successful countries with high-quality urbani-
zation can be further divided into two sub-categories based on the span of time
it took to achieve urbanization: the pioneer countries such as the United
Kingdom, Germany, and the United States, which eventually achieved
high-quality urbanization after a century of exploration, and the post-war
catch-up economies represented by Japan and South Korea, which rapidly
achieved high-quality urbanization in about 30 years. Although Latin American

countries have a high urbanization rate, they have not realized high-quality
urbanization. Analyzing the reasons behind the different pace reveals the key
to high-quality urbanization.
1.3.1 Urbanization in European and American countries through gradual

industrial upgrading
Pioneer countries like the United Kingdom, Germany, and the United States
had entered the advanced stage of urbanization before the World War II.
However, they had no precedents to go by for industrialization and urbaniza-
tion. It took about a hundred years of long exploration before their urbaniza-
tion entered a high-quality and stable stage of development.
In terms of initial endowment, the pioneer countries enjoyed superior natu-
ral resources and primitive accumulation of capital. For example, abundant
coal reserve in the United Kingdom was of great significance to the inception
of industrial revolution. Britain’s coal deposits were shallow, easy to mine, and
adjacent to navigable waters, making its coal price the lowest among all coun-
tries at that time. Affordable coal enabled Britain to overcome the constraints
of wood shortage. Colonial expansion and foreign trade were important
sources of primitive capital for the pioneer countries. They plundered agricul-
tural products, minerals and other primary products or purchased them at low
prices from their colonies, and exported manufactured products the other way
around. High price scissors helped accumulate a large amount of capital for
urbanization and industrialization, making capital-intensive mechanized mass
production possible.
From the perspective of industrial development, evolution of industrial
structure in the pioneer countries follows the steps of “light industry-heavy
industry-service industry”. The industrialization in the United Kingdom began
with the revolution of textile technology. The development of light industry
represented by the textile industry created a large number of non-agricultural
jobs. After the second technological revolution, the industrial structure of the
pioneer countries was dominated by heavy industries such as steel and chemi-
cal industries. When urbanization rate generally reached 50% in 1950, their
industrial structure shifted toward service industries. It is noteworthy that the
service sector4 in these countries was also undergoing structural upgrading.
Knowledge- and technology-intensive services emerged and developed rapidly,
and the share of producer services and social services in the added value of the
service sector rose continuously, gradually replacing the traditional goods dis-
tribution services as the pillar of the service sector and even the national econ-
omy. For example, in 1950, the added value of distributive services accounted
for 23.7% of GDP and 41.1% of the service industry in the United States. But
in 2008, its share dropped to 19.7% and 25.0%, respectively. While the share of
producer services jumped from 15.3% and 26.6% to 33.2% and 42.1%, respec-
tively in the same period. The added value of social services also rose from
Table 1.4 S
tructural Change of Added Value of American Service Industry (1950–2008):
(Unit: %)
Year Distributive Producer Personal Social Others

services services services services
Proportion in 1950 23.7 15.3 3.2 12.8 2.6

relation to 1960 22.0 18.8 2.8 15.9 2.9
GDP 1970 21.8 20.0 2.8 19.2 2.6
1980 21.2 22.5 3.0 18.8 2.2
1990 19.7 27.7 3.4 20.5 2.4
2000 20.5 31.3 3.6 19.2 2.3
2008 19.7 33.2 3.6 20.1 2.3
Proportion in 1950 41.1 26.6 5.5 22.2 4.6
relation to the 1960 35.3 30.1 4.5 25.5 4.6
service sector 1970 32.9 30.1 4.2 28.9 3.9
1980 31.3 33.3 4.4 27.8 3.2
1990 26.7 37.6 4.6 27.8 3.3
2000 26.6 40.7 4.7 25.0 3.0
2008 25.0 42.1 4.5 25.5 2.9
Source: The U.S. Bureau of Economic Analysis (BEA).
12.8% and 22.2% to 20.1% and 25.5%, respectively. The constant industrial
transformation has anchored high-quality urbanization in the pioneer coun-
tries (Table 1.4).
In terms of urban governance, the pioneer countries improved urban public
policy and social security through exploration. The 19th century witnessed a
large number of rural people swarming into cities. However, due to inadequate
infrastructure and public services, cities in the United Kingdom suffered from
serious sanitary and environmental issues such as foul air, untreated sewage,
and epidemics. Mortality rate in cities was much higher than that of rural area.
Therefore, the British government promptly adjusted public policies and
enacted the Public Health Act in 1848, the Sanitary Act in 1866, and the world’s
first Clean Air Act in 1956. As a result, urban environmental issues were effec-
tively addressed. In the second half of the 19th century, Germany also faced
surge in urban population, poor sanitation, environmental pollution, and a
rioting working class during its urbanization. Against this backdrop, the
Bismarck government promulgated the Health Insurance Act in 1883, provid-
ing social relief for workers haunted by illness, workplace injuries and ageing.
The first social security system promoted healthy social transformation and
urbanization. As urbanization accelerated in the United States, the urban envi-
ronment and living conditions deteriorated. Urban poverty and crime became
rampant. At the end of the 19th century, the United States launched the urban
beautification movement, implemented housing reform, and passed the United
States Housing Act in 1937, which played a significant role in improving the
urban landscape, relieving urban poverty, and improving living conditions.
Overall, urbanization in the pioneer countries was led by the market with
follow-up intervention by the government. It was spontaneously driven by the
technological revolution and subsequent industrialization, and was dominated
by market mechanism and the private sector in its early stage. The private sec-
tor was the main force behind growing industries, population flow, and even
the provision of urban infrastructure. As urbanization progressed, urban resi-
dents raised new concerns and demands for public services. In response, the
government started to play a more prominent role in improving infrastructure,
combating infectious diseases, and providing social security coverage, contrib-
uting to the quality of urbanization.
1.3.2 The catch-up urbanization driven by industrial policies in countries like

Japan and South Korea
After World War II, Japan and South Korea, the catching-up economies in
East Asia, rapidly completed industrialization and urbanization in about 30
years. From 1956 to 1973, Japan’s industrial output grew at an average annual
rate of 13.6%. From 1961 to 1980, South Korea’s manufacturing added value
grew at an average annual rate of 16.5%. Jobs created by urban industrial
development attracted large numbers of rural people to cities. Both countries
underwent from the initial stage of urbanization (<30%) to the mature stage
(>70%). Urbanization rate in Japan jumped from 27.8% in 1945 to 74.2% in
1973, with an average annual increase of 1.66 percentage points. Urbanization
rate in South Korea soared from 28.6% in 1960 to 78.2% in 1995, averaging an
annual growth of 1.42 percentage points.
In terms of initial endowment, catch-up economies had highly educated
human capital and strong external assistance. With the policy of to prioritize
education as a foundation for nation-building tool in the 1950s, Japan pro-
vided universal compulsory education and actively promoted vocational edu-
cation, effectively lifting human capital to a higher level. Both Japan and South
Korea benefited from external assistance and a favorable international market
for rapid urbanization. For example, with financial aid from the United States
in the 1950s, Japan introduced new technologies from the United States to
quickly build up its clusters of heavy chemical industry.
In terms of industrial development, the government was deeply involved
from the very beginning. Government-led industrial policies successfully pro-
moted industrial transformation and upgrading, transforming the center of
economic activities from industry to service. On the one hand, the government
provided enabling policies for industrial upgrading. For instance, the Japanese
government provided a series of supportive measures for the high-tech indus-
tries in terms of taxation, land and infrastructure. South Korea implemented
the “government-led growth strategy” during the take-off stage to support
export and heavy chemical industries with favorable financial and land policies,
accelerating capital formation (Figure 1.4). On the other hand, the Japanese
and Korean governments attached great importance to planning to align
South Korea
70
60
50
40
%
30
20
10
0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Industry (%) Services (%)
Japan
80
70
60
50
40
%
30
20
10
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Industry (%) Services (%)
Figure 1.4 Share of Industry and Services in GDP (South Korea & Japan).
Source: World Bank database, the Japanese Statistics Bureau, and the National Statistics Center.
spatial policies to industrial policies and create industry-city synergy. Japan

started national land improvement after World War II. The Comprehensive
National Land Development Act was enacted in 1950, and the Comprehensive
National Development Plan was implemented for five rounds. In South Korea,
four rounds of comprehensive national land planning were conducted since
1972, during which the Framework Act on National Territory and other regu-
lations were enacted. These plans have played an important role in reshaping
the spatial layout of cities and optimizing the spatial distribution of factors.
In terms of urban governance, timely and effective response to urban
social and environmental issues safeguarded rapid urbanization in Japan and
Korea. Between the 1950s and 1970s, Japan struggled with severe pollution,
a byproduct of its booming steel, energy and chemical industries. Four major
environmental disasters were recorded. The Japanese government promptly

introduced 14 laws and regulations on environmental protection, including the
Disaster Countermeasures Basic Act and the Air Pollution Control Act, to set
strict environmental standards and hold corporations accountable for public
hazards. Local governments introduced social supervision and took manda-
tory measures against substandard enterprises. After a decade-long effort,
Japan’s urban pollution was effectively fixed. As South Korea urbanized, the
patriarchal management style resulted in growing economic and mental stress
of workers and negligence of their social rights. At first, the government sup-
pressed labor actions. But in 1987, a nationwide labor unrest broke out, involv-
ing over 3,000 conflicts. The government had to change course, revised the
labor law to recognize the freedom of labor actions, and standardized
labor-capital relations by legal and administrative means. Meanwhile, it
actively motivated enterprises to adopt a more humane management style, alle-
viating social tension amid urbanization.
Overall, to build on their own resources endowment, Japan and South
Korea fully respected market forces, while allowing the government to leader-
ship in planning and formulating industrial policies. Both attached importance
to technological innovation, industrial upgrading and human capital invest-
ment, and resolved environmental and social challenges in urbanization. As a
result, they realized high-quality urbanization and caught up in economic
development.
1.3.3 Unbalanced urbanization due to insufficient industrial support in Latin

America and other countries
There are 33 independent countries in Latin America,5 each with a different

starting point and degree of urbanization. Urbanization rate of the whole
region reached 80.7% in 2018, 25 percentage points above the global average
(55.3%). Some countries such as Uruguay and Argentina have urbanization
rate above 90% (Figure 1.5).
In terms of initial endowments, Latin America is relatively rich in natural
resources. The export of primary products empowered its early urbanization.
The colonizers built urban systems comprising coastal transportation hubs,
production centers, and Indian settlements, and used cities to control and man-
age the countryside. After the Second Industrial Revolution, surge in the
export of primary products fueled an economic boom, attracting a large
amount of foreign investment. Infrastructure, such as railroads and ports, was
built, further accelerating urbanization.
In terms of industrial development, Latin America’s advanced urbanization
failed to achieve sustained industrial transformation. The informal sector
became a major employer of the urban population, discounting the quality of
urbanization. In the 1930s, the Great Depression forced some local countries
to adopt import substitution strategies. After the outbreak of World War II,
European exports of manufactured goods to Latin America plummeted,
100
90 87.8
80.7 83.6
80
70.7
Urbanization Rate (%)
70 68.4
57.3 55.3 60.4
60
50
41.3 36.6 43
40
29.6
30
20
10
0
1950 1970 1990 2018 2030 2050
Globally Latin America
Figure 1.5 Urbanization Rate in Latin America (1950–2050).

Source: The United Nations: World Urbanization Prospects, 2018.
driving the development of local manufacturers. But even in the intermediate

stage of urbanization, manufacturing did not become the dominant industry,
and its share in GDP hovered between 20% and 25%, peaking in 1988 at
25.48%. From 1989 on, Latin America’s urbanization rate exceeded 70%, ush-
ering in the advanced stage. However, caught in cycles of populist policies, it
failed to join the tide of globalization and shift from import substitution to an
export-oriented growth pattern, losing out in global competition. The share of
manufacturing in the national economy declined from 25.05% in 1989 to
14.26% in 2022, spelling stagnation or recession for the local economies. Rapid
urbanization without adequate industrialization left new urban dwellers stuck
in the informal sector.
From the perspective of urban governance, urbanization in Latin America
was highly spontaneous, lacking government planning and policy guidance.
The authorities of large cities were unable to meet the demand of migrants for
infrastructure, public services, and housing, resulting in congestion, environ-
mental degradation, and urban slums. Limited financial resources and govern-
ance capability made it difficult for Latin American countries to effectively
cope with housing shortage and environmental crisis during urbanization.
Therefore, the quality of urbanization has been a cause of concern.
1.3.4 Lessons and inspirations
High-quality urbanization is conditional on cities that encourage innovation,

industries that can constantly upgrade, environmental and social governance
that can accommodate a growing urban population, and government policies
that respond to the challenges of urbanization timely and effectively. If urban-
ization is not adequately supported by industrialization, or if urban resources
are strained to accommodate the huge inflow of population, cities will not be
80
70
60
50
% of GDP
40
30
20
10
0
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Primary Industry Secondary Industry Tertiary Industry
Figure 1.6 The Proportion of Primary, Secondary and Tertiary Industries Latin Amer-
ica (1965–2022).
Source: The World Bank.
60
50
40
30
20
10
0
1980 1990 1994 1997 1999 2002 2004 2005 2006 1979 1990 1993 1996 1999 2001 2004 2005 2006 2007 2008 1996 1998 2002 2004 2005 2006 2008
Argentina Brazil Mexico
Figure 1.7 Share of Employment in the Informal Sector in Argentina, Brazil and

Mexico (1980–2008).
Source: Statistics before the 1990s were sourced from the Panorama social de America Latina, 2009,
Cuadro18, Cuadro 24.
able to achieve inclusive development, and governments cannot address crises

arising from urbanization, which will result in urban poverty.
Facing a new round of division of labor and industrial reorganization trig-
gered by globalization since the 1970s, populist governments in Latin America
failed to host industry transferred from developed countries and continued to
implemented the import substitution strategy. This has cost them the opportu-
nity for industrial upgrading and comparative advantages. Their development
grounded to a stop. In contrast, the government-led and export-oriented strategy
has enabled South Korea, Taiwan region of China, Hong Kong SAR, Singapore
and other economies to take over heavy industries transferred from developed
countries and achieve rapid economic take-off and urbanization (Table 1.5).
China’s urbanization rate is above 60%, close to the level of Latin America
at the end of its intermediate period. And they have similar challenges.
According to the experience of urbanization in pioneer countries and catch-up
economies, and lessons of Latin America such as insufficient industrial sup-
port, China should seize the opportunity of the new round of technological
revolution, drive urbanization with industrial development, give full play to the
fundamental role of market forces in resource allocation, and allow the govern-
ment to take the lead in planning and industrial policies. Meanwhile, China
needs to address the challenges of environmental pollution and public govern-
ance as cities develop. With greater inclusiveness and sustainability, cities will
become more friendly and accommodating for low-income migrants. Policies
should recognize the value of rural migrants in building cities, providing
Table 1.5 A Comparison of Three Typical Urbanization Models
Pioneer countries Catch-up economies Latin American

countries
Initial Abundant natural Strong human Good natural

endowments resources and capital with endowment with
primitive capital external primary products as
accumulation assistance the mainstay exports
brought about by
colonization
Industrial From light industry, Introduction of Primary product
development heavy industry, to technology to export - import
service industry transition from substitution. Failed
heavy industry to in the transition to
service industry export substitution
Urban Timely and effective Timely and effective Weak
governance
Role of the Late intervention Intervention from Populist distribution
government with a focus on the very beginning policies
public services with strong
industrial policies
Source: DRC IME.
affordable services, lowering living cost, and enhance urban industrial compet-
itiveness. A steady inflow of migrants is a source of vitality in cities.
1.4 Prerequisites for a smooth urbanization

A retrospect on the history of global urbanization and the paths of typical
countries shows that industrialization or industrial transformation triggered
by technological revolution is the most important driver and accelerator for
urbanization, and that continuous industrial transformation is key to the
quality of urbanization. Facing challenges such as infrastructure bottle-
neck, housing shortage, environmental pollution, and urban poverty, qual-
ity of urbanization can be safeguarded with timely and effective institutional
and policy adjustments.
1.4.1 An industrial structure that keeps upgrading and optimizing
Industrial transformation or industrialization triggered by technological revo-

lution, either spontaneously or through the introduction of foreign capital and
technology, is the main engine to start and accelerate urbanization. Specifically,
industrial development attracts rural population to cities. Meanwhile, industri-
alization of agriculture (by extensive use of agricultural machinery) boosts
productivity, frees up rural laborers, and channels them to cities. Benefiting
from mechanization and the technological revolution in cities, agricultural pro-
ductivity reached a new high, enabling surplus laborers to work in the expand-
ing manufacturing sector in cities. Better pay and opportunities appeal to a
large number of workers from rural areas. Higher agricultural productivity
also means more food to feed the growing urban population. This process is
accelerated by the farm instrument, farm machinery, fertilizer, and other goods
manufactured in cities, lifting agricultural productivity to a higher level.
Urbanization, driven by the industrial revolution, is an upward spiral powered
by external economy and agglomerated economy. Rise of the industrial sector
and mass production of standardized and low-cost products in factories stim-
ulate the construction of transportation infrastructure. Pay for labor and mon-
etary economy become norms, wholesale and retail trade thrives, the labor
force gets more specialized, and the industrial sector is less dependent on the
natural environment. Instead, cultural and economic conditions become more
important for the siting of businesses. When enterprises move to favorable
locations, they lay the groundwork for industrial cities.
Industrialization is driven by a series of technological changes and revolu-
tions. Specific stages of urbanization are supported by specific technological
systems. In this sense, technological revolutions set the course for regional and
national economic evolution and reshape the urban spatial patterns (Table 1.6).
Thirty percent to seventy percent of urbanization rate corresponds to the
acceleration stage, and cities have the fastest pace of urbanization when the
measure hits fifty percent. At this stage, urban civilization spreads most quickly,
Table 1.6 Technological Revolution and Urbanization
Stages of Initial Stage Intermediate Stage Advanced Stage

Urbanization
Technological Hydraulic power Coal-fired Internal Microelectronics.

revolution Steam engine steam combustion Digital
Cotton textiles engine engine communication
Iron and steel Iron and steel Oil and plastic Biotechnology
mills Railroads Electronic Information
Machine tool engineering technology
Global Aeronautics
shipping Radio and
telecommuni
cation
Urban Walking cities Industrial Suburbani City clusters
spatial cities zation (metropolitan
patterns areas)
Source: Paul L. Knox, Linda M. McCarthy. Urbanization: An Introduction to Urban Geography.
Publishing House of Electronics Industry, 2016, p. 10.
Box 1.3 Technological Revolution and Urban Spatial Patterns
Changes in transportation technology are considered to be the most im-

portant single determinant of urban spatial patterns and land use in ur-
ban development. Transportation systems determine the density of cities
and the extent of urban expansion, and transportation hubs become in-
tersections of commerce and recreation.
Pedestrian cities: In the early years of economic development, compact

cities emerged due to a shortage of fast and inexpensive transporta-
tion. People travelled on foot. Most goods were transported by hand-
carts or wagons. All kinds of activities in the pedestrian city were
disorganized. Since most cities were harbor or river port cities, most
economic activities took place in the waterfront areas, where mer-
chant’ offices, convention centers, warehouses, and docks clustered.
Closely adjacent to the waterfront areas were hotels, churches, retail
stores, public buildings, and house for the upper class. Dwellings for
craftsmen, warehouse keepers and laborer were mixed in here and ex-
tended to the edge of the town, where normally factories (such as
slaughterhouses, tanneries, etc.) that occupied large areas (e.g., textile
factories), consumed large amounts of water (e.g., breweries), and dis-
seminated unpleasant odors were often built. There was often no sep-
aration between their lodgings and factories, and factory owners
usually built their dwellings next to the factories.
Industrial cities: The industrial revolution brought about a dramatic ex-

pansion of urban populations and city boundaries, and an unprece-
dented specialization and differentiation of land use. More advanced
transportation technologies, communication technologies, and infra-
structure brought cities into an era characterized by economies of
scale, agglomeration economies and a division of labor. Economic
specialization triggered a reorganization of urban space. Economic
development brought more industries, commercial activities and pop-
ulation, and the constant increases in scale and intensity of different
land uses gave rise to intense competition and confrontation over land
use. Land users were spatially segregated from one another and chose
the best location for industrial, commercial, or residential lands based
on their ability to pay. Factories first chose suitable locations and dom-
inated all aspects of spatial layout. For the pillar industries of the
Second Technological Revolution, such as textiles, chemistry, and
steel, the best sites were waterfront areas in order to ensure sufficient
water to supply steam boilers, to make the necessary chemical solvents
and dyes, and also to dump the waste. Around the factories, specula-
tors built houses for factory workers and a specialized housing market
emerged. Workers could not afford to pay for quality housing, nor
could they pay for daily intercity commutes, so developers had to build
crowded and austere dwellings for them in the empty lots between fac-
tories and railroads, where competition kept costs and prices to the
lowest. The reorganization of urban land uses gave birth to compact
plots, narrow alleys and neighborhoods without parks. Meanwhile,
two trends of changes emerged, an outward and an inward movement.
Wealthy professionals, white-collared households and high-end retail
services moved to inner and outer suburbs, generating outward forces
of land use reorganization; while most factories, warehouses, offices,
hotels and specialty retail activities clustered in specialized central ar-
eas, generating inward forces.
Grid-based infrastructures reshaped cities. Opportunities for urban de-

velopment increased dramatically with the advent of new technologies
(gas lighting, electrification, steel-framed skyscraper, elevators, etc.), cre-
ating unprecedented money opportunities for entrepreneurs. They gave
rise to all kinds of new consumer products, and financed the construction
of modern infrastructure such as roads, tunnels, bridges, sewers, and
streetlights. Infrastructure networks, such as water supply, drainage, gas
supply, electricity supply, telegraphs, telephones, tram, and subway sys-
tems were fundamental to urban evolution.
Suburbanization: The advent of trams made it possible for people to

travel 16 kilometers outward from the city center in just half an hour,
greatly expanding residential lands. The suburbanization of the mid-

dle class provided space for the rearrangement of non-residential land
in the city center. The comfort and low price of the trams allowed
suburban housewives to avoid driving in rush hour to go shopping,
which in turn helped form specialized upscale shopping areas in the
city center. Trams also promoted the development of outer suburbs
and satellite towns.
City clusters (metropolitan areas): The popularity of automobiles and
the development of highways have further facilitated the expansion of
suburban areas and connected the satellite towns. Developers “leap-
frogged” to the outskirts of the suburbs, built along the new highways
large shopping centers in locations with good transportation facilities,
and used these shopping centers as marketing tools for new and large
residential communities. The third technological revolution, repre-
sented by the information technology revolution, has enabled large
corporations to use location and organize production more flexibly.
The reduction of spatial barriers has amplified the nuances of land
and labor markets across regions as new technologies allowed these
nuances to be quickly exploited. The global urban division of labor
was rapidly reshaped, and metropolitan areas became centers of spe-
cialized and commercialized services.
Source: Paul L. Knox, Linda M. McCarthy. Urbanization:
An Introduction to Urban Geography. Beijing.
Publishing House of Electronics Industry, 2016, p. 10.
and cities exert the most prominent hub-spoke effect. For example, when the
United Kingdom, Germany, and the United States reached 50% of urbaniza-
tion in 1851, 1900, and 1920, respectively, they were all ranked among the most
powerful countries in the world.
Typical countries had one point in common when their urbanization rates
reached 50%. Their industrial structure changed significantly and the service
industry (i.e. tertiary industry) began to overtake the manufacturing industry
to dominate the economic structure. The continuous upgrading of industrial
structure, especially the development of the tertiary industry, became an
important driver for the quality of urbanization. Therefore, 50% of urbaniza-
tion rate marks a critical juncture. Successful transformation to a service-
dominated economy will assure high-quality urbanization.
Generally speaking, when urbanization rate is below 50% (i.e. the accelera-
tion period dominated by industrialization), the industrial structure is still
dominated by heavy industry. The scalability and specialization of heavy
industry leads to increased dependence of enterprises on the external environ-
ment and social services, giving rise to producer services. Meanwhile, higher
income boosts consumer services. As industrialization advances, industries
The United Kingdom in 1851

Germany in 1900
The United States in 1920
Japan in 1955
South Korea in 1980
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Primary Industry Secondary Industry Tertiary Industry
Figure 1.8 Industrial Structure of Typical Countries with an Urbanization Rate of 50%.

Source: Li, L. Perplexity of Inflection Point at 50% Urbanization Level—A Comparative Study on
Rapid Urbanization of Typical Countries, Urban Planning Forum 2013 (the third issue).
such as electrical equipment, aviation and precision machinery become less

labor-intensive, while thriving modern service industries such as finance,
insurance, and real estate become more important employers. For example, as
Japan reached 50% in urbanization in 1955, consumer revolution shifted its
tertiary industry to a higher gear, leading to 18 years of rapid growth. As a
result, it became the first country in Asia to complete urbanization. Latin
American countries also entered a period dominated by the service sector
when their urbanization rate reached 50%. But their modern service sectors
failed to develop further, leaving most of the urban population in the informal
sector. Poor quality of urbanization has partly contributed to their middle-
income trap.
1.4.2 Well-functioning infrastructure
Infrastructure is a basic and quasi-public good in nature, which is not only

fundamental to urban livelihood, but also the key to cities’ agglomeration
effect. Progress of urbanization largely relies on the capacity of infrastructure
to accommodate rapid inflow of migrants. In the pioneer countries of urban-
ization such as Britain and the United States, industrialization came with
environmental and health challenges as population assembled in cities. City
governments were forced to improve infrastructure and provide public ser-
vices, thus sustaining urban viability. Catch-up countries, such as Japan and
South Korea, used external financial and technological aid to improve infra-
structure in parallel with industrialization. They even built up high-quality
infrastructure first as the foundation for industrialization. Enterprises were
able to share the large-scale high-quality infrastructure to generate economy
of scale. Urban residents also benefited from the well-established infrastruc-
ture, which in turn made cities more attractive to migrants. In contrast, coun-
tries caught in the middle-income trap, including those in the Latin America,
have long had high urban population density. Yet their urban infrastructure
has been underdeveloped. New urban residents were packed into slums with
shabby infrastructure, vulnerable to poverty and crime. Poor order and secu-
rity have constrained the development of cities.
1.4.3 Timely and effective institutional and policy adjustments

Timely and effective institutional and policy adjustments help address chal-
lenges that come with urbanization. This is especially true in the acceleration
stage. When urban economy enjoys record boom, governance problems arise.
Tensions are particularly high when urbanization rate reaches about 50%. In
pioneer countries, catch-up economies and Latin American countries alike,
this period is plagued by housing shortage, traffic congestion, environmental
pollution, lagging social security and other issues that restrain urban develop-
ment (Table 1.7). The government’s ability to make timely and effective
response is crucial to healthy urbanization. The German national welfare sys-
tem advocated by Bismarck, especially the world’s first workers’ pension, health
insurance, and medical insurance systems, laid a solid foundation of human
capital for its manufacturing industry. Social tensions were effectively miti-
gated. In the 1980s, South Korea amended its Labor Law, offering more flexi-
bility to labor actions, guiding enterprises to improve management, and better
safeguarding labor rights and interests. By adopted populist policies, Latin
American countries provided some temporary relief. But their debt-ridden
Table 1.7 Governance Challenges in Typical Countries with Urbanization Rate of 50%
Year Urban Social Tensions Countermeasures
The United 1851 Housing shortage, poor Model Dwelling Movement.

Kingdom sanitation The Public Health Act 1848
Germany 1900 Overcrowded housing, The Health Insurance Act 1883.
inadequate protection Urban planning starting in
of labor rights 1910
The United 1920 Housing shortage, The United States Housing Act.
States soaring unemployment The City Beautification
Campaign
Japan 1955 Environmental pollution Enacted the Disaster
Countermeasures Basic Act
and the Air Pollution Control
Act
South Korea 1980 Inadequate protection Amended the Labor Law
of labor rights
Latin America The 1960s Housing shortage, urban Public housing. Subsidy for
poverty self-built houses.
Source: DRC IME.
governments have been unable to finance better infrastructure or public ser-

vices, depriving cities of the possibility for sustainable development.
1.4.4 Factor mobility and an open market
Mobility of factors and an open market are the engine for urbanization.
Economy of scale through clustering is an important driver for urban devel-
opment. Free flow of factors enables enterprises to allocate factors on a
larger scale and effectively reduce production costs. A fully open market ena-
bles enterprises to ship products over a longer distance and have a better
chance to meet the best buyers. Factor mobility and an open market are also
conducive to the spread of technology, which is essential to continuous
industrial upgrading. The United Kingdom became “the factory of the
world” between the 18th and the 19th century largely because it could source
raw materials from colonies to minimize cost, and sell products globally to
benefit from the open market. Latin American countries and others that
implemented import substitution strategy restricted import and “protected”
domestic goods with high tariff. But inadequate demand at home made it
difficult for them to scale up the market. Domestic businesses were not moti-
vated for industrial transformation and upgrading. That’s how they gradu-
ally lost competitiveness in the era of global division of labor, and have been
bogged down in the vicious cycle of stagnant income, shrinking domestic
market, and escalating urban poverty.
1.5 Summary
Among the three stages of urbanization (the initial stage, the intermediate
stage and the advanced stage), the intermediate stage is critical to quality dif-
ferentiation, with 50% of urbanization rate as a watershed. After reaching the
benchmark of 50%, cities gradually enter a period where the service industry
takes a dominant position. At this stage, the ability of cities to formulate insti-
tutions and policies to improve infrastructure, sanitation, and quality of life,
and to promote high value-added service industries and emerging industries is
crucial to the quality of subsequent urbanization.
The comparative analysis of the paths and outcomes of urbanization in
typical countries in terms of initial endowments, industrial development, and
urban governance shows that to successfully promote urbanization, we should
learn from the success of pioneer countries and catch-up economies and from
the lessons of inadequate industrial support in Latin American countries. We
should seize the opportunity of the new round of technological revolution,
ratchet up urbanization with industrial development, and make cities more
inclusive and sustainable.
Overall, continuous industrial transformation and upgrading are the key to
successful urbanization. Facing challenges like infrastructure bottleneck, hous-
ing shortage, environmental pollution, and urban poverty amid urbanization,
timely and effective institutional and policy adjustments can safeguard

high-quality urbanization, while factor mobility and an open market are the
source of vitality for urbanization.
Notes
1 The first chapter of the first part of the National New Urbanization Planning
(2014–2020), released on March 16, 2014, defines “urbanization” as “a natural
historical process that is in tandem with industrialization, a process characterized
by the assembly of non-agro industries and rural population in cities and towns. It
is an objective trend of human social development and an important symbol of
national modernization”.
2 In fact, as early as 1974, the United Nations proposed a similar urbanization curve
in the United Nations Method of Urban and Rural Population Projections.
3 Transport means in the pre-industrial era included muddy roads, sailboats, and
horse traction. They facilitated the dispersal of population, evening out conditions
across regions.
4 This book follows Singelmann’s method to categorize service industry into distrib-
utive services, producer services, personal services and social services (see Service
Mechanism, Policy and Practice of Service Sector (Xingzhou Ren, Wei Wang et al.,
China Development Press, 2011).
5 12 territories in the region have not gained independence yet.
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2 Impact of technological revolutions
on urbanization
A technological revolution refers to a significant and fundamental change in

production technology. It is acknowledged that humanity has witnessed three
technological revolutions. Although the socio-historical context and the sym-
bolic achievements of each technological revolution are different, they share
similarities in corresponding stages and pattern of evolution. They propelled
human from the Age of Steam, to the Age of Electricity, and then to the Age
of Information. Each has nurtured new general technologies and leading
industries, starting the main engine for cities’ development.
2.1 Three stages of technological revolutions

In a long-term perspective, each technological revolution has evolved through
phases, generally divided into the installation phase, the deployment phase,
and the explosion phase.1
2.1.1 The installation phase of technological revolutions

New technologies and innovations emerge at the installation phase, but they
are only applied in specific fields and regions. Application and dissemination
of leading technologies are slow due to uncertainty about their sophistication
and commercialization outlook, limited scope and high cost of application,
and, in particular, the absence of supportive technologies and infrastructure.
For example, the steam engine is a symbolic achievement of the first techno-
logical revolution. However, the Newcomen steam engine first emerged in the
early 18th century as a large, poor-functioning and low-efficient machine. It
was with improvements made in the Dudley Castle that it gradually became
economically viable. During the installation period, the slow diffusion of steam
engines had several reasons. First, they were invented by individual craftsmen
with immature techniques that updated slowly. Second, the high cost of engines
dwarfed their advantages compared with existing power technologies. The
Newcomen steam engine was bulky and costly to use. It was several years after
its advent that it was introduced to France, Germany and Belgium.2
DOI: 10.4324/9781032663180-3
During the second technological revolution, technological inventions and

innovations became increasingly dependent on organized scientific experi-
ments. Industrial research laboratories became the core for organizational
innovation. A large number of R&D laboratories were established within
German and American companies as well as on university campus, such as the
Royal Institute of Physics and Technology in Germany, the K-W Institute of
Chemistry, and the Bayer R&D Laboratory. During this period, technological
inventions and innovations were intertwined with science and relied heavily on
the scientific exchange networks among universities. By establishing laborato-
ries that were closely connected to the market, companies not only developed
proprietary technologies but also acquired ready-to-use technologies from out-
side. The pace of innovation and adoption was significantly accelerated.3
The revolution in electronics during the third technological revolution can
be traced to two key innovations, the transistor and the computer, both of
which emerged in the late 1940s. But commercial demand for computers did
not grow until the early 1950s, thanks primarily to government procurement.
It was not until the 1950s and 1960s that the development of scientific comput-
ers and minicomputers boosted the development of electronic computer, com-
puter software, and semiconductor component industries.
In general, during the installation phase, the evolution of technology based
on individual inventions or basic scientific research outcomes usually takes a
long time. This is especially true for the transition of new technologies to eco-
nomically viable solution through applied research. As the leading technology
matures, its cost drops, and breakthroughs are achieved in supporting technol-
ogies, facilities, and key raw materials overtime. Paradigm and path of the new
technology will gradually clarify, reducing uncertainty about its commercial
value and potential, and gradually accelerating its dissemination and expand-
ing its scope of applications.
2.1.2 The deployment phase of technological revolutions
During the deployment period, the leading technology is further matured and
optimized. So are its supportive technologies, which become more integrated
with one another. The leading technology is used in a wider scope, showing the
tendency of becoming a general technology. The leading technology and its
supportive technologies constitute a maturing technological cluster, with grow-
ing recognition by the public for its technological and commercial value.
Multiple new technologies “co-exist and integrate pending a critical mass” for
explosive growth in commercialization and industrialization.
During the first technological revolution, revolutionary tweaks to the proto-
type steam engine by Watt and others made the machine less demanding on
fuel, more fuel-efficient, and more cost-effective, ready to be deployed any-
where. Its extensive application in mining and metallurgy also brought about
breakthroughs in transportation, the textile industry, and related technologies
and industries.
Impact of technological revolutions on urbanization 35
During the second technological revolution, alternating current was born at

the end of the 19th century. But it was not ready for wide application yet,
absent multiple elements, in particular the invention of the generator. Thanks
to revolutionary breakthroughs by Pacirotti, Werner von Siemens, Grimes,
Hermann Sprengel and others, breakthroughs in technical difficulties such as
polyphase motors and transformers were made, followed by a series of inven-
tions and wide applications.4
During the third technological revolution, as the cost effectiveness of cen-
tral processors, storage devices and other computer components significantly
improved after the 1950s, computer technology developed rapidly, and its
application was extended to many new areas at a greater speed.5 After the
1980s, breakthroughs in communication technology, data transmission and the
Internet gave rise to an Internet boom. The 21st century has seen break-
throughs in online and mobile payment, the integration of which has engen-
dered new industries and business models such as e-commerce.
The history of technological revolutions shows that it takes a long time for
technologies to spread and integrate, and for complementary technologies to
mature. As the leading technology diffuses and grows into a general technol-
ogy, new business models gain traction. Application of the new technology will
not only give rise to new industries but also make infrastructure adapt. As the
technology is widely used, a large amount of capital is invested in the new
growth engine, creating the economy of scale. Meanwhile, new technologies, in
combination with prior technologies, are applied to traditional fields, partly
reshaping the industrial landscape. Also, the structure and growth pattern of
enterprises and industries are revolutionized. This process will last until the
arrival of the technological singularity,6 where the interplay of old and new
technologies, enterprises and industries will have a big bang and spread to
most industries, transforming the techno-economic paradigm.
2.1.3 The explosion phase of technological revolutions
The explosion phase is characterized by breakthroughs in general technologies,

introduction of inexpensive inputs, and the extensive application of technolo-
gies, which mark the tipping point for each technology system to thrive. The
new general technology and its sufficient complementary technologies are fully
coupled in effectiveness and scale, leading to large-scale industrial application
of the general technology.
Take the first technological revolution for example. In the second half of the
19th century, steam power was applied in all industrial sectors such as trans-
portation, shipping, steelmaking, and all aspects of economic life, with pres-
ence across the west and the rest of the world.
During the second technological revolution, breakthroughs in the use of
other energy sources to generate electricity, the construction of receiving
devices to convert electricity into kinetic energy or heat, and the development
of long-distance transmission technology and equipment led to extensive use
of electricity, turning it into a power with centralized source and decentralized

load centers to redefine the layout of enterprises.
Commercial application of integrated circuit microprocessors by Intel in
1971 during the third technological revolution marked a breakthrough in com-
puter technology, transforming the technological fundamentals of the entire
ICT industry. The emergence of desktop computers and their rapid applica-
tion in many sectors massively changed the economic form of the computer
hardware and software industry, and created the preconditions for the applica-
tion of the Internet, whose commercialization in the 1990s ushered in the Age
of Information Technology.
As technological systems get more complex in these technological revolu-
tions, it takes longer for general technologies to spread. “The more profound
and far-reaching the potential restructuring, the longer the time lag between
the initial invention of the technology and its full impact on the economy and
society.”7 During the explosion phase, breakthroughs in the general technology
allow a new economic paradigm dominated by the technology to take hold and
penetrate all sectors of industry, from business, administration to education
and other related activities. Higher productivity and quality output become the
norm until the momentum of the technological revolution is exhausted and the
next round of technological revolution takes place.8
Box 2.1 The Six Phases of Technological Revolutions
According to Chris Freeman, the evolution of a technological revolution

can be further subdivided into six stages. The first stage is featured by
laboratory inventions, initial prototypes, patents, demonstrations of a
small scope and early applications. At the second stage, we can see deci-
sive demonstrations of technical and commercial viability, with a huge
potential for applications. Stage three is one for an explosive take-off and
growth, during which new regulatory regimes are gradually established,
accompanied by structural economic turmoil and political reconciliation
crises. Stage four features sustained rapid growth, during which techno-
logical systems become common knowledge and dominate the technolog-
ical regimes of the world’s leading economies, with a wider range of
industries and services for technological applications. The fifth stage is
marked by slow growth and lower profitability as the systems mature and
are challenged by new technologies, triggering a new crisis of structural
adjustment. The sixth stage refers to the maturity phase, during which the
“renaissance” effect may occur thanks to the fruitful coexistence with
new technologies, but it may also disappear slowly.
Source: Chris Freeman. As Time Goes By: From the Industrial
Revolutions to the Information Revolution. China
Renmin University Press. 2007.
It is worth noting that the process of each technological revolution is not

continuous. The emergence and diffusion of technological innovation may
take a protracted or explosive pattern. Most often a new technological innova-
tion or technological revolution is not readily accepted, though it shows appar-
ent benefits, potential for extensive application, and superior performance and
profitability over prior art. This is because of conflict of interest with powerful
vested interests and cultural norms associated with the incumbent dominant
paradigm and regulatory system. While startup firms and industries grow rap-
idly and report higher margin, those obsessed with traditional technologies lag
behind in business growth and expansion, sowing the seed for tensions in
employment, finance and trade, and for conflicts and confrontations between
old and new rules, institutional frameworks, laws and regulations, and behav-
ioral patterns. As a result, structural rise and structural decline coexist in a
technological revolution.
Moreover, path and pace of the spread of technological revolution differ
across countries and regions, due to difference in national conditions, indus-
trial structure, and response to the “mismatch” between old institutional
framework and new technology clusters. Some have profound effect immedi-
ately. Some are affected only after a long time. Others are hardly affected at all.
2.2 Four patterns of technological revolutions

By the end of the 20th century, humanity had witnessed three technological
revolutions. The first technological revolution, represented by machine pro-
duction, brought mankind into the Age of Steam. The second technological
revolution, marked by the application of electricity, ushered in the Age of
Electricity. The third technological revolution, featured by electronic and
information technology, inaugurated the Age of Information. Although lead-
ing technology of the revolutions differs, they share common patterns.
2.2.1 Ground-breaking scientific discoveries laid the foundation for

technological revolutions
Generally, industrialization follows the process from science to technology,

and then to industrial system. As a decisive factor of productivity, technologi-
cal inventions provide a solid foundation for economic development. So far, all
economic take-offs have been driven by technological inventions. Scientific
breakthroughs are an important prerequisite for a surge in technological inven-
tions and technological revolutions.
The first technological revolution bears testimony that the rise of science
preludes the arrival of technological revolution.9 The first technological revo-
lution began with the invention, improvement and use of machines, marked by
the popularity of steam engine as power source. The development of sciences
such as Newtonian mechanics and mathematics laid the scientific foundation
for the creation of machines.10 Before the first technological revolution,
Box 2.2 Different Perceptions of the Type of the First Technological

Revolution
Some people opine that the main feature of the technological change is
the replacement of organic materials by inorganic ones (Wrigley, 1987).
Others defines an industrial revolution as an increase in energy input,
especially non-animal energy. They consider steam power as the most sig-
nificant advance (Cipolla, 1965). Still others see the technological revolu-
tion as the use of machines rather than hand tools (Paulinyi, 1986).
Source: Mokyr, J. (2011). The Lever of Riches: Technological Creativity
and Economic Progress. Oxford University Press. https://doi.org/
10.1093/acprof:oso/9780195074772.001.0001
mathematics, astronomy, geometry, astronomy, and navigation had already

developed in England, laying the foundation for technological inventions. In
1690, Denis Papin designed the first piston steam engine. In 1698, Thomas
Savery built a piston-less steam engine, turning steam into power. After several
tweaks, the steam engine designed by James Watt was officially put into pro-
duction use. Thanks to the outstanding contributions of skilled workers and
craftsmen in this period, machines such as the “flying shuttle”, the “spinning
Jenny”, the hydraulic spinning machine, and the “spinning mule” were invented
one after another.
In the second technological revolution, theoretical breakthroughs such as
electromagnetic induction made it possible to transform scientific principles
into technologies and then apply them to production. In this period, universi-
ties played an important role in scientific discovery and theoretical advances.
In particular, the development of German universities and the breakthroughs
in related scientific theories contributed a lot to the second technological revo-
lution. According to economic historian Carlo M. Cipolla, “It was the German
preference for science in the second half of the 19th century that allowed
industrialization in this country to progress more rapidly than that in Britain
and the US.” For example, in 1888, Hertz experimentally discovered electro-
magnetic waves. Following the discovery of electromagnetic induction by
Michael Faraday, the advent of wireless telegraphy, radio broadcasting, tele-
phones, generators, and engines brought about revolutionary changes in tele-
communications and transportation. Moreover, thanks to the development of
chemistry, chemicals such as ammonia, benzene, and synthetic fuels could be
made from coal. Plastics, insulating substances, and synthetic fibers were
invented, mass produced and widely use one after another.
The rapid development of information science has given rise to the third
technological revolution. Thanks to breakthroughs in fundamental theories
achieved by Claude Shannon and John von Neumann after the 1940s and the
1950s, technological innovations in computer, microelectronics, and the
Internet were made possible. Claude Shannon proposed the idea of aligning
the “ON” and “OFF” of a circuit system with the “1” and “0” of the binary
numeral system, laying the theoretical foundation for digital circuit. John Von
Neumann’s pioneering use of binary as the basis for the numeral system of
computers greatly simplified their logic circuit. He also proposed the working
principle of modern computers based on stored programs and process control,
founding the theory of modern computers. After the 1960s, transistors, semi-
conductors, computers and controllers became important technologies. By
1971, the invention of microprocessor boosted computer and communication
technologies. In 1968, the first experimental computer network was set up. By
1986, network technologies such as the Internet had been rapidly developing.
In addition, with robust development of cable, fiber optic and satellite commu-
nication technologies and innovation in program-controlled switches and
mobile communication systems, fixed and mobile telephones gradually gained
popularity. The third technological revolution differs from the previous two in
that all scientific and technological fields are intertwined, scientific progress
and technological development reinforce each other, and the cycle of science-
technology conversion greatly shortens.
2.2.2 Increased market demand as an important driver of technological revolutions
Scientific discoveries are a prerequisite for technological inventions. But to

translate inventions to technological revolutions, market demand is irreplacea-
ble. The formation of regional markets, the unification of national markets
and the expansion of the global market have become important drivers for
technological revolutions.
The first technological revolution bears testimony that growing market
demand provides the direct impetus. After the British Enclosure Movement,
factors such as labor and land were marketized, contributing to a flourishing
commodity economy. Markets of various kinds boomed, gradually eliminating
the barriers of domestic trade. Convenient shipping and transportation net-
works also enabled Britain to take the lead in Europe to form a unified domes-
tic market. The unified domestic market and the growth of demand promoted
the technological revolution. Meanwhile, Britain continued to expand overseas
markets through commercial wars, colonial plundering, and mercantilism. By
the 18th century, non-European markets exceeded Europe in the share of
British exports (see Table 2.1). To meet the sizzling demand in overseas mar-
kets, technological inventions were motivated, gradually approaching the criti-
cal mass for a technological revolution. According to Fernand Braudel (1992),
“Once America found its way into the life of Europeans, it gradually changed
all the fundamentals in Europe and even reset its development course.”
The second technological revolution was expedited by the formation and
expansion of factor markets. Germany and the United States were most repre-
sentative of the pattern. Unification of domestic market and expansion of
international market gradually helped them develop a worldwide factor market,
Table 2.1 S
hare of Different Markets in British Exports from the Late 17th
Century to the End of the 18th Century
Year Americas(%) Europe(%) Others(%)
1663–1669 8.0 90.5 1.5

1700–1701 10.3 85.3 4.4
1750–1751 15.6 77.0 7.4
1772–1773 37.3 49.2 13.5
1797–1798 57.4 30.1 12.5
Source: P. K. O Brien and S. L. Engerman. Exports and the Growth of the British
Economy from the Glorious Revolution to the Peace of Amiens, in B. L. Solow, ed.,
Slavery and the Rise of the Atlantic System, Cambridge, 1991, p.186.
effectively allocating resources in a wider scope and strongly promoting the

technological revolution. For example, Germany had a peak in railroad con-
struction after the 1830s, helping to connect once fragmented markets.
Meanwhile, the customs union accelerated the formation of a unified market in
Germany, optimizing the allocation of factors and creating strong demand for
inventions and their applications. In the United States, its huge and abundant
market contributed to its accelerated technological revolution and rapid rise
after Germany. Europe was the birthplace of many innovations, yet the United
States prevailed in application thanks to its economy of scale. In the second
half of the 19th century, the United States applied a series of major inventions
in electrical technology, including Morse’s telegraph, Bell’s telephone, Edison’s
light bulb, De Forest’s triode, etc. New products and processes originating in
Europe were patented in across the Atlantic. By first switching to new techno-
logical racing tracks, the United States took over leadership of the technologi-
cal revolution, and started to gain market share and even monopoly in the
countries of origin (Jia, 2013).
It is evident in the third technological revolution that post-war globaliza-
tion and an integrated global market have contributed to the birth and spread
of the technological revolution. To meet military needs in World War II,
European powers and the United States vigorously developed atomic energy,
computer and other technologies. After the war, military technologies were
rapidly put to civilian use, which laid the foundation for the technological
revolution. In the post-war era, the U.S. economic strength and military might
expanded like never before, making it the most powerful capitalist country. It
ranked No.1 by industrial strength and gold reserve. New York became the
world’s financial center. Also, it advocated the establishment of General
Agreement on Tariffs and Trade (GATT), established the Bretton Woods sys-
tem, and became a super power of the world. Thus, a capitalist world domi-
nated by the U.S. economy was formed, promoting global economic integration
and a unified global market. By further eliminating institutional barriers to
technology diffusion, it has promoted the advent and global dissemination of
the technological revolution.
2.2.3 Breakthroughs in general technologies as the key to technological revolution
Technologies are divided into general technologies and special technologies

measured by their general applicability and scope of influence. Past technolog-
ical revolutions show that breakthroughs of general or leading technologies
are critical for a technological revolution to gain traction, with decisive influ-
ence on its orientation and path of. Evolution of the past technological revolu-
tions is the result of the iteration and interplay of new technological clusters.
Fundamental changes in technological paradigms and production modes are
often triggered by a few key technology clusters (Development Research Center
of the State Council, China).
When triggered by breakthroughs in general or leading technologies, a tech-
nological revolution typically has one or more “key factors” that have become
affordable and available, inducing new combination of factors that unlocks the
potential for successive recombination or industrial development. They become
the dominant force driving other sectors, giving birth to new products and
sectors formed by the combination of new technological innovations and
related inputs (Perez, 2016).
It is evident in the first technological revolution that steam technology, as a
general technology, reduced the reliance on manual or natural forces, provid-
ing more convenient power and greatly promoting the popularity and develop-
ment of machines. In addition, steam power led to the invention of steamships
and steam trains, revolutionizing transportation technologies and modes.
Thanks to leading general technologies such as electric power, internal com-
bustion engine and electromagnetic communication during the second techno-
logical revolution, electrical appliances replaced mechanical devices as electricity
emerged as a new energy source to supplement and replace steam power.
Invention of light bulb, tram, and movie projector ensued. Internal combustion
engines were used for transportation, providing strong power for cars, boats,
and airplanes, which in turn promoted oil extraction and petrochemical
technology.
During the third technological revolution, progress in fields such as com-
puter, microelectronics and automatic control has paved the way to electronic
computing, space and optical communication, semiconductor, mobile commu-
nication, and chip, laying the groundwork for the Internet and related break-
throughs.
2.2.4 Institutional innovations as a solid assurance for technological revolutions
Technological innovation is a systematic process. It takes a suite of supporting

factors to scale up to a revolution, among which institution is an important
variable. It is composed of the patent system, the intellectual property system,
the corporate system, the educational system, and related legal systems, all of
which affect the likelihood or the speed of scientific discoveries to evolve to
inventions and finally to a revolution.
Table 2.2 U.S. Venture Capital Investment in Internet-Related Industries
Year 1995 1996 1997 1998 1999 2000
Investment Volume 1931.0 4215.3 6,339.7 11,911.9 42,567.8 80,656.8

(Million/USD)
Number of 427 761 1,027 1,494 3,068 4,611
Companies
Source: NVCA Yearbook 2013.
The speed and scope for the spread of a technological revolution are usually
constrained by a range of factors at the time, including infrastructure, organi-
zation, and institutions. Perez (1983) argues that institutional change is as
important as technological change, and that systemic changes in technology
will not occur unless there are profound social, organizational, and technolog-
ical innovations. The adoption of new technologies needs investment, which
requires that property rights are properly protected. The adoption of new tech-
nologies may change the existing distribution of interest and thus be obstructed.
Good institutions should make such obstruction less likely to succeed (Comin
and Mestieri, 2014).
In addition, maturity of the infrastructure, new industries, new services, and
new management systems needed for the rapid application of technology can
determine the speed of diffusion of a given technology. For example, in the
United States, the patent law was amended in 1836 to replace the registration
system with an examination system. And a patent office was established to
oversee patent examination (Quigg, 1986). The improvement of the patent sys-
tem strongly motivated technological inventions, with a surge in the number of
patents. From 1850 to 1860, 25,250 patents were granted in the United States.
From 1890 to 1900, the number increased to 234,956. Moreover, the develop-
ment of the capital market, including venture capital, has strongly empowered
to IT innovation and the IT revolution in the United States. The Nasdaq
SmallCap Market has also contributed to the IT revolution by largely lowering
financing threshold of technology startups since its establishment in 1992. The
scale of venture capital increased from $1.931 billion in 1995 to 80.657 billion
in 2000 (Table 2.2).
2.3 Five effects of technological revolutions on urbanization
2.3.1 Technological revolutions accelerate urbanization
Technological revolutions give birth to more efficient industries, promote the

development of non-agricultural industries and the evolution of industrial
structure, and significantly increase the productivity and material wealth of a
society as a whole. However, they also widen income gap between occupations,
communities, industries, and between rural and urban areas.11 In particular, the
widening urban–rural income gap fuels migration to cities and urbanization.
In terms of spatial distribution, technological revolutions usually start in

cities, where new high-income jobs and new industries are first created and
concentrated, leading to a widening income gap between agriculture and
non-agricultural industries. It in turn widens the income gap between urban
and rural areas, and attracts the remaining agricultural population to cities,
thus accelerating urbanization.
Industrial revolutions triggered by the technological revolutions attract
people to cities with scale and agglomeration economies, thus widening the
urban–rural gap in terms of industrial layout, job opportunities and income.
The gap in turn gathers population in cities and raise the degree of urbaniza-
tion. Take the United States as an example. Between 1900 and 1920, the urban
population rapidly expanded from 30 million to 54 million, averaging an
annual growth of 3.1%, 1.4 percentage points higher than the growth rate of
the U.S. population during the same period. The share of urban population to
the national total rose from 39.6% to 51.2%, exceeding rural population for the
first time. From 1920 to 1960, the urban population went up from 54 million to
125 million, with an average annual growth rate of 2.17%, 0.8 percentage
points higher than the growth rate of the U.S. population during the same
period. Meanwhile, the urbanization rate rose from 50% to nearly 70%.
Technological revolutions not only spur urbanization, but also significantly
enlarge the number and territory of cities. For one thing, changes in urban
transportation technology and modes expand the range and cut the cost of
commuting. Changes in information technology facilitate interpersonal com-
munication and the provision of urban public services. Changes in energy tech-
nology, especially the stable and large-scale supply and effective management
of energy, enables cities to host huge population and bustling economic activi-
ties, moving them to the next level of carrying capacity and scale. For another
thing, as cities grow bigger, agglomeration incurs more costs than benefits,
making gathering less economic. Therefore, population and economic activi-
ties will move to new locations, giving birth to new cities. More cities are built
up. During the two decades of rapid urbanization in Japan, for example, the
urban area increased from 20,000 km2 to 95,400 km2, a growth of nearly 4.7
times, averaging an annual growth of 8.6%. Large cities played a leading role in
this process. Between 1950 and 1970, the total population of large cities (each
with more than 300,000 residents) in Japan increased from 12.577 million to
33.264 million, with their share in the total urban population rising from 40.1%
to 44.1%, up by 5.25% per year, leading the average annual growth of national
urban population in the same period by 0.5 percentage points. In 1950, there
were only 10 Japanese cities with more than 300,000 people, including 4 above
1 million. But in 1970, these numbers reached 36 and 8, respectively, growing
by 3.6 and 2 folds compared to 1950. The number of large cities kept growing
rapidly. By 2000, Japan had 70 cities with more than 300,000 people, account-
ing for nearly 10% of Japanese cities. But they accommodated 50% of the
entire urban population. As the United States got more urbanized from 1900
to 1960, the number of cities soared from 1,737 to 6,041, a 3.5-fold increase or
71 new cities per year. More importantly, the momentum has become stronger.
From 1900 to 1940, the number of cities rose from 1,737 to 3,464, up by 43 per
year. From 1940 to 1970, the number almost doubled from 3,464 to 7,129, on
average adding 122 cities per year.
As technological revolutions expand urban space, development of metropo-
lis becomes a theme of urbanization. Cities evolve from single-center layout to
a poly-center pattern, and the scope of urbanization extends from city proper
to a much larger metropolitan area. In the United States, for example, metro-
politan urbanization began in 1910, when the number of metropolitan areas
was less than 50, whose population accounted for only 28.4% of the national
total and 60% of the total urban population. By 1960, when turbocharged
urbanization was completed, there were 212 metropolitan areas, with high con-
centration of residence and employment. They were home to more than 60% of
the U.S. population, or more than 90% of the urban population. Similarly,
from 1950 to 1970, there was a trend of relocating from urban centers to
peripheral areas in Japan. Three major metropolitan areas were around Tokyo,
Osaka, and Nagoya. Population of these areas grew by 20.019 million, raising
their share in the national population to 46.1%, up by nearly 10 percentage
points. Population of the Greater Tokyo Area alone grew by 11.618 million,
equivalent to 53.1% of the incremental population in Japan over the same period.
2.3.2 Technological revolutions as a force behind the rise and fall of cities
Dominant factors behind the rise and fall of cities are not the same at different
stages of development. In pre-industrial society, natural resources and location
played an important role. Access to main waterways and abundant natural
resources became the key. In the industrial society, natural conditions became
less relevant. Instead, technologies, especially flagship technologies, started to
play a more important role.
Technological revolutions affect the rise and fall of cities in the follow-
ing ways.
First, technological revolutions change the transportation and competitive
advantages, causing the rise and fall of cities. New transportation, energy and
communication technology trigger time–space compression, which reduces the
cost and time of transportation, communication and coordination, so that
enterprises and industries become less dependent on the natural environment.
As they are relocated, new cities are founded far away from areas rich in natu-
ral resources. Existing resource cities start to decline. For example, Manchester,
among similar cities, rose as a center of the first industrial revolution with its
abundant coal and iron ore reserve and convenient transportation. But with
the advent of the second industrial revolution and new industries, Manchester,
like other traditional industrial centers, declined. In addition, cities along the
main transportation routes before the new technological revolution faded away
due to the diversion of main transportation routes or the rise of new transpor-
tation modes, which contributed to the rise of new transportation hubs.
Second, new cities rise and old cities decline when technological revolutions
engender new factors, products, industries and markets. In Germany, the Ruhr
emerged and thrived by virtue of abundant coal reserve and convenient trans-
portation. After the 1970s, however, traditional industries such as coal and
steel rapidly declined due to the impact of new technologies and new energy.
The region was also plagued by a single production structure, environmental
degradation and other problems. As a result, it lost competitiveness and status
in the German economy. In the United States, the initial rise of cities such as
Chicago was attributable to the proximity to the Great Lakes and flourishing
trade. The manufacturing boom helped transform them from legacy trade
hubs to new industrial centers in the Midwest. However, as industrialization
approached its intermediate and advanced stages, traditional industries tailed
off, resulting in a 40-year downturn after a centennial boom. Meanwhile, since
the 1990s, emerging cities such as those in the Silicon Valley have benefited
from the Internet technology and the Internet industry to prevail during the
third technological revolution.
Box 2.3 The Rise and Fall of Pittsburgh
There are four stages for Pittsburgh’s development.

At the early stage, the city became an important transportation hub
when the Pennsylvania Canal was completed. In the late 17th century,
European colonists built a fur-trading post here. In 1758, it was seized by
British colonists and was named after the British Prime Minister William
Pitt, 1st Earl of Chatham. In 1816, it was merged with nearby settle-
ments. In 1837, the Pennsylvania Canal was completed. In 1851, the rail-
road was opened. The city thus became an important water and land
transportation hub.
At the rapidly expanding stage, the city became the largest steel base in
the United States. But a crisis was in the making despite its prosperity. By
the 1880s, the city had become the largest steel base in the United States,
contributing to nearly 2/3 of its steel output. Before and after World War
I, the U.S. heavy industry and railroad developed rapidly. During World
War II, soaring demand heralded an “golden age” for the steel industry.
The boom also spurred metallurgy, coking, heavy electrical manufactur-
ing equipment and glass industries. However, overreliance on the steel
industry resulted in severe pollution, excessive industry concentration,
and overly homogeneous employment.
At the transformation and upgrading stage, as environmental prob-
lems were contained, and the economic structure diversified, new indus-
tries rose. In the 1950s, the government began to transform Pittsburgh.
Urban environment became a priority. Later the focus was shifted to new
industries, achieving significant results by the late 1980s. Some of its large
and competitive traditional industries were retained, while a number of
high-tech enterprises were set up for research, development and coding of
software, artificial intelligence, biotechnology and biomedicine, mainly
benefiting from the technological leadership of the University of Pitts-
burgh and Carnegie Mellon University. It has since adopted a diversified
industrial structure with high-tech industries as the mainstay, supple-
mented by metallurgy, biopharmaceuticals, chemicals, computers, tele-
communications, and finance.
The transformation was successfully completed with remarkable
achievements. Since the 1990s, Pittsburgh has endeavored to be a world-
class city with the construction of the 4th largest international airport in
the United States and a large number of restaurants, cultural and sports
facilities. By improving infrastructure and the investment environment, it
becomes a preferred destination for foreign investment. After half a cen-
tury of transformation, Pittsburgh has also achieved remarkable progress
in social development, and has now become a national center for bank-
ing, healthcare and high-tech. In terms of education, Pittsburgh boasts
28 higher education institutions with more than 100,000 students. In the
21st century, Pittsburgh is transforming into a thriving industrial and
commercial portal known for biotechnology, computer software, robot
manufacturing, healthcare, finance, and education, setting a role model
for urban economic transformation in the United States.
Source: The Background Briefs by DRC IME.
2.3.3 Technological revolutions change the internal spatial structure of cities
Technological revolutions not only affect inter-city relations, but also the intra-
city spatial structure. Previous technological revolutions show that progress in
production methods, especially the agglomeration and mass production of
manufacturing and service industries, change the behavior and lifestyle of
urban residents in terms of housing, consumption and entertainment, with
decisive influence on how urban transport, housing, public infrastructure and
commercial layout evolve.
Take the United Kingdom, the birthplace of the first technological and
industrial revolution, as an example. Concentration of industrial production in
cities in the wake of the technological revolution reshaped the spatial structure
of cities. Before the technological revolution, most cities in England were polit-
ical, religious and economic centers, home to non-productive buildings such as
town halls, guild halls, and religious venues. Production in cities was domi-
nated by family workshops. There were no separate industrial and commercial
buildings, nor was there a division among industrial, commercial, and residen-
tial areas.12 After the first technological revolution, more factories were located
in the city center, and industrial buildings became an important part of the
urban landscape. As the population gathered in cities, new housing was built
up, constituting residential quarters separated from workplaces, better demar-
cating industrial, commercial, and residential areas. As the population and
industries further clustered, cities become crowded and chaotic, and the envi-
ronment deteriorated. As a result, the middle and upper classes moved to the
suburbs, sparing room for urban construction. The chaotic city centers became
industrial and commercial areas packed with lower-class residents, whereas the
middle and upper classes chose to live far from the cities. This process was
greatly facilitated by the improvement in transportation technology and sys-
tem. Before the 19th century, only the richest few could afford living outside
cities given the high cost of private cars. However, advance in transportation,
especially public transit, significantly brought down the cost of commuting,
making it possible for more better-off residents to move to the suburbs.
History in the United States shows that technological revolutions also influ-
ence how the intra-city spatial structure evolves from crowded downtown to
suburbanization, and to downtown revamp. At the early stage of development,
improved public transportation accelerated the growth of cities and changed
their central layout. Pedestrian cities became work zones, dotted with offices,
stores and warehouses. Tall buildings filled with offices and stores were built
along main streets, and department stores appeared.13 In the process, the con-
vergence of tram lines to urban centers made urban department stores more
important, promoting the growth of surrounding areas (Gordon, 2018).14 As
technological revolution and industrialization progressed, population and fac-
tories further clustered in urban centers, and the quality of life declined,
prompting migration to the suburbs. Cable cars had accelerated the outward
expansion of cities. But the development of trams and intercity transportation
catalyzed suburbanization. In the 20th century, suburbanization was further
fueled by the penetration of elevated railways, subways and trams. After World
War II, automobiles and highways stimulated “mass suburbanization” in the
United States. Manufacturing industries moved to the edge of urban centers
and suburbs, forming sub-industrial centers or continuous industrial zones
along railroad routes. It also gave rise to suburban industrial towns. Meanwhile,
public transportation vitalized the urban–rural continuum. Businesses in
urban centers also moved to the suburbs. The mid-1950s recorded a construc-
tion fever of shopping centers and large markets at highway intersections and
suburban neighborhood centers. Such suburban commercial areas accommo-
dated large department stores, community banks, movie theaters, restaurants,
gyms, and other recreational facilities. From 1954 to 1977, 15,000 suburban
commercial areas mushroomed in the United States.15 As middle-class resi-
dents moved outward, the remaining customers for urban shopping centers
were those who could not afford cars and had to rely on public transportation.
Some urban shopping centers had to close down. Suburbanization led to the
decline of urban centers and the weakening or void of traditional urban func-
tions. Outside the metropolitan areas, satellite cities and small peripheral towns
became the main residential and commercial centers, forming a post-suburban
spatial structure characterized by a grid-like structure.16
In the post-war Europe, popularity of railroads and automobiles offered
strong impetus to the construction of satellite cities, the poly-center structure,
and the formation of an urban pattern with centralized functions and decen-
tralized settlement. To accommodate urban expansion and soaring car parc,
radial roads and ring roads were built in most large cities. Population and land
uses were concentrated along public transport lines and stations. In the devel-
opment axis of Hamburg, Germany in 1969, for example, urban construction
was carried out along the axes, so that the open natural space was reserved
close to the city center. Each axis was linked by highways or trunk roads, the
centers of the districts along the axes were linked by fast electric trains, and the
plots among axes was used for agricultural production. By using the transpor-
tation axes as the framework to relocate the functions of the city center and
build satellite cities and new towns, the city center was reshaped, significantly
improving the intra-city environment city and revitalizing the city center.
2.3.4 Technological revolutions enhance the efficiency and level of urban governance
Urban governance and sustainable development have been important topics of

urbanization. As rural people move to urban areas, cities grow larger, trigger-
ing malaise such as congestion, pollution, housing shortage, and poor public
sanitation. But new technologies and previous technological revolutions have
significantly increased the capability and level of urban governance, making
“Victory City” and “Better City, Better Life” possible.
Technological revolutions influence urban governance in the following ways:
Firstly, technological revolutions improve urban governance by empower-

ing urban planning. A major challenge in urbanization is how to main-
tain the vitality of cities with a growing population despite land and
resources restraints. How to make cities vital, liveable and sustainable has
become a primary issue for city managers. Technological revolutions,
especially changes in transportation, information and energy technolo-
gies, provide effective support for urban planning and management. For
example, the development and extensive application of mapping, GIS,
GPS, and remote sensing have made urban planning more efficient and
rational, thus achieving science-based and cost-effective urban planning.
Secondly, technology revolutions improve urban governance by empower-
ing urban management. Urban management involves multiple disci-
plines, more so in bigger cities. As the population grows, the collection
and processing of discrete information are the key to and challenge of
urban management. Technological revolutions and communication tech-
nology make it possible to collect, process, and manage information at a
lower cost. The management system for urban information is becoming

more sophisticated and used more broadly, making grid-based urban
management a reality and significantly enhancing emergency response,
governance capability and efficiency.
Thirdly, technological revolutions improve urban governance by empower-
ing urban infrastructure. Technological revolutions have changed urban
transportation, energy and information infrastructure, built up highly
efficient urban transportation, ensured reliable energy supply, and effec-
tively empowered urban governance so that more can benefit from better
public services and urban civilization. For example, before the 1950s, the
first-generation power system was mainly based on small generator units
serving small-scale grids at low voltage. Power supply in cities was not
safe or reliable, plagued with frequent failures and blackouts. After the
1950s, the second-generation power system was set up amid the new tech-
nological revolution. It comprised large generator units to serve large-
scale grids at ultra-high voltage, remarkably improving the safety and
reliability of urban power supply.
2.3.5 Technological revolutions profoundly affect urban–rural relations
Technological revolutions improve transportation and information systems.

They not only promote urbanization, but also have a profound impact on
urban–rural relations. Urban–rural disparity evolves in the wake of technolog-
ical revolutions.
Technological revolutions affect urban–rural relations mainly in the follow-
ing ways. For one thing, they promote agriculture, leading to surplus agricul-
tural products and surplus labor. During the first technological revolution,
steam engines, large farms, and scale farming boosted agricultural productivity
and output, while decreasing the demand for labor, pushing the surplus labor
to cities. For another, the technological revolutions promoted industry and ser-
vices, which clustered mainly in cities. Large-scale and efficient production cre-
ated a huge demand for labor, pulling migrants from the rural area. In addition,
transportation technologies and industry matured, making transport service
faster and more affordable. Fledgling transport networks strengthened inter-
city and urban–rural connectivity, making population flow to cities ever easier
(Figure 2.1).
In the second technological revolution, increased mechanization of agricul-
ture dramatically promoted agricultural productivity, secured the supply of non-
discretionary goods, raw materials, and labor, and boosted urban development.
Meanwhile, accelerated construction of rural grids integrated urban and rural
power facilities to electrify the rural areas. In the 1930s, the U.S. government
established the Rural Electrification Administration, which was in charge of
establishing a huge rural grid for nationwide coverage. Penetration of electric-
ity in U.S. farms increased from 1.9% in 1919 to 9.5% in 1929, and the share of
farms powered by central substations rose from 10.9% in 1935 to 97% in 1960.
Figure 2.1 Impact of the First Technological Revolution on Urbanization and Urban–Rural Relations in Britain.
Source: DRC IME.
The development of heavy industries such as steel, oil, and car making, boosted
a number of industrial cities, a process coupled with massive inflow of rural
population. In addition, construction fever of railroads, rapid development of
urban transportation and growing car parc in the United States marked the
dawn of a new era for transportation, contributing to greater efficiency of
transportation, sprawling cities and tighter urban–rural connection.
Led by computer and information technology, the third industrial revolu-
tion has reinforced urbanization and urban–rural integration in various coun-
tries. For one thing, the application and penetration of information technology
in agriculture and rural areas, i.e., agricultural and rural informatization, have
helped accelerate their modernization, integrated urban and rural informa-
tion infrastructure, and facilitated urban-rural industrial and social fusion.
For example, the U.S. Agricultural Resource Management Survey (ARMS)
showed that in 1999 the proportion of corn production area using yield mon-
itors, yield maps, geographic soil maps, remote sensing maps, and GPS navi-
gation reached 36.5%, 13.7%, 25%, 12.7%, and 6.9%, respectively. Technical
progress has made rural industries increasingly informatized and integrated
with their urban counterparts. ICT has also boosted education, medical care
and other public services in the rural areas in a more coordinated manner
with urban service provision. For example, the United Kingdom used the
Internet for remote education and began building the National Grid for
Learning (NGFL) in 1998, aiming to improve teaching and school manage-
ment with ICT. Through this program, every rural school has gained online
access to updated educational content from a network of learning centers,
enabling rural children to receive the same educational content as their urban
peers (Figure 2.2).
2.4 Summary
From a long-term perspective, each of the previous technological revolutions
can be divided into three periods—the installation phase, the deployment
phase, and the explosion phase. During the installation phase, new leading
technology is not mature enough, with limited application in a few areas,
underdeveloped supportive technologies and infrastructure, and high uncer-
tainty about its technical and commercial value. In the deployment period, the
leading technology constantly improves. It is applied to a wider scope and in
more fields, showing the potential to become a general technology. Its technical
and commercial values are recognized by the public. Multiple new technolo-
gies “coexist and integrate pending a critical mass”. During the explosion
phase, the leading technology becomes a general technology, triggering explo-
sive growth in industrial application. History of technological revolutions
shows that they are all based on ground-breaking scientific discoveries, and
driven by increased market demand. Breakthroughs in general technologies
are key to technological revolutions, while institutional innovations offer solid
Figure 2.2 Impact of the Third Technological Revolution on Urban–Rural Relations.
Source: DRC IME.
assurance. Technological revolutions have extensive and profound impact on

urbanization, accelerating the process worldwide. They give rise to bigger and
more cities, promote the rise and fall of cities, and change the intra-city spatial
structure. Also, they help improve the efficiency and level of urban governance,
and exert a far-reaching influence on urban–rural relations.
Notes
1 Carlota Perez divides a technological revolution into two phases, the installation
phase, and the deployment phase, from the perspective of the relationship between
technological revolutions and financial capital. She further divides the two phases
into five stages: the irruption, the frenzy, the point of inflection, the synergy and the
maturity phase. We borrow Carlota Perez’s concept of the installation and installa-
tion phase and divide a technological revolution into three stages mainly from the
perspective of the impact of technological revolutions on industrial development.
2 Mokyr, Joel. The Lever of Riches: Technological Creativity and Economic Progress
[M] Huaxia Publishing House. 2008, p. 91.
3 Jan Fagerberg et al. The Oxford Handbook of Innovation [M]. Intellectual Property
Publishing House. 2012, p. 347.
Publishing House. 2012.
Publishing House. 2012, p. 362.
6 A technological singularity is a point at which a great advance in technological
development occurs in a very short period of time, causing a great change in society.
7 Triplett, J. E. Economic Statistics, the New Economy, and the Productivity
Slowdown [J]. Business Economics, 1999, 34(2): 13–17.
8 Carlota Perez. Technological Revolutions and Financial Capital: The Dynamics of
Bubbles and Golden Ages [M]. China Renmin University Press. 2007.
9 But there is also much literature that argues that technological revolutions are not
closely linked to scientific discovery. Please refer to the Oxford Handbook of
Innovation for more details.
10 For more details about the history of technological revolutions, please refer to:
Mokyr, Joel. The Lever of Riches: Technological Creativity and Economic Progress.
Huaxia Publishing House. 2008.
11 Technological revolutions can widen the income gap through the following ways.
First, they widen the income gap among jobs and industries by creating high-in-
come jobs. Second, low-skilled jobs will be replaced. Third, they give rise to monop-
olistic competitive markets, significantly widening the income gap between different
types of firms and employees.
12 Peter Clark and Paul Slack. English towns in transition 1500–1700. Wuhan University
Press. 1992, p. 1–3.
13 Howard P. Chudacoff, et al. The Evolution of American Urban Society. Shanghai
Academy of Social Sciences Press. 2016, p. 93-95.
14 Robert J. Gordon. The Rise and Fall of American Growth. CITIC Press. 2018, p. 145.
15 Xu Heping. Suburbanization and the Evolution of Urban Functions and Spatial
Structure in the United States. Urban Development. 2001, pp. 20–21.
16 Howard P. Chudacoff, et al. The Evolution of American Urban Society. Shanghai
Academy of Social Sciences Press. 2016, p. 272-275.
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3 The role of institutional policies in
urbanization and technological revolution
The evolution of urbanization and technological revolution is also a process of

continuous adjustment and improvement of institutional policies and urban
development strategies. The technological revolutions and the subsequent
industrial transformations bring about major changes in the urban economic
structure and the dominant development drivers, and corresponding institu-
tional policies and urban development strategies usually undergo major
adjustments accordingly. In general, the institutional policies and innova-
tion-oriented development strategies that promote continuous optimization
and reorganization of various factors, and cultivate the “acquired” competi-
tive edges provide basic assurance for smooth urbanization, sustainable
development of cities, and their transformation and upgrading.
3.1 Evolution of institutional policies in urbanization

The emergence, development, and decline of cities can be perceived as the
agglomeration, flow, and loss of population. Urbanization is also about con-
tinuous reorganization of various factors such as labor, land, capital, and tech-
nology along with population flow. How the factors are organized determines
the model of urban industrial development and spatial layout. Changes in the
supply quality, flow, and reorganization of factors bring about the transforma-
tion and cycle of industries, hence the rise and fall of cities. In the process of
urbanization, the evolution of systems and policies has an important impact
on the supply quality, flow, and reorganization of factors. In different stages of
urbanization, systems and policies show different characteristics. The transi-
tion between stages of urbanization is usually coupled with major changes in
related systems and policies.
3.1.1 The inception of institutional policies to adapt to and assure urban development

in the initial stage of urbanization
The initial stage of urbanization generally refers to the stage where urbaniza-
tion rate is between 10% and 30%. This stage is also the initial stage of the
urban economy. Its outstanding features are low level of urbanization,
DOI: 10.4324/9781032663180-4
importance of the primary industry for employment, low labor productivity,

and small size of cities. With the take-off of industrial development, the clus-
tering of manufacturing enterprises and related industries, and the initial
development of cities, more job opportunities are created, attracting migrants
to cities. Generally speaking, in the initial stage of urbanization light industries
such as the textile industry begin to take shape, cities are transforming from a
traditional commercial hubs to industrial centers, and various systems and
policies for urban development are formulated.
3.1.1.1 The start of labor mobility and rights protection systems
Early development of urbanization benefited from the rise of the secondary

industry and the free flow of population. The first industrial revolution directly
empowered the secondary industry. Factories created a large number of jobs.
The agglomeration of population in cities required supporting urban func-
tions, which in turn drove the development of the tertiary industry, and various
resources were diverted to cities. The countries that first completed industrial-
ization such as Britain, the United States, and Germany did not restrict the free
flow of rural population to cities in the early stages of urbanization. At the
same time, land grab ensuing free transaction of rural land released a large
surplus of rural labor, who flocked to cities because of the boom of urban
industries and job opportunities, enlarging the urban population.
Although the development of industries greatly unlocked productivity, in
the early stage of urbanization and industrialization, workers’ production and
living conditions were relatively poor, with a surge in workplace accidents and
occupational diseases. They suffered from housing shortages and poor living
conditions. Disability, disease, incapacity and ageing would deprive them of
the means to support themselves and their family. In response to the social ills
and labor-capital tensions, countries began to establish systems and policies to
protect workers’ rights and interests. For example, Germany promulgated the
world’s first “Sickness Insurance Law”, “Work Injury Insurance Law”, and
“Old Age and Disability Social Insurance Law” in 1883, 1884, and 1889,
respectively. In the early stage of industrialization and urbanization, given the
rising labor-capital tensions, the social security system, which was initially
designed to protect the rights and interests of workers, became an important
tool to ease tensions and maintain social stability. The catch-up countries basi-
cally started to establish similar systems and policies in their early stage of
urbanization entailing industrialization.
3.1.1.2 The growing importance of land and planning systems
Land is a basic material for production and living. With the start of industrial-
ization, cities gradually shifted from traditional commercial hubs to industrial
centers with increasing diversity. More land was needed to support the changes
in urban industries and functions, as well as the expansion of urban area.
The role of institutional policies in urbanization and technological 57
During the first industrial revolution, the British land system effectively met the
need of large industries. The enclosure movement concentrated land plots for
maximum development and utilization, conducive to the adoption of new pro-
duction technologies and operating methods. Large landlords, in particular
landed aristocrats, rented their lot to tenant farmers, making many yeomen
jobless and turning them into fresh supply of labor for the Industrial Revolution.
As practices in other countries show, a land system conducive to land transfer
and concentration, and the rise of large-scale factory production is crucial to
the initial development of industrialization and urbanization.
In the early stages of urbanization, development of industrial and service
sectors lagged behind, and cities were small in scale. Urban development was
something new to the government. In addition, land resources were adequately
available. City governments barely gave systematic consideration to develop-
ment planning. Nor did they command the capability to proactively plan the
layout, industrial and spatial structure of cities, poorly prepared buffer the
shock of population growth, factory emission and other problems. However,
with the development of cities, issues of transportation, environment, public
security, and housing caused by the absence of planning became more and more
prominent, making it imperative for the government to step in through land use
planning. Britain, the first country of industrialization and urbanization, was
also the first country to make laws on urban planning. To solve urban ills, the
United Kingdom introduced a public health law in 1848 to set sanitary stand-
ards for buildings, a housing law in 1890 to delegate the government to disman-
tle non-compliant buildings, and “Laws on Housing and Urban Planning”, the
world’s first urban planning law in 1909 to allow governments at all levels to
formulate urban planning bills. The last piece of legislation suggested that plan-
ning officially became an administrative function of the government.
3.1.1.3 A better financial system
Finance is the core of the modern economy. A well-functioning financial sys-

tem makes possible a highly complex, finely divided and efficiently specialized
economy. In the process of urban development, financial systems and policies
are constantly evolving along with changes in the urban economic structure.
Historically, banks were the initial form of the financial system. However,
countries varied in their financial system in the early stage of urbanization.
The United Kingdom first embarked on initial urbanization through the first
technological revolution, largely thanks to its relatively developed stock mar-
ket. The success of the United States in first completing post-industrial revolu-
tion was also attributable to the rapid development of its stock market.
However, the later comers have mainly relied on a bank-centered financial sys-
tem in their early stage of urbanization. Financial intermediaries like banks
are more suitable for financing relatively mature industries, with lower transac-
tion cost and stronger control over the scale of capital allocation and the direc-
tion of capital flow.
3.1.1.4 The rise of technological innovation and education
The rise of the industrial sector means that cities are no longer trade hubs, but
also centers of production. After the industrial revolution, mechanical produc-
tion replaced manual production. Production evolved from a mere physical
effort to a combination of physical strength, knowledge and professional skills.
The demand for education has therefore arisen. Due to the concentration of
population, cities provide favorable conditions for running schools and other
cultural and educational activities. In addition, industrial production and tech-
nological progress also have impact on old-fashioned academic style. New
types of universities and middle schools emerge, putting technology and sci-
ence first in their research and teaching. Therefore, new science and technology
continue to be created, constantly empowering social progress.
3.1.2 Institutional policies basically taking shape in the intermediate stage

of urbanization
When urban population accounts for 30%–70% of the total population, urban-
ization reaches its intermediate stage, a stage with the fastest pace urbaniza-
tion. According to changes in the industrial structure and difference in growth
rate, the intermediate stage can be further divided into two: the acceleration
period of urbanization led by industrialization and the period led by service
industries. The acceleration period of urbanization led by industrialization
ends with industry accounting for its highest share in GDP and a peak in total
industrial employment. The transition to the next period dominated by the
service industry often leads to divergence. Some traditional industrial cities
may suffer lasting decline due to their failure to transition smoothly. Generally
speaking, in the intermediate stage systems, policies, and urban governance
mechanisms basically take shape.
3.1.2.1 Significantly enhanced labor mobility and protection of rights

and interests
In the last 30 years of the 19th century and the beginning of the 20th century,
the power industry, steel industry, chemical industry, and automobile industry
thrived in the United States, Germany, and other countries thanks to the sec-
ond technological revolution. Heavy chemical industry replaced textile as the
leading industry. The level of socialization, specialization and scale of produc-
tion continued to increase, and the scale of cities was rapidly expanding.
Population of many important industrial cities multiplied, even up by tens of
folds, and city clusters started to emerge. Even in the countries that came late
in urbanization, the acceleration stage led by industrialization was mainly
driven by the rapid development of heavy chemical industry. The development
of power, steel, and chemical industries not only created jobs, but, more impor-
tantly, significantly improved inter-city infrastructure, promoted the integra-
tion of domestic and foreign markets, and laid a foundation for the scale
expansion and efficiency improvement of other industries. Jobs created by the

booming industry attracted immigrants and rural population. Cities grew in
number and scale. Acceleration of urbanization and population growth cre-
ated new demand for industrial development. Urbanization has thus ensured
and promoted the development of sectors like transportation and other indus-
tries. Development of cities and industries has improved the production and
living conditions of the labor force. Coverage of the social security system wid-
ened. Labor unions were established by workers to better protect their rights
and interests.
The rapid development of industry accumulated huge assets. When chan-
neled to other sectors under the influence of market forces, they fueled the
development of the service industry. The rapid assembly of population in indus-
trial cities also created huge demand for postal service, finance, commercial ser-
vice, education and technology, culture and entertainment, etc. Benefiting from
both factors, development of the service industry was cranked up. The unique
globalization process of the 21st century has caused strong capital flow around
the world, heating up the competition among cities for investment and trigger-
ing global reconfiguration of manufacturing. For most cities, the outcome of
the competition is not certain. The prosperous cities in the industrial age expe-
rienced painful restructuring with manufacturers moving away, and services
dominating economic growth (Judd, Swanstrom, 2017). When the service
industry’s share of GDP began to exceed that of the manufacturing industry,
factors were reallocated and reorganized. Labor, finance, and technology con-
tinued to flow to the service industry. If the acceleration stage of industrializa-
tion-led urbanization is about the flow and reallocation of factors of production
to the industrial sector, the next period led by the service industry saw the
diversion of resources to services. Since the labor productivity of industry is
generally greater than that of services, the transition normally leads to a mod-
eration in economic growth.
During economic restructuring, decline of original leading industries has a
huge impact on urban development. Cities such as Detroit, Pittsburgh, and
Manchester were all victims of the industrial decline, but some have trans-
formed successfully, while others are still exploring the way out of recession. In
the process of urban development, how to balance the protection of labor
rights and the assurance of reasonable mobility is essential to successful trans-
formation. Take Detroit for example. During the golden years of the auto
industry, it took pride in the tradition of offering decent package to auto work-
ers, synonymous with the “auto era” in the United States. However, generous
welfare and strong auto unions became a heavy burden. When the industry
entered a mature period and faced increasing external competition, it was dif-
ficult for automakers to improve efficiency by downsizing. Many negotiations
were aborted because of tough stance of the unions. Industrial development is
the foundation of urban development and employment. When excessive pro-
tection undermines competitiveness, industrial decline is inevitable. Cities and
residents also fall victims.
3.1.2.2 Continuous improvement of the land and planning systems
During the acceleration stage of urbanization led by the heavy chemical indus-
try, the land and planning system is continuously improved, mainly to meet the
need of the heavy chemical industry and related infrastructure. As economic
structure changes, it’s increasingly imperative to update land use planning for
the new circumstance.
Urban expansion intensified the competition for land resources, making it
necessary to have new supply of land for residence and production. Take the
United States for example. Its policy focus was gradually shifted to the transfer
of agricultural land for non-agricultural development and fair distribution of
land resources. During this period, land was capitalized and circulated mainly
through repurposing and financial innovation. A comparative study shows
that ambiguous ownership and difficulty in legally and efficiently transferring
land are detrimental to urban development. For example, in the Philippines, it
took 13–15 years and 170 administrative procedures and signatures to obtain a
piece of land legally. As a result, 60%–70% of Filipinos didn’t have legal own-
ership of their land. This was a barrier for the mortgage market and hindered
the development of the local financial system. Even large companies struggled
to acquire land as needed (Farrell, 2010).
With the rapid development of urbanization and industrialization, planning
gained a more prominent status in urban development. In 1932, the United
Kingdom promulgated the Urban and Rural Planning Act, which superseded
previous legislation and became the core law of urban planning. In 1947, the
United Kingdom introduced the Urban and Rural Planning Act 1947, setting
the basis for modern urban planning. As is provided in the Act, urban planning
is a statutory obligation of the local government, and all development activities
must be approved by it. It stresses proactive planning over passive control, cod-
ifies land development as a right of the government, and authorizes the central
planning agent to coordinate development between regions.
Following the acceleration stage of urbanization, changes in the interna-
tional market and competition from foreign countries dragged the heavy chem-
ical industry in some cities into recession. Enterprises up and down the
industrial chain were forced to close down or move out. Rampant closure and
decline in turn left idle many land lots, with factories and houses abandoned,
and jobs slashed. In the wake of the decline, many cities implemented urban
renewal plans, repurposed the idle land, and tried incubate substitute indus-
tries. In practice, adjustment of land use planning is a prerequisite for indus-
trial restructuring and urban renewal.
3.1.2.3 Financial support as a critical element
As the leading industry in the intermediate stage, the heavy chemical industry
is typically capital-intensive, served well by a financial system led by banks. It’s
particularly true when the development trend is clear and technologies are
relatively mature, given banks’ advantages in monitoring capital-intensive

industries and their scale to hedge uncertainty. It’s noteworthy, however, that
when the heavy chemical industry first started as an emerging industry, its tech-
nologies were far from mature, making equity financing a more viable option
for the countries that led the transition to the heavy chemical industry. The
capital market showcased its institutional advantage in supporting high-risk
burgeoning industries. With the maturity of the heavy chemical technologies,
banks recognized their development prospects and were more capable of risk
control. The bank-led financial system were better able to meet the need of the
heavy chemical industry in its mature phase of development. The universal
bank supported by the German government during the second industrial revo-
lution was very successful in supporting related industries. This model also
worked well in the industrial catch-up stage in Japan and South Korea.
After entering the acceleration stage of urbanization led by the service
industry, the leading position of capital-intensive heavy chemical industry
starts to be replaced by technology-intensive and service industries. Manu
facturing and traditional service industries such as real estate, wholesale, and
retail are still mainstay customers of indirect financing by banks. Although
R&D and other emerging service industries have good prospects, they are not
compatible with the operation and risk management of banks given their huge
capital demand and high risks. Instead, the American-style direct financing
model can better seize the opportunities of the new economy. In order to pro-
mote the high-tech industries with diverse sources of funding, financial policies
give priority to direct financing via bond market and capital market.
3.1.2.4 Growing integration of education and innovation
During the acceleration stage of urbanization led by the heavy chemical indus-
try which features rapid development of industries, enhanced economic vital-
ity and intensified market competition, enterprises are continuously encouraged
to accelerate innovation. Government gears up investment in education and
innovation systems. Functions of education and innovation systems are fur-
ther improved. Universities and research institutions start to demonstrate their
positive effect on the development of their host cities.
With urban economic restructuring and changes in the leading industries,
the share of manufacturing in the economy gradually declines, and the share
of the service industry continues to rise. Changes in the leading industries
highlight the role of education and research institutions in supporting urban
transformation. After the decline of the original leading industries, new
industries need to be nurtured for urban renewal. Their need for new technol-
ogies and a skilled labor force puts forward new requirements for the develop-
ment of education and innovation systems. In the transformation of urban
economic structure from manufacturing to services, the education and scien-
tific research system and the industrial innovation system are increasingly
integrated.
3.1.3 Basically mature institutional policies in the advanced stage of urbanization
When urban population accounts for more than 70% of the total population,
urbanization enters an advanced stage. At this stage, urban systems and poli-
cies basically take shape, with cities administered largely by laws and regula-
tions. Yet it becomes more challenging to adjust and reform incumbent systems
and policies. Competitiveness of cities and vitality of leading industries rely
more and more on the “acquired” advantages such as education and scientific
research, while traditional natural advantages in geographic location and
resource endowment are less relevant.
3.1.3.1 Hidden barriers to labor mobility and excessive protection of rights

and interests
After urbanization enters a stable and mature stage, the proportion of the ser-
vice industry continues to grow, attracting a constant inflow of labor force. As
city clusters centered on metropolises provide diversified jobs, they become
magnet for migration. Policies on population management and social security
are full-fledged with continuous economic development and urbanization,
with few explicit barriers to population mobility. However, new immigrants in
cities, especially in high-cost metropolises, are exposed to growing pressure.
Adjustment of population-related systems and policies should focus on
improving public housing, medical care and other social security measures.
Sophistication of labor protection comes with concerns about over-protec-
tion. Since massive layoff is the last option during an economic downturn,
managers are reluctant to hire new staff. Such a mentality is a curse on both
corporate development and job creation. In addition, some regulations intend
to ensure that low-income employees receive decent salary, but they actually
inhibit the generation of low-skilled jobs in the service industry. For example,
the minimum wage effective in France is twice that of the United States. As a
result, American retailers employ 50% more people per unit of capital than
their French counterparts (Farrell, 2010).
3.1.3.2 Land and planning reforms promoting urban renewal
As urbanization enters a stable and mature stage, the land and planning system
is well refined. Continuous expansion of some mid- and large-sized cities
makes land reserve inadequate for further development. More land is
needed to accommodate continuous influx of population and development
of industries. Urban renewal becomes an inevitable choice to make best use
of the stock of land. Urban renewal and repurposing need the consent of
owners. Their feasibility and efficiency are affected by the opinions of com-
munities (especially the local or neighboring communities) and other
organizations. Improvement of the land and planning legal system better
protects the interests of stakeholders, but it also hinders the efforts to
repurpose the land. Some countries have adopted tentative measures. For
example, the British conservative government took measures to cut public

expenditure and strengthen the role of market forces, including the Local
Government, Planning and Land Act promulgated in 1980 that allowed the gov-
ernment to set up development zones and business districts for investment pro-
motion. In order to improve the efficiency of land use, Singapore One-north
City (see Box 3.1) adopted a multi-functional planning concept to remove the
Box 3.1 Case Study of One-north City in Singapore
One-north City is located near the Buona Vista MRT station in the
southwest of Singapore. It covers an area of 200 hectares and is about a
20-minute drive from the CBD. As Singapore is located at 1° north lati-
tude, it is named “Weiyi”, literally latitude 1°. And it sounds similar to
“only” in Chinese.
One-north City is different from traditional planning in that it inte-
grates the function of centralized production and urban life service func-
tions, so as to fully meet the needs of work, study, lifestyle, consumption
and so on. Based on the concept of “one building as an innovation com-
munity”, it creates opportunities and space for people-to-people commu-
nication interaction. Covering a total of two square kilometers, One-north
City hosts research and development areas and supporting facilities such
as public services, education, apartments, and commerce, constituting a
multi-functional community for work and residence.
Land use of One-north City
Functional Areas Area Core Function

(hectare)
Core functional area 17 Socializing, transportation, offices, and
comprehensive business services
Life Science Park 20 Laboratory-style R&D enterprises, business
offices and incubators for the life medicine
industry
Information and 30 Offices and supporting commercial facilities
Media City for TMT industries, and also for public
research institutions under the Bureau of
Science, Technology and Research
Multifunctional 16 Outdoor public activities
open space
Residential area 40 Low-density residential communities
Vacant space for 77 Reserved for future development of a Science
future and Technology City
development
Source: https://www.tusstar.com/index.php?app=web&a=detail&id=1942
border of functional zones, develop a large proportion of the land amenities

and service facilities, and reserve vacant land for future development and
adjustment.
3.1.3.3 More focus on financial risk prevention
After urbanization enters its advanced stage, the proportion of the service
industry is far higher than that of the primary and secondary industries.
Vitality and competitiveness of cities mainly depend on the development of
high-end service industries, especially knowledge-intensive ones. Since the
1990s, with changes in the economic structure of developed countries that first
entered the stable and mature stage of urbanization, their capital markets have
been replacing commercial banks as fundamental players of modern finance,
which is defined by a larger share of direct financing, a prominent role of risk
investment, robust capitalization of knowledge. In the mature stage of urban-
ization, financial assets are mainly concentrated in the capital market and the
real estate sector, the swings of which are often passed on to the economy,
amplifying market volatility. In the 1980s and 1990s, financial liberalization
greatly facilitated the international flow of capital. While optimizing the allo-
cation of resources, capital flow has also sent shockwaves to the economic
development of various countries. Their economy, financial market, capital
market and real estate sector are increasingly interlinked, making it easier for
local financial risks to be transmitted across border and escalate to regional
even global crises.
3.1.3.4 Priority given to human capital and innovation strengths

Continuous improvement of education and scientific research is the source of
power for the development of industries and cities. Human capital plays a very
important role in all stages of urbanization, often a herald of resources reor-
ganization. After urbanization enters the advanced stage, technology-knowl-
edge-intensive industries and service industries become the leading industries
that drive urban growth. Changes in urban leading industries make cities more
dependent on human capital. Wide application of computers, microelectronics
and other outcomes of the third industrial revolution has given rise to a cohort
of new industries, and geared up the development of emerging knowledge-in-
tensive service industries. A developed knowledge economy has become a
benchmark for the competitiveness of cities. Innovation capability can be
measured by the concentration of education, scientific research institutions
and high-quality labor force in cities. Government institutions and policies are
more focused on supporting education and scientific research institutions and
attracting high-caliber talents.
3.2 Mutual promotion between urbanization and the market economy

Urbanization is coupled with continuous improvement and development of the
market economy. In this process, formation of a unified market, continuous
improvement of market access, competition mechanism and market environ-
ment, and adjustment of the relationship between the government and the
market all play an important role. Constant refinement of the market economy
system has made cities more efficient and attractive.
3.2.1 Expansion of market boundaries driven by urbanization
Economy of scale and deepening of the division of labor endow cities with
higher labor productivity. Development of urban industries and efficiency
gains fuel the rapid growth in the output of main products. Intra-city market
space cannot support the development of urban industries, hence an urgent
need to expand the market boundaries. Development of high-efficiency indus-
tries in cities and competitive pricing of products provide the possibility to
expand beyond the original space. In the process of urbanization, a pattern is
generally observed from initial establishment of a unified regional market to
removal of regional barriers and construction of a unified domestic market,
and later to continuous expansion of the global market with the boom of inter-
national trade.
Formation of a unified regional and domestic market further promotes spe-
cialized division of labor and trade activities. Resources continue to flow and
be reorganized at intra-city and inter-city levels, changing the scale, forms and
functions of cities accordingly. Development of multinational companies
reshapes the layout of global industrial chain, further propelling the formation
and development of the global market, paving the way to a new urban indus-
trial pattern. International metropolises are rising with global influence while
some cities are fading with the adjustment of the global industrial division of
labor. Mutual influence between globalization and urbanization is ever deep-
ening. In the process of urbanization and globalization, it’s imperative to
attach importance to the construction of a unified market and actively inte-
grate into the global market. This will provide new market space for the urban
industries to develop. Building a unified and open factors market and promot-
ing factor mobility and competition with it will help improve industrial effi-
ciency and enhance innovation. As economic development moves to the next
level, priority should be given to the rational mobility of core factors such as
labor, land, finance, and technology.
3.2.2 Greater urban efficiency based on robust market mechanisms
Efficiency is the core advantage of a city. Urbanization is actually a process

where the market economy is continuously improved and market mechanisms
are fully empowered. Through continuous improvement of institutional policies
that allows market mechanisms to work, high-efficiency urban enterprises and

industries enjoy uninterrupted development and contribute to constant growth
of the overall efficiency. In urbanization, gradual improvement of market mech-
anisms is mainly showcased in three aspects.
The first is to establish rules on fair market access and constantly adjust and
improve market access standards in accordance with the stage of development.
Market demand and competition are the main driving forces for sustainable
development of enterprises and industries. Establishing rules on fair market
access is the first step to perfect competition. The fairer and more open the
market access is, the more conducive it is to the formation of a market environ-
ment that guarantees healthy industrial development. Market access rules are
gradually drafted in the initial stage of urbanization, and steadily improved in
the intermediate stage. However, in the advanced stage, with major changes in
economic structure and growth momentum, it’s imperative to readjustment the
rules, making deregulation a new trend. For example, since 1980, the United
States, the United Kingdom and other countries have relaxed control of net-
work-based industries such as natural gas and telecommunications. By liberal-
izing public utilities, railways and other network-based industries, they have
significantly unleashed potential productivity. From 1998 to 2008, access con-
trol of the service industry in OECD countries was notably weakened, among
which the United Kingdom, Japan, Norway and other countries were most
aggressive in deregulation. Loosened control enhanced competitiveness of
related industries and ultimately promoted the development of the service sec-
tor (Figure 3.1).
1998 2008
6
Figure 3.1 Changes in Barriers of the Service Industry in Major Developed Countries

(1998–2008).
Source: OECD database.
The second is to establish a market environment based on fair competition

and the rule of law. Establishing an institutional system that safeguards fair
competition and the rule of law is the basis and assurance of market players
operating by law and the survival of the fittest. This lays the most solid institu-
tional foundation for sustainable industrial and urban development. Globally,
development of urban leading industries and development level of cities vary,
largely due to difference in the market economy system environment. A com-
parative study of 130 countries and regions shows a positive correlation
between degree of marketization (economic freedom)1 and development of the
service industry. The more market-oriented the economy is, the more devel-
oped the service industry becomes. Every 1 percentage point increase in the
level of marketization leads to 0.91 percentage point increase in the share of
the service industry in total added value. Level of marketization in Hong Kong
SAR, China exceeds 90%, and the share the service industry in total added value
is as high as 90%. It is the most developed service economy in the world and
exemplifies a high degree of marketization and full development of the service
industry (Figure 3.2). When the degree of marketization reaches 55%, the ser-
vice industry can account for 50% of total GDP. It is noteworthy that in coun-
tries with a degree of marketization below 50%, basically developing countries
and low- and middle-income countries, the correlation is weaker between the
GDP share of the service industry and the degree of marketization. Therefore,
Figure 3.2 Correlation between the Share of the Service Industry in Total Added Value
and the Degree of Marketization.
Source: World Bank database, American Heritage Foundation “Economic Freedom Report 2008”.
it’s of critical importance to govern by law, scale up property rights protection,

unify standards of law enforcement, establish a healthy market order, and level
the playing field where enterprises of various ownership have equal access to
factors of production, so as to make cities more attractive and urban industries
more productive.
The third is to reduce government’s administrative intervention in the
market. The process of urbanization, adjustment and reconstruction of the
economic structure all involve the relationship between the government and
the market. With technological progress and the acceleration of structural
adjustment, the relationship needs to be better handled. The government
should prioritize the creation of an institutional environment that is condu-
cive to the development of enterprises and industries, including improving
environment, safety, quality, network and other standard systems, enhancing
the intensity and consistency of standards implementation, and reducing
direct intervention with enterprises, the market, and industries. Instead, it
should fix financial distortion, and wean enterprises and industries off gov-
ernment subsidy and policy investment. According to the “survival of the
fittest” law, the most competitive enterprises and industries will prosper, gal-
vanizing technological progress and innovation and making cities more ani-
mated and competitive.
3.2.3 Continuous improvement of the modern market economy system and

policy system
Technological revolution and urbanization exert constant impact on the exist-

ing institutions and their evolution. The industrialization-led urbanization
basically forms various institutional systems of cities. But when urbanization
rate exceeds 50%, due to major changes in the urban economic structure, the
service industry becomes the leading sector, leaving the original institutional
policies incompatible. Transformation and upgrading of cities require new and
better institutional policy system. History in developed market economies
shows, after the service industry rose as the largest economic sector, service
activities demonstrated high information asymmetry, warranting ex-post
assessment. Its boom also added to the complexity of cooperation and diver-
sity of transactions between economic entities. In response, countries generally
opened up service markets, kicked start institutional reforms, and established
reasonable institutional frameworks and policy norms that were aligned to the
characteristics and requirements of the service industry. One priority was to
introduce efficient transaction system, stringent business norms and service
standards, and a fair legal environment according to the needs of technological
innovation, division of labor, development of SMEs and agglomeration of
premium factors of production. Therefore, it is due to the establishment and
gradual improvement of the pro-service institutional framework that devel-
oped economies successfully shifted from industrial economy to service econ-
omy, with enhancement in urban functions and vitality.
Every step forward in the technological revolution brings about industrial

restructuring, creates more institutional options, increases marginal returns to
scale, reshapes organizational forms, triggers changes in social relations, struc-
ture and institutional, and promotes institutional optimization. By recognizing
and actively adapting to the requirements of technological progress, structural
changes, and urban development, government can most effectively cope with
changes and challenges, and maximize the benefit from the long-term develop-
ment of cities.
3.3 The role of institutional policies in technological revolution

Every technological revolution cultivates emerging industries that have a sig-
nificant impact on the economy, social life and urban development. These
emerging industries grow rapidly to become leading urban or national indus-
tries, promoting the transformation, upgrading and sustainable development
of cities. Since the first technological revolution, only a handful of countries
have gone through the subsequent technological revolutions. A recap of sys-
tems and policies in these countries to energize technological revolutions and
promote the use and diffusion of technological outcomes helps to draw inspi-
ration from successful experience, improve China’s institutions and policies
and lay a solid institutional foundation for the formation of long-term urban
competitiveness.
3.3.1 Establishment and development of a modern education system as the prerequi-

site and foundation for technological revolution
Every major technological change stems from new advances in science. For
example, the first technological revolution and the development of natural
sciences, especially Newtonian mechanics and mathematics, laid a scientific
theoretical foundation for the invention of machines. Faraday’s electromag-
netic induction theory became the theoretical basis of the second technological
revolution. Since modern times, the emergence and development of modern
universities and extensive and solid higher education have provided a large
number of professional talent for scientific and technological progress. The
initial reform of the German education system (such as the Humboldt edu-
cation system) embraced the spirit of integrating teaching and research to
train professionals in various industries. Later America followed suit by inte-
grating general education and vocational education. Modern university
reforms have increasingly emphasized the importance of independent and
original research, and have given universities, research institutions, and
researchers greater autonomy in research directions. Government agencies
and government funds also give continuous financial support to basic
research on some innovative directions. The development of modern educa-
tion with a focus on universities has made them one of the important sources
of innovation. In the 20th century, most of cutting-edge scientific and
technological achievements were born in universities. Countries with leader-

ship in science and technology were also home to world-class universities. The
modern education system attaches great importance not only to universities
but also to vocational and poly-tech education. Incorporating vocational and
poly-tech education into academic degree system symbolized the official for-
mation of vocational and poly-tech education system. The United States began
the public school movement in the 1830s. Germany started its “Practical
School Curriculum Development” in 1859. France inaugurated the “The Basic
Law on Public Education” in 1802. Countries that first achieved industrializa-
tion, such as the United States, the United Kingdom, and Germany, have
attached great importance to modern education. Other countries like Japan
and South Korea have also valued and benefited from the development of
modern education in the process of catching up. For example, South Korea
actively developed education and training when the nation was just founded.
Despite shortage of funds, it vigorously invested in education and cultivated a
large number of skilled labor. National illiteracy rate plunged, and education
became a valued trait across the country. With increasing dependence of indus-
trial development on knowledge and skills, the country craved more for more
and better talent. In order to meet the needs of urban industrial development,
the Korean government advocated equal importance of theory and practice in
education administration. It stressed that universities were more than a venue
for theoretical teachings. They were expected to contribute social progress and
play a basic role in economic development. To that end, Korean colleges and
universities have established various scientific research institutions, which are
capable of advanced researches with cutting-edge facilities and a large staff of
research personnel.
3.3.2 Continuous support for basic research helps foster modern industries

Basic research is the source of applied research and major innovation. From a
theoretical point of view, a complete innovation chain extends all the way from
basic research and applied research to technology development, industrial
application, and large-scale development. The outcomes of basic research are
public goods, which can be disseminated far and wide for amplified applica-
tion. Practice has proved that basic research guided by scientific discoveries is
an indispensable foundation for major and economically viable innovations.
Although basic research does not directly generate new products, new pro-
cesses, and specific solutions, it provides society with new knowledge, theories,
and methods. Its benefits are broader than applied research and product
development in a certain field. More importantly, it may spawn new industrial
ecosystems not predicted in the very beginning. The United States has not
adopted any specific industrial policies. Yet it has benefited a lot from contin-
uous support for basic research. Continuous investment of government
resources has helped the United States create an impressive number of new
industrial sectors and maintain global leadership in them. The United States
may not have skilled and experienced government personnel who can help it
create an industry to ward against existing competitors, but it did set a prece-
dent in supporting basic research a long time ago. This has kept the United
States at the forefront of the development of emerging industries (Gomory
and Baumol, 2018).
3.3.3 The patent system and intellectual property protection as important means to

motivate innovation
As technological revolution requires long-term and huge capital investment,

the patent system has offered important incentives for inventors. Modern pat-
ent system can be traced back to the medieval days when European monarchs
granted privileges, including exclusive rights, to their subjects. Modern patent
laws are generally based on the “Statute of Monopolies” promulgated by the
United Kingdom in 1623. The enactment motivated individual inventors and
gave birth to a wave of innovations, which was most manifest in the textile
industry in the United Kingdom. The most typical case is the investment by
Boulton conditional on patent protection by the British government. The
investment financed Watt’s refinement of the steam engine. With patent protec-
tion and funding, a group of inventors from all social strata established facto-
ries and enterprises, enabling people of different professional backgrounds to
enter the manufacturing industry, and further promoting economy of scale in
the industrial sector. With the deepening of technological revolution and the
development of the goods economy, advanced technologies became a craved
source of profitability. Other countries followed the United Kingdom to estab-
lish the patent system. This has provided legal clarity and assurance for the
exclusivity of new technological know-how, motivated people to innovate, pro-
moted technical innovation, and accelerated economic and social develop-
ment. From its nascent form in the first industrial revolution to its full-fledged
development in the third industrial revolution, intellectual property system has
been hardwired in the DNA of learning and innovation. The legal system of
intellectual property protection in various countries has continued to mature
and improve, paving the way to an international alliance for harmonized intel-
lectual property protection.
3.3.4 Modern company system promotes the industrialization of

technological outcomes
To decisively affect the development of human society, outcomes of techno-

logical revolution such as the steam engine have to be industrialized for wide
application. Enterprises lead the process. Although manual factories have
long existed, modern enterprise system developed with technological
revolution has greatly sped up innovation. Douglas North pointed out in

“The Rise of the Western World”:
Efficient economic organization is a key factor for growth. The reason for
the rise of the western world is the development of an efficient economic
organization. An efficient organization needs to be institutionalized and
requires the establishment of property ownership, constantly leading the
individual’s economic efforts to a social activity, so that the individual’s
rate of return is constantly approaching the social rate of return.
Institutional economists generally believe that the key to economic growth is an

efficient economic organization. An efficient organization needs to make institu-
tional arrangements and determine all rights and interests to form incentives,
turning individual efforts into activities where the private rate of return is close
to the social rate of return. In addition to patent system, factory system was also
established. Machine-powered factories gradually replaced manual workshops,
freeing labor force, improving productivity, and expanding production scale. The
second industrial revolution made the world closely interconnected. Joint-stock
companies and multinational companies continued to grow, which promoted the
formation and development of shareholding system and in-house R&D. Share
holding system can absorb capital on a large scale, enhance resilience to market
risks, and facilitate major innovations and their dissemination. In order to save
the cost of acquiring third-party technologies, keep the pace of iteration with
market demands, and build up core competitiveness, some large enterprises
started to set up in-house R&D departments to better collect market informa-
tion and initiate development programs. This was a major innovation, which has
greatly enhances corporate innovation and competitiveness.
3.3.5 The establishment and improvement of a financial system compatible with the

development stage of technological revolution
Different stages of technological revolution require different institutional pol-

icy support. The installation requires huge capital investment, but the risks are
huge too. Given rapid technological changes and uncertainties in new indus-
tries, government and banks have a limited role to play. With assurance by the
patent system, venture capital is most capable of translating high-tech to pro-
ductivity. High returns from the tech boom compensates for the underlying
risks of capital investment. When technological revolution is ready for indus-
trialization, technical standards are already recognized and the scale of bank
financing is a blessing for industrialization and rapid scaling.
3.3.6 Inclusive market access and regulatory system that are conducive to the rise of
new industries
Technological revolution requires long incubation and exploration before succeed-

ing, where technologies evolve from nascence to maturity and industrialization.
According to the past three technological revolutions, countries and cities vary
greatly in the pace of outcomes application and industrialization. In general, inclu-
sive market access and regulatory system are conducive to the rapid application of
technological outcomes and the development of emerging industries.
Technological revolution and the industrialization of its outcomes are man-
ifest as fundamental economic and social changes, which often have a huge
impact on the incumbent industrial system and resources allocation. If the
development of technological revolution undermines the interests of benefi-
ciaries of the incumbent system and policies, they will usually oppose or resist
technological advances. At the beginning of technological revolution, it is
common for social and institutional values to hold on to old paradigm and
resist the new one. As the British government pointed out in the “Regulation of
the Fourth Industrial Revolution” policy white paper in June 2019: “Regulation
has a huge impact on innovation, which can both stimulate new ideas and pre-
vent their implementation. It can influence investment risks and guide funds to
be used for valuable research and development. It can affect consumer confi-
dence and demand, and determine whether a company enters or exits the
market.” “Enterprises may face unnecessary obstacles when proposing new
propositions, while citizens face outdated protective measures. In this way, the
benefits of innovation to people and the economy may be lost.” On the whole,
the more rigid institutional system and the stricter access restrictions are
imposed on new industries, the more barriers are in place for technological
revolution and the commercialization of its outcomes. However, in the long
run, industrial reforms driven by technological revolution will continue to
remove institutional barriers and build up a new institutional policy system
that is consistent with the trend of technological revolution and industrial
development.
3.4 Governance and development strategy in urbanization

Urbanization is a process of continuous evolution. So is technological revolu-
tion. Even under the same institutional environment, city governments vary in
their governance capability, make different choice on infrastructure layout,
and set different strategies for urban transformation. This largely accounts for
their difference in the path and outlook of urban development.
3.4.1 Political and social stability is a necessary condition for sustainable

urban development
A stable political and social environment provides the necessary institutional

norms for urban development, which significantly reduces uncertainty and
risks faced by enterprises and industrial development, help enterprises and
institutions to invest with confidence, and provides basic assurance that attracts
labor and other factors. Globally, strong governance capability, relatively fair
distribution, a large share of middle class, and well established social safety net
constitute the basis for political and social stability. And for cities without
political and social stability, it is almost impossible to achieve development.

Some cities once suffered incompetence in governance, high crime rates, and
economic stagnation in their development. By building up governance capabil-
ity, they have managed to solve these problems. Improvement of governance
capability can promote the sense of security, investment confidence, and the
likelihood of urban resurrection.
3.4.2 Adjusting priorities of infrastructure investment in response to changes in

development stage
The government doesn’t invest in infrastructure, such as roads or higher educa-

tion, just to benefit designated industries, but to lay the groundwork for urban
development, so that many industries can be empowered. Just as urbanization
and technological revolution, construction and improvement of urban infra-
structure is also a continuous process. At different stages of urbanization,
infrastructure development has different priorities. It’s important for the gov-
ernment to agilely adjust the priorities in accordance with changes in the devel-
opment stage, so as to meet the needs of urban emerging industries and improve
overall urban efficiency. The construction and improvement of urban infra-
structure is generally divided into three stages.
In the initial stage of urbanization, infrastructure expansion is outpaced by
the influx of population, leading to major short supply. At this stage, the pri-
ority is usually to address most imminent health and safety concerns. Large-
scale public utilities such as transportation are ranked lower by the order of
priority. Progress of education and poverty alleviation is extremely slow.
Through this stage, due to limited capability and resources, there’s a huge gap
between the supply and demand of government services.
With the development of heavy chemical industry, urbanization starts to
accelerate. The development of heavy chemical industry significantly improves
the construction capacity of infrastructure such as roads, railways, and energy.
This stage also features the fastest development of transportation and energy
infrastructure. Prominent improvement of infrastructure promotes the forma-
tion of a unified international and domestic market. Latecomer economies
gradually join the international trading system amid globalization. By doing
so, they not only rapidly expand the scale of manufacturing industry but also
improve governance capability of the government. Accelerated urbanization
driven by heavy chemical industry enables cities to increase the supply of infra-
structure and public services. In addition to transportation and energy, educa-
tion, sports, culture, and entertainment infrastructure also receive substantial
investment. Overall, the positive feedback effect is most pronounced between
infrastructure investment by the government and economic development.
After urbanization stabilizes and matures in its advanced stage, a higher level
of economic development and changes of the leading industries put forward
new requirements for infrastructure investment. On the one hand, urban resi-
dents have higher expectation of infrastructure provided by the government in
terms of environmental quality, public health, safety, and time-efficiency. On

the other hand, development of emerging industries depends more on a new
type of infrastructure, especially education and scientific research, than tradi-
tional infrastructures such as transportation and energy.
3.4.3 Implementing an innovation-oriented and future-ready strategy

for urbanization
How to buffer the impact of technological and economic transformation and
adapt to changes in the external environment is the primary challenge for
urbanization. Around the 1970s, with the decline and relocation of original
leading industries, many traditional industrial cities in developed countries
were ailing. In the face of continuous development of science and technology
and major technological and industrial changes, the key to maintaining a city’s
long-term competitiveness is to implement an innovation-oriented and future-
ready strategy.
First is to actively adapt to economic and industrial transformation, and
divert factors from declining industries to emerging industries. Urbanization
and technological revolution is also a process of constant substitution of lead-
ing industries. With the development of science and technology, the original
innovative industries gradually decline, and new technologies and industries
continue to rise. Urban development and technological revolution have to
remain updated. The only way forward is to follow the trend of innovation and
the requirements of economic and industrial transformation and encourage
and promote the transfer of factors from declining industries to emerging
industries with favorable systems and policies. History shows that when the
leading industries of a city decline, the government has two policy options.
One is bailout. Due to the large footprint of the original leading industries,
when they show signs of decline, the government is tempted to invest a lot of
resources to bail them out. However, as the cases of Manchester, Detroit and
other cities show, the bailout policy is seldom successful. When a leading
industry declines, often is the case that the host city has lost competitive advan-
tages for its development. Bailout efforts may protract but cannot avert the
decline. The other option is transformation. Aware that the bailout doesn’t
work, the government shifts focus to the development of new industries, invests
factors in them, acquire new competitiveness, and drive urban resurrection.
According to international comparison, all cities that have revived after reces-
sion are beneficiaries of new industries. Some turned to new industries imme-
diately after the decline of original leading industries, while others tried bailout
policy first and turned their focus to new industries when the policy failed.
With deepening of globalization, emerging industries and their new global lay-
out have put forward new requirements for economic transformation and
upgrading. Performance has varied from country to country in response to the
new requirements. Cities within the same country are also polarized in the
restructuring. Those home to emerging industrial clusters enjoy strong
momentum of development, while those failing to regain industrial advantages

suffer population outflow.
Second is to develop local education and research institutions to underpin
urban transformation. Almost all successful cases of urban transformation in
the United States and Western Europe are attributable to their universities and
research institutions. When original leading industries decline, a city counts on
innovation from local universities and research institutions to cultivate new
knowledge-intensive enterprises and industries, whose growth redefines the
urban industrial structure for successful urban transformation.
Third is to strike a balance between the benefits of short-term specialization
and the need for diversification in the mid- to long-term. Agglomeration of
industries and deeper specialization are conducive to the competitiveness in
specific industries. Generally, city governments also take supportive policies to
maintain competitive edges of such industries. But any industry has a life cycle,
which is accelerated by technological revolution. Traditional industries lose
out in time. To ensure healthy urban development over time, cities should also
brace for potential industrial and technological revolutions, diversify urban
development, and allocate labor, finance, land, and innovation factors accord-
ing to the need for diversified development.
3.4.4 Establishing and improving coordinated governance for the development of

city clusters
With the evolution of urbanization and changes in urban industrial structure,

city clusters have increasingly become the main form of urban development.
The economic and industrial division of labor, coordination, and complemen-
tarity among cities are the internal driving forces for the development of city
clusters. However, cities within a cluster may differentiate in governance due
to administrative nuances, which often inhibits the division of labor, coopera-
tion and coordinated development of the city cluster. In order to enhance the
competitiveness, many city clusters have improved governance capability by
establishing regional coordination mechanisms. Despite differences in politi-
cal system and economic and social environment, countries share some com-
mon features in collaborated governance of city clusters. The first is to
establish a regional coordinated management system. For example, Greater
London and Greater Tokyo have established coordination and management
systems based on their local conditions. For coordinated development of
Greater London, the central government set up a top-level administrative
coordination center to guide centers at local level, thereby breaking down
administrative silos and promoting integration and coordination in the city
cluster. The second is to promote coordinated governance through a partici-
patory approach. The development of a city cluster goes beyond city bound-
aries and involves many market players, making it necessary to have the
participation of government, enterprises, social organizations, universities,
and research institutions. This is essential to the coordinated development.
The third is to establish a rational incentive and compensation mechanism.

Cities in a city cluster are of different positioning and development levels. In
addition, fiscal and administrative decentralization creates practical difficul-
ties and constraints in promoting coordinated governance. To remove these
barriers, it is necessary to establish a rational incentive and compensation
mechanism to for “benefit sharing” and “cost sharing” within city clusters
(Jiang Minjuan, 2017).
Box 3.2 The Decline and Transformation of Traditional Industries in the

Ruhr Region
The coal industry and steel industry in the Ruhr region played an impor-
tant role in promoting the economic recovery in Germany before the
1950s. With the large-scale development and utilization of oil and natural
gas in the 1950s, the share of coal in energy consumption in Western
countries gradually dropped. At the same time, industrialization of third
world countries led to fierce competition in the international steel market,
and widespread use of new materials such as aluminum alloy and plastics
slashed the demand for steel, making the Ruhr region, which had rela-
tively high cost of steel making, lose comparative advantages. Under the
dual impact, Ruhr’s industrial structure was in big trouble.
From the 1950s to the late 1960s, the Ruhr region began to adjust its
industrial structure and implemented a “re-industrialization” strategy to
transform traditional industries, provide financial subsidies, and improve
infrastructure. The strategy was rather defensive in the early stage of
transformation, that is, to heavily subsidize merger and upgrading of coal
and steel companies, rather than to build a more diversified industrial
structure. As the policy failed to curb the decline, the Ruhr region began
to change course, gradually scaled down its dependence on the coal and
steel industries, and shifted focus to emerging industries. From 1985 to
1988, new enterprises in the region increased by 41%, far above the na-
tional average. With the development and growth of new enterprises in
information technology, biotechnology, health and pharmacy, new en-
ergy and other emerging industries, Ruhr reshuffled its industrial struc-
ture and rejuvenated the whole region.
3.5 Summary
In the process of urbanization, evolution of institutions and policies has an
important impact on the quality, mobility and reorganization of factors. At
different stages of urbanization, institutions and policies show different char-
acteristics. Transition between stages of is usually coupled with major changes
in underlying institutions and policies.
Urbanization is also a process of continuous improvement of the market

economy. In this process, formation of a unified market, continuous enhance-
ment of market access, competition and environment, and adjustment of rela-
tionship between the government and the market all play an important role.
Constant refinement of the market economy makes cities ever more efficient
and attractive. Every technological revolution engenders a number of emerg-
ing industries that have a significant impact on the economy, social life and
urban development. They thrive as urban or national leading industries, con-
tributing to the transformation, upgrading, and sustainable development
of cities.
Under the same institutional environment, cities vary in their governance
capability. Their choice of infrastructure layout and strategies for urban trans-
formation largely account for their difference in the path and outlook of urban
development.
Note
1 In theory and practice, Index of Economic Freedom is a good proxy of the degree
of marketization. Indicators against which economic freedom is measured are
closely relevant to the market economy. The greater the economic freedom, the
higher degree of marketization, and the more sophisticated the corresponding mar-
ket economy is. Index of Economic Freedom released by the Heritage Foundation
is one of the most authoritative matrix of economic freedom in the world. The
Index comprises 50 indicators to assess 130 countries and regions in the world.
These indicators are categorized into 10 groups, including trade policy, government
fiscal expenditure, government intervention in the economy, monetary policy, capi-
tal flow and foreign investment, banking and finance, wages and prices, property
rights, regulation, and informal market activities (black market).
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The Commercial Press, October 2010 edition.
Gomory, Ralph, Baumol, William, Global Trade and Conflicting National Interests,
CITIC Publishing Group, July 2018 edition.
Jiang, M., “Comparison of international experiences in collaborative governance of
city cluster: From the perspective of institutional mechanism”, Foreign Social
Sciences, No. 6, 2017.
Judd, Dennis R., Swanstrom, Todd, The Politics of Urban America, Shanghai Academy
of Social Sciences Press, July 2017.
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Wenzhou University (Social Science Edition), September 2016.
Liu, J. The process of urbanization in the United States, country report. n.d.
Liu, X., Ge, S., Ding, X., “The rise of the industrial revolution and the evolution of the
national innovation system: From the perspective of institutional genes and organi-
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Part II
A new round of technological

revolution and global
urbanization
The new century ushered in a new round of technological revolution world-

wide. A cohort of new technological changes have taken place, led by digital,
intelligent and green technologies. These changes have given rise to a cohort of
new industries, business formats and business models, energizing continuous
evolution in production methods and industrial structure on a global scale,
and cultivating new drivers for global economic growth and urbanization on a
higher level. It is noteworthy that the new round of technological revolution
will restructure factors of production, upgrade global industrial chain and
value chain, relocate population and industries across the world, and put in
place a new landscape of urbanization. The world will take a facelift in its ur-
ban system and development pattern. Innovative high-tech cities will gain
more importance in the world urban system. The critical scale of urban system
tends to enlarge, where metropolitan areas and city clusters will become the
prevailing model of urban development. Cities will provide a far more flexible,
friendly and attractive venue for industrial organization. Connotative and sus-
tainable high-quality development will become the key theme for the develop-
ment of cities. Smart city, big data and other technologies will empower cities
to adopt new models and improve capability of governance. Challenges such
as income inequality will also be effectively addressed in time with the deepen-
ing of technological revolution.
DOI: 10.4324/9781032663180-5
4 Background, traits, and trends of the
new technological revolution
Since the beginning of the new century, the world has embraced a new round
of technological revolution. A cohort of new technological changes have taken
place, led by digital, intelligent and green technologies and their integration.
The technological revolution continues to evolve, demonstrating new trends.
4.1 Background of the new technological revolution

Measured by the dual impact on technological system and industrial revolu-
tion,1 the new technological revolution is defined as major technological
changes oriented by a higher degree of intelligence, and can be divided into
three groups: information technology group typified by digital technology, en-
ergy technology group by renewables, and transportation technology group by
high-speed railway.2 The new round of technological revolution started to un-
fold around 2010. In general, the revolution has moved to its expansion stage,
featuring accelerated application, large-scale commercialization and profound
economic and social implication.
The 21st century has witnessed a surge of innovation in mobile Internet,
digital technology, artificial intelligence, Internet of Things, cloud computing,
advanced robots, next-generation genetics, self-driving vehicles, energy stor-
age, advanced materials, and renewables. The boom has a profound economic
and social context.
4.1.1 Innovations are urgently needed to address development challenges
Since the beginning of industrial revolution, the world has been haunted with
traffic congestion, environmental pollution and other challenges. To fix them,
innovative solutions are urgently needed. Since the first industrial revolution,
large-scale use of fossil fuel in economic development has caused severe pollu-
tion and global warming in spite of productivity gains. In the past 130 years,
human activities have triggered a rise in global temperature, and a series of
problems such as pollution of automobile exhaust, depletion of the ozone
DOI: 10.4324/9781032663180-6
84 A new round of technological revolution and global urbanization
layer, reduction of biodiversity, acid rain, deforestation, and growing incidence

of hurricanes and tsunamis. There is an urgent need to switch to clean and re-
newable energy to mitigate climate change and environmental pollution. At the
same time, with the agglomeration of urban population and growth in private
car ownership, cost of traffic congestion continues to rise. Take Beijing for ex-
ample. According to Beijing Transportation Research Institute, average daily
congestion time (moderate congestion) in 2019 totaled 2 hours and 40 min-
utes.3 These problems have seriously impaired sustainable economic and social
development, hence the urgent need for innovative solutions.
4.1.2 Application of new technologies is moving from the deployment stage to the

expansion stage
Commercial application of new information, energy and transportation tech-

nologies has gained scale and shifted from the deployment stage to the expan-
sion stage. Since the beginning of the 21st century, the Internet and mobile
communication technologies have been widely used, collecting massive ubiq-
uitous big data, creating conditions for disruptive application of machine
learning and artificial intelligence algorithms, directly promoting the rise of
Internet platforms, sharing economy, and digital economy, and bringing about
changes in business model, format and industries. In the field of energy tech-
nology, wind energy, solar photovoltaic, smart grid, and energy Internet have
been put to large-scale application. Electric vehicles are expected to break bot-
tlenecks in the early stage for large-scale development.4 For example, Since its
founding in 2003, Tesla has seen its valuation go above US$600 billion, more
than that of the 9 largest traditional car makers combined. Companies like
Google, Waymo, Apple, and Baidu have prioritized investment in the research
and development of autonomous driving. The technology is maturing, with
prototypes for road test.
4.1.3 Slowdown of the world economy has further motivated the application

of new technologies
Since the 2008 financial crisis, low-speed growth of the global economy has
motivated the promotion and application of new innovations. Many schol-
ars regard the financial crisis as a turning point in the long-term economic
cycle. The global economy may be in recession and readjustment between
two long-term economic cycles. History shows that at the end of each tech-
nological revolution, the global economy enters a protracted period of re-
cession pending the rise of a new round of technological revolution and
large-scale application in industrial sectors. Rapid development of emerging
industries provides new momentum for economic growth. The research
group on “Changes in the International Economic Landscape and China’s
Strategic Choices” under the DRC Centre ran a simulation, showing that
Background, traits, and trends of the new technological revolution 85
the global economic growth will remain in a downward trajectory, with a rela-
tively low growth rate for quite a while. From 2020 to 2035, average global
growth rate will be 2.6%. Growth in developed economies is likely to be weaker,
with an overall growth rate around 1.7%, lower than the average rate over the
past 50 years. Growth rate in developing countries will also decline, and their
average annual growth rate is projected to be around 4.9%.5 This global weak-
ening makes it urgent to rapidly apply and disseminate new technologies as a
source of extra growth. If history is a reference, the new round of technologi-
cal revolution may guide the world economy to a new phase of prosperity in
the coming 15–20 years, despite uncertainties about its prospect.
Box 4.1 Different Views on the New Round of Technological Revolution
Since the beginning of the 21st century, new technologies have emerged
rapidly, such as big data, artificial intelligence, cloud computing, Internet
of Things, 3D printing, new materials, new energy and so on. New terms
have been proposed to describe the emerging technologies, the Fourth
Industrial Revolution by Schwab, the Third industrial Revolution by
Rifkin, Industry 4.0 in Germany, to name a few. They can be roughly di-
vided into two schools of thoughts. One believes that the current techno-
logical revolution typified by digital technology is part of the third
technological revolution and a continuation of the information age. The
other argues that digital technology makes the ongoing revolution com-
pletely different from the previous one, and it deserves to be singled out
as the fourth technological and the industrial revolution. For example,
Germany divides the information age into an automation stage based on
information technology and an intelligent stage based on cyber-physical
systems, hence the evolution from Industry 1.0 to Industry 4.0. The two
schools of thoughts are only different in the angle of observation.
Source: collated by the research team
4.2 Traits of the new technological revolution

Compared with previous technological revolutions, the ongoing one can be
characterized by digitalization, intelligence, green technologies, and a high de-
gree of integration.
4.2.1 Digitalization
The new round of technological revolution is prominently manifest in the

transformation of digital technology, innovative breakthroughs in application,
and the digital transformation of economic and social activities. Breakthroughs

of digital technology have directly promoted the digitization of information.
In-depth application of digital technology has generated massive amounts of
data. It is becoming ever more important in people’s life, production, deci-
sion-making, and analysis. Data have become a key factor of production.
Their combined applications have triggered major changes in production
methods. In particular, digital technology effectively connects the cyber world
with the BIT (binary digit) world to set stage for the digital economy. At the
same time, development of digital technology preludes breakthroughs and ex-
tensive application of new-generation energy and transportation technologies.
Innovative development of smart energy and smart transportation systems
gives rise to shared mobility platforms and shared service models. Uber doesn’t
produce a car, yet it has been a pilot of brand-new shared mobility and shared
economy. In addition, development of digital technology has triggered changes
in the fields of communication, e-commerce, electronic payment, and smart
manufacturing, accelerated the digital transformation and intelligent develop-
ment of traditional industries, redefined decision-making, production, and
transaction, and improved their efficiency. Industrial application of data and
digitalization of industries are brand-new business formats and production
methods, marking the evolution from “information economy” to “digital
economy”.
4.2.2 Intelligence
From the perspective of production, the biggest difference between the new
round of technological revolution and its predecessors lies in the high level of
intelligence embedded in its products and services. Manufacturing, commerce
and agriculture are all moving on from automation to intelligence as the basis
of operation. Intelligence is empowering various sectors, from design and
R&D, assembly and integration, logistics and distribution, to financial service.
Digital technology is making production tools more intelligent at a faster pace.
Intelligent equipment such as 3D printers, CNC machine tools, and smart ro-
bots are thriving. Thanks to embedded intelligence, labor tools are more pow-
erful than just converting one form of energy to another. The “nuclear fusion”
of intelligent technologies such as 5G, Internet of Things, AI, digital twin,
cloud computing, edge computing, and time-sensitive networks, is propelling
humanity from the Internet of Everything to Intelligence of Everything, from
ubiquitous connectivity to ubiquitous empowerment, toward the new ear of
“intelligence+”6.
Especially from the perspective of industrial revolution, with breakthroughs
and development of chip technology, development and improvement of Inter-
net facilities, availability of affordable sensors in large quantities, and improve-
ment of advanced manufacturing technology, the manufacturing industry is
increasingly digitalized, networking-based, and intelligence-empowered. The

industrial Internet is gradually formed. Rise of smart factories has fully inte-
grated the industrial Internet and realized the transformation from automated
production to intelligent production. Smart manufacturing has become a real-
ity. With the Internet of everything, a data-driven, software-defined, plat-
form-based, reorganized and intelligence-empowered system is becoming the
holy grail of the manufacturing industry.7
4.2.3 Greenization
Another important trait is the greening of technology. In response to environ-

mental pollution, ecological destruction and global warming, new technolo-
gies must safeguard both economic growth and green development, meet with
environmental and ecological standards, and cut the cost of green develop-
ment. This green trait is most obvious in the fields of energy, transportation
and manufacturing. In the energy sector, collective breakthroughs are achieved
in clean and low-carbon technologies, such as the new generation of nuclear
energy, shale gas, hydrogen energy, inflammable ice, energy storage, distributed
energy, and smart energy management. In the transportation sector, break-
throughs in lithium batteries and charging pile technologies have helped new
energy vehicles powered by hydrogen and electricity to outperform traditional
models. Major countries around the world have come up with a timeline to
phase out petroleum and diesel-powered vehicles. In the manufacturing sector,
priorities include energy-efficient, water-saving and comprehensive utilization
of resources, and low carbon emission technologies, as important as smart
manufacturing.
4.2.4 Integrated development
The new round of technological revolution typified by digital technology has a

high degree of integration and connectivity, with the potential for collective
breakthroughs. Upon the advent of big data, Internet of Things, cloud com-
puting and other emerging technologies, they quickly made way into various
fields and got integrated with energy and transportation technologies. Inte-
grated innovation have been accelerating to generate more significant impact.
For example, traditional energy giants ExxonMobil, Chevron, Shell and tech-
nology giant Microsoft have launched in-depth cooperation, and Total has
joined hands with Google for technological innovation. Many traditional car
makers such as Mercedes-Benz and Toyota cooperate with IT companies to
promote research and development and product innovation. Fused transfor-
mation of information, transportation and energy technologies has changed
the pattern of innovation, enabling technologies to work together for joint
innovation. For example, Tesla deeply integrates core technologies of new en-
ergy and smart vehicle to solve fundamental challenges of mobility and energy,
involving deep learning, AI chips, big data, supercomputing, battery, new en-
ergy, new materials and many other fields. By doing so, it has gone above tra-
ditional car maker and converted to a business and technology combo similar
to “Toyota + NVIDIA + Waymo + CATL”8.
4.3 Trends of the new technological revolution

The new round of technological revolution is still evolving. With further tech-
nological breakthroughs, integration and application, it will pick up new
trends.
4.3.1 Development of information technology toward high-speed, high-efficiency

and intelligence
Hardware is becoming faster and smaller. Widespread application of digital

technology, the Internet of Things, and the emergence of massive amounts of
data have higher requirement of hardware. In response, computer hardware is
becoming faster with larger capacity. High-performance processors will develop
faster, and multi-core parallel processing configuration will be mainstream tech-
nology. Technological advancement will make sensors more reliable, more accu-
rate, and faster. With wider application of electronic equipment and increasing
demand for portability, electronic components will shrink in size. Integrated
circuit devices will become smaller, gradually challenging physical limits at mi-
cron, nano, or even ultra-nano scales. It is estimated by the International Semi-
conductor Technology Development Association that CMOS circuits with a
feature size of 22 mm and MPUs with an actual gate length of 9 mm will be a
reality.
Communication transmission technology will upgrade to 6G, satellite Inter-
net and aerospace Internet. The fifth-generation mobile communication (5G)
technology is already in commercial use. Future development of communica-
tion transmission technology will feature high speed, large capacity, long-dis-
tance, and low latency. Greater operating efficiency will effectively promote the
Internet of Everything. The 6G communication technology is still under devel-
opment. It promises a data transmission rate 50 times faster than 5G, and its
latency will be reduced to one-tenth that of 5G. Moreover, it will outperform
5G on other indicators such as peak rate, traffic density, connection density,
portability, spectrum efficiency, and positioning capability. In addition, rapid
development of satellite Internet, aerospace Internet, smart satellite, and milli-
meter-wave communication has made interplanetary communication more
powerful. With Gbps-level bandwidth, satellites can make high-quality com-
munication directly with personal smart terminals.9
Background, traits, and trends of the new technological revolution
Table 4.1 Technical Parameters of the New Generation of Low-orbit Internet Constellation
Constellation Number Orbit Height Frequency Total Mass of Data Latency/ Inter Lead Latest
of (km) Range Capacity Single Transmission ms Satellite Investor Development
Satellites (Tbit· s−1) Satellite/ Rate Link
kg
OneWeb 720 1,200 Ku (user) 5–10 125 50 (user) 20–30 No SoftBank Frequency range
Ka (test and granted by
control) USA FCC
Starlink 4,425 1,110–1,325 Ku 8–10 386 1,000 25–30 Yes SpaceX Frequency range
Ka application
approved by
FCC
Telesat 1,171 1,000 (polar) Ka 1–10 N/A 1,000 30–50 Yes Telesat Frequency range
1,248 application
(inclination) approved by
FCC
Source: Review of the Overseas Development of Commercial Low-orbit Satellite Communication Constellations.
89
Box 4.2 Major Global Satellite Internet Companies
The constellation plan proposed by OneWeb is the first new-generation

NGSO (non-geosynchronous orbit) satellite constellation approved in
the United States. The plan will complete its first phase by deploying 720
satellites in 2021, and will eventually achieve global coverage with 1,980
satellites, building a high-speed and low-latency global network. The to-
tal capacity will be 5.4 Tb/s, providing Internet access at 200Mbit/s down-
link and 50M/s uplink, with latency around 30 ms.
The StarLink constellation is a low-orbit small satellite constellation
developed by Space X. It plans to launch 12,000 low-orbiting satellites,
which will constitute a huge space interconnection network. In the first
phase, 4,425 Ku-Ka band satellites are rocketed into a 550-km orbit. The
second phase will deploy 7,518 V-band satellites along a 340-km orbit.
After its completion, the total capacity will reach 8–10 Tb/s, with each
satellite providing 17–23 Gbit/s downlink capacity, and a latency of 25–35
ms. Sixty satellites are launched for each mission. Two hundred and forty
satellites are deployed so far.
Telesat is one of the world’s five largest commercial satellite operators.
It plans to launch 117 satellites, deployed in a polar orbit inclined 99.5
degrees relative to the equator and a second inclined orbit with an altitude
of 1248 kilometers. This constellation network can provide global coverage.
Source: Sealand Securities Research Institute
A large number of emerging intelligent technologies are flourishing. With rapid

iteration, application and promotion of information technology, and accelerated
development of artificial intelligence and virtualization technologies, general artifi-
cial intelligence becomes the hallmark of the next generation of artificial intelli-
gence. Key to the new round of technological and industrial transformation,
artificial intelligence will accelerate the advent of new technologies, industries, and
business formats based on intelligence through cross-innovation and integration.
For example, in the manufacturing sector, integration and fusion of advanced man-
ufacturing, information processing, artificial intelligence and other technologies
will lead to network-based and coordinated production facilities, and intelligent
production systems that are self-organized and self-adaptive with perception, anal-
ysis, inference, decision-making, execution, autonomous learning, and self-mainte-
nance capabilities to realize the whole process and end-to-end transformation.
In addition, as a new branch of information technology, blockchain con-
tinue to make breakthroughs in relation to consensus algorithm, encryption
algorithm and other underlying technologies. It will become more powerful,
available and reliable, thanks to deep integration with artificial intelligence, big
data, the Internet of Things. Accelerated large-scale commercial application
enables it to be another driver for the digital economy.10
Box 4.3 Development of Artificial Intelligence
According to the China Artificial Intelligence Industry Research Report

(2019) issued by iResearch, there were 2,167 artificial intelligence-related
companies in 2018, with a market scale of 25.11 billion yuan. The scale
was expected to exceed 57 billion yuan in 2019, and go above 150 billion
yuan in 2022, with a significant spillover effect on the real economy. So
far, artificial intelligence is mainly applied in security and financial sec-
tors, exhibiting potential for explosive growth in manufacturing, health-
care, and education sectors (Figure 4.1).
16
14
12
Trillion Yuan
10
8
6
4
2
0
2018
180
160
140
120
Trillion Yuan
100
80
60
40
20
0
2018 2019 2020 2021 2022
Figure 4.1 Size of Real Economy Empowered by Artificial Intelligence (100 million

Yuan, 2018–2022).
Source: iResearch, the China Artificial Intelligence Industry Research Report (2019).
4.3.2 Low-carbon, distributed, and intelligent transformation of energy technology
Growing signs show an innovation boom in the energy sector, with a long pipe-
line of innovative technologies. New energy technologies are deeply integrated
with information technology, new materials, and advanced manufacturing.
Low-carbon energies such as solar and wind, and new energy vehicles continue
to mature, with expected breakthroughs in large-scale energy storage, hydrogen
fuel cell, and distributed energy. New models of energy utilization, new busi-
ness formats, and new products abound. Intelligence-empowered energy pro-
duction and consumption are emerging. Distributed energy supply starts scale
application in industrial parks, urban communities, public buildings and pri-
vate housing.
4.3.2.1 Mainstreaming of low-carbon and carbon-free technologies
In the fight against climate change, low-carbon energy technologies have

developed rapidly, accelerating low-carbon and carbon-free transformation
of the world energy structure. In the global primary energy mix, non-fossil
fuel energy has reached 3 billion TOE, accounting for nearly 20% of total
demand. As technological progress accelerates and costs continue to fall,
renewable energy will move to a higher gear for development and utiliza-
tion. IEA predicts that from 2018 to 2040, investment in renewable energy
capacity installation will reach 8 trillion USD. Additional capacity of re-
newables in the period will reach 4.17 billion kilowatts, accounting for two-
thirds of newly installed capacity, or 70% of power plant investment. By
2040, power generation from renewable energy will reach 16.8 trillion kilo-
watt-hours, nearly thrice that of 2017. In 2040, the share of non-fossil fuel
power generation in the total power generation will rise to 45%, and total
consumption of non-fossil fuel energy will exceed 4.6 billion TOE, basically
equivalent to oil consumption and higher than coal consumption (Figure
4.2). By then, the share of non-fossil fuel energy in the total primary energy
consumption will increase to 26%, two percentage points higher than that
of coal.
4.3.2.2 Rise of distributed energy
Distributed energy systems are deployed at the user side in small-scale and
small-capacity modules, providing two-way power and heating/cooling transmis-
sion. Distributed generation is with high efficiency, low online loss, flexibility in
operation, and better economic performance. Moreover, it can be coordinated by
utility grid to facilitate scale development of renewables. Distributed energy has
become a priority of the energy industry.
According to some statistics, 25%–30% of the world’s newly installed ca-
pacity in recent years has been distributed power. Developed economies in
North America, Europe, and other regions have issued supportive policies.
Figure 4.2 Installed power generation capacity worldwide by source under IEA Policy
Scenario.
Source: IEA, World Energy Outlook 2018.
Policies in European Union, the United States, and Japan have prioritized
rooftop PV systems for households and businesses in places with abundant
sunlight and high electricity price. This has greatly promoted the develop-
ment of rooftop PV. Although investment in the new system is relatively high,
it is also popular in developing countries, in particular in China and India,
given their growing appetite for power and abundant resources. As focus of
the distributed energy industry, distributed PV will enjoy explosive growth.
IEA predicts that the scale of rooftop PV will increase from less than 90 mil-
lion kilowatts in 2013 to 500 million kilowatts in 2040, up by nearly five times.
It is foreseen that distributed energy will reshape the production and con-
sumption pattern, sowing the seed for a new energy supply system. This will
save monetary and time cost for the construction of transmission and distri-
bution networks, and enable energy users to become producers and suppliers,
fundamentally changing how energy is produced and supplied, and how peo-
ple produce and live.
4.3.2.3 Accelerated development of intelligent energy system
Since the beginning of the new century, an energy technology revolution has
gained traction. Deep integration of energy and information technologies pro-
motes the development of an intelligent energy system centered on smart grid.
The U.S. Department of Energy proposed to establish a “21st Century Energy
Network”, launched a smart energy building plan, and accelerated the con-
struction of a smart energy system. In order to improve reliability and quality
of power supply and promote renewables and other clean energy, EU proposed
to build a European technology platform for the “Future Grid” for the
construction of smart grid in 2004, and to implement the “Super Smart Grid”
plan in 2005. In 2013, the European Parliament announced to implement the
second “Smart Energy-Europe” plan, mainly to establish a high-efficiency and
self-regulated energy system based on information and communication tech-
nology. Smart grid was also a priority under Japan’s “New Generation Energy
and Social System Demonstration Program” in 2010, at par with “Smart City
Community”. Major developed economies have made remarkable progress in
technology development, standard setting and project demonstration of smart
metering, smart grid platform, grid monitoring and management, grid connec-
tion of renewables, large-scale storage, smart energy building, and PHV/
EV. With a “global grid” empowered by information technology, the develop-
ment of intelligent energy system will gather pace.
4.3.3 Evolution of transportation technology toward ultra-high-speed, intelligent,

green and shared mobility
Transportation technology features concurrent and mutually reinforcing inno-

vation from systems and tools to infrastructure and service operation, paving
the way to ultra-high-speed transportation, driverless and intelligent vehicles,
electrification and green transformation, and shared mobility.
4.3.3.1 Ultra-high-speed transportation system
Technological breakthroughs are shifting the transportation system toward

an ultra-high-speed track. The “super loop system” developed by Virgin Hy-
perloop One can carry passengers or cargo in a pod at up to 1,100km/h
through a pipeline, where air pressure is reduced close to vacuum to minimize
air resistance. The pod uses magnetic levitation to eliminate rolling friction
and can travel faster than airplanes, shortening inter-city travels from hours to
minutes. In May 2017, Hyperloop One conducted the first full-system test in
Nevada, achieving an operating speed of 113 km/h. In August, XP-1 pod was
tested at an operating speed of 309 km/h. Countries including India, China,
France, the Netherlands, the United Arab Emirates, and the United States are
conducting feasibility study of similar technologies and building test pipe-
lines. Hyperloop technology may be the next generation vehicle for public
transport.
Another option is magnetic levitation (maglev) technology. At the begin-
ning of the 21st century, maglev was successfully put to use in China, Japan
and South Korea. The Shanghai Pudong Airport Line has been the world’s
only high-speed maglev line in commercial operation. Maglev is a rail transit
system. It uses electromagnetic force for non-contact levitation and directing
between the train and the track, and powers the train with electromagnetic
force generated by linear motors. Maglev is engineered to eliminate wheel-rail
contact and acting force. Its max speed is 400–500 km/h and can be hugely
extended. Maglev is a cheaper, safer and more rigid solution, hence a compet-
itive candidate for the next generation ultra-high-speed rail transit.
The German government started the development of maglev system in

1969. Its first set of normal-conducting maglev system was completed and
passed evaluation in 1991. In 2001, it exported a complete set of TR08 train
and operating system to China. Germany has retained its core technology and
development team, and promoted the solution to countries planning for high-
speed rail transportation such as Malaysia, Brazil, and Spain.
Japan began research on high-speed maglev transportation in 1962. In 2009,
the low-temperature superconducting high-speed maglev technology was veri-
fied to be mature. In 2015, it set a world record of 603 km/h on the 42.8 km
Yamanashi test line and started the construction of Phase One superconduct-
ing high-speed maglev railway (Tokyo-Osaka, scheduled to complete in 2027)
and Phase Two (Nagoya-Shin-Osaka, scheduled to complete in 2045).
China started its research during the “8th Five-Year Plan” period and com-
pleted the Shanghai high-speed maglev demonstration line in 2002. During the
“12th Five-Year Plan” period, a scientific and technological support plan “Re-
search on the Engineering Integration System of High-speed Maglev Trans-
portation” was compiled to further improve China’s capability in this domain.
On May 6, 2016, Changsha’s medium and low-speed maglev system was put
into operation, with a designed speed of 100 km/h. In July 2016, the Ministry
of Science and Technology approved the launch of the “13th Five-Year” Mag-
lev Transportation Project. It has been by CRRC for implementation, includ-
ing the 600 km/h maglev task force led by CRRC Sifang Rolling Stock Co.,
Ltd. and the 200 km/h maglev task force led by CRRC Zhuji Co., Ltd.
4.3.3.2 Driverless and intelligent vehicles
Autonomous cars, or driverless cars, refers to motor vehicles automatically

and safely operated by computer without human active intervention. It’s sup-
ported by the collaboration between artificial intelligence, visual computing,
radar, monitoring devices, and global positioning systems. There are two main
paths for the research and development of driverless vehicles. One is advocated
by Internet companies such as Google, Tesla and Baidu. Autonomous vehicles
developed by these companies adopt a sensor-based “detection-decision mak-
ing-execution” design approach, which combines radar, GPS positioning, laser
detection and measurement, video, ultrasonic, infrared and other sensors to
detect the external environment (road, traffic, weather, etc.) and vehicle inter-
nal information (vehicle speed, tire pressure, passenger weight distribution,
etc.). Software algorithms are deployed to process sensor data, identify obsta-
cles, formulate driving paths, and take control actions (brake, turn, lane change,
etc.). Its features include autonomous driving, comfortable and safe driving
experience, and savings in labor cost.
Alternatively, vehicle networking communication technology is used to pre-
vent collision and manage traffic. Traditional carmakers like Volvo, BMW,
Mercedes-Benz, Ford, Toyota, etc., have been working on this technology since
the 1970s, guiding the technology to a higher level of automation. Also known
as advanced assisted driving, this system is ready for active safety, equivalent to
L1 and L2 defined by the U.S. Highway Safety Administration. The Internet of

vehicles uses wireless technology (such as special-purpose short-range commu-
nication, cellular communication, etc.) to enable vehicle-to-vehicle (V2V) and
vehicle-to-infrastructure (V2I) communication. Compared with the car-
mounted sensor solution, the Internet of vehicles allows a farther and larger
range of detection, and offers vehicles more time to analyze data, switch driv-
ing modes and give early warning to drivers.
Box 4.4 Levels of Autonomous Driving Technology
The United States National Highway Safety Administration (NHTSA)

divides autonomous driving into 5 levels, from L0 to L4. L1 and L2 are
called advanced assisted driving, and L3 and L4 autonomous driving. A
considerable number of cars sold in market have reached L1. Research
and development of L2 is fairly mature, and L3-ready cars are emerging.
Levels of Main Features

Autonomous
Driving
L0 Fully manual driving

L1 Automation at this level involves one or more specific control
functions; if multiple functions are automated, they operate
independently from each other. The driver has overall control.
Specific automation systems include: cruise control,
automatic braking, and lane keeping.
L2 This level involves automation of at least two primary control
functions designed to work in unison. The driver is still
responsible for safe operation. In specific operating conditions
(a closed lane designed for autonomous driving, for example),
an automated operating mode is enabled such that the driver
is disengaged from physically operating the vehicle by having
his or her hands off the steering wheel and foot off pedal at
the same time.
L3 Limited Self-Driving Automation. Vehicles at this level of
automation can be heavily relied on to monitor for changes in
those conditions requiring transition back to driver control,
providing the driver with an appropriate amount of transition
time to safely regain manual control.
L4 Full Self-Driving Automation. The vehicle is designed to
perform all safety-critical driving functions and monitor
roadway conditions for an entire trip. Such a design
anticipates that the driver1 will provide destination or
navigation input, but is not expected to be available for
control at any time during the trip.
Source: U.S. Department of Transportation, National Highway Traffic Safety Administra-
tion, Preliminary Statement of Policy Concerning Automated Vehicles. 2013.
Figure 4.3 Outlook of Driverless and Intelligent Vehicles.
Autonomous driving technologies in developed countries such as the United

States and Japan have entered different stages of systematic application and
promotion. In 2014, the joint project office of the U.S. Department of
Transportation and the ITS (Intelligent Transportation System) proposed the
“ITS Strategic Plan 2015–2019”. The U.S. ITS strategy has dual priorities for
intelligent vehicle network and intelligent automation (Figure 4.3).
4.3.3.3 Electrification and green transformation of transportation

In a broader sense, new energy vehicles include electric vehicles (including so-
lar-powered vehicles), hybrid vehicles, fuel cell vehicles (mainly hydrogen fuel),
and other vehicles (natural gas, ethanol, and other energy storage solutions).
Electric vehicles are the mainstream, and fuel cell is the most cutting-edge tech-
nology. Both types are powered electric motors. Compared with traditional
models, electric and fuel cell vehicles have better performance with less energy
consumption, greater efficiency, less pollution and lower noise. They also have
a simple structure with less mechanical transmission components, hence faster
torque response and smoother acceleration. Also, the electric power train
makes it are easier to integrate information technology and wire control to
augment intelligence.
Highway electrification is an important area of electrification of transpor-
tation. Electrified highways can be divided into two types. One is to deploy
fast-charging stations along the highway/expressway network so that vehicles
can be rapidly recharged to extend their range. The other is electrified motor-
way per se. That is, the motorway is equipped with a power supply system, and
vehicles can be constantly recharged while on the go. Wireless charging and
solar power pavement may be potential solutions. Different from ordinary
electric vehicles, vehicles compatible with electrified roads can be called e-power
vehicles. The crucial distinction between e-power vehicles and early trolley-
buses is that e-power vehicles must carry some fuel or power batteries for
non-charging conditions. E-power vehicles must be “dual-energy” models. An-
other use of e-power vehicles is to replace fossil fuel in land freight transporta-
tion and to turn transportation sector greener.
Box 4.5 Development of Electric Vehicles Worldwide
Global technology leaders include Toyota (world leader in hybrid vehi-

cles), Tesla (world leader in electric vehicles), GM, BMW, and BYD. On
the whole, electric vehicle technology has matured with growing market
penetration. Among them, traditional hybrid vehicles have been launched
to the market. The United States, Japan, and the European Union all
began to develop new energy vehicles in the 1960s and 1970s. Since the
1990s, the US government has invested more than 20 billion dollars in the
research and development of new energy vehicles and several billion dol-
lars in the construction of charging facilities. As of the end of 2018,
54,000 charging facilities had been installed. Popularity of Tesla electric
vehicles has driven Department of Energy, power companies and Tesla to
pace up the research of wireless charging technologies and the construc-
tion of supercharging stations.
China aims for leadership in automotive industry and promotes
“made-in-China”. The Project of Major Technological Industries for
Electric Vehicles was included in the “9th Five-Year Plan” for science and
technology research. In 2001, the state launched “863” project dedicated
to electric vehicle technologies to strengthen the three vertical segments
of electric vehicles, hybrid vehicles, and fuel cell vehicles and the three
horizontal segments of power batteries, drive motors and electronic con-
trol technology. In 2012, China officially released a strategic document,
the Development Plan for Energy-saving and New Energy Automobile In-
dustry (2012-2020). In 2018, global sales of new energy vehicles were
2.018 million units, including 1.256 million units sold in China, account-
ing for 62.5% of the world total and ranking first by market size. Repre-
senting a year-on-year growth of 74.2%, 777,000 charging facilities,
including 331,000 public facilities, have been installed.
4.3.3.4 Shared mobility
In 2015, researchers and practitioners in the transportation sector started

to advocate MaaS (mobility as a service), thanks to the development of
information technology and mobile Internet services. MaaS integrates infra-

structure, vehicles (public transport, shared cars, taxis, shared bicycles, etc.),
and transportation organization (operation plan, vehicle scheduling, personnel
dispatch, etc.). It aims to provide passengers with one-stop mobility experience
where they can order different combinations of services and products as needed
and make a single payment with mobile terminals (see Figure 4.4). To a certain
extent, emerging services such as online taxi-hailing, bus-on-demand, and car-
pooling are primary products of MaaS. With the advent of autonomous driv-
ing and sharing economy, MaaS is hailed as the best mode for public, private
and shared transportation for maximal efficiency, best economy of scale and
shortest response time (Burrows et al., 2015; Sochor et al., 2016). Under the
Figure 4.4 Concept of MaaS system.

MaaS trend, operators of public, private and shared transportation integrate

and share data, based on which supply plans are generated to optimize coordi-
nation on the supply side to ensure the quality of responsive and one-stop
mobility services. Ongoing electrification of vehicles facilitates data sharing
among energy networks and charging facilities with mobility demand, vehicles
and service organizations to optimize the layout and utilization of transporta-
tion-energy networks.
4.3.4 Collective breakthroughs of other technologies
The new round of technological revolution is not dominated by a single tech-

nology, but collective breakthroughs on multiple fronts. Technology groups
inspire and empower each other for a concurrent chain action. Personalized,
composite and multifunctional new materials are being developed. Graphene,
FPD, bionic materials, superconducting materials, and smart materials are
mushrooming. In the field of life science, breakthroughs in genomics, synthetic
biology, brain science, stem cell are expanding boundary of our capability to
comprehend, regulate and reengineer life. New technologies and methods are
scaling up their clinical application, promoting medicine to a new stage of
personalized and precise diagnosis and treatment and ex-ante health interven-
tion. Cellular immunotherapy is considered one of the most promising cancer
treatments. Stem cell and regenerative medicine are expected to become a third
option in parallel to pharmacy and surgical treatment, triggering a new epi-
sode of medical revolution. Synthetic biology, artificial photosynthesis, molec-
ular modular breeding and similar technologies and methods point to a
promising outlook of bio-economy. Among them, synthetic biology is known
as the “third biological revolution” after the discovery of DNA double helix
and human genome sequencing. It has profound impact on drug development,
gene therapy, biological breeding, biosafety, modern agriculture and other
fields and will likely disrupt the technology world.11
4.4 Summary
Environmental pollution and other pressing challenges have to be fixed with
technological solutions. New technologies are moving from installation to de-
ployment. Slowdown of the world economy calls out for new growth engine.
Hence, a new round of technological revolution is propagating on a global scale.
Different from its precedents, the new round of technological revolution is typ-
ified by digitalization, intelligence, green transformation, and trans-disciplinary
integration. It will gear up the high-speed, high-efficiency, and intelligent devel-
opment of information technology. Energy technology will continue to embrace
a low-carbon, distributed and intelligent pattern. Transportation technology
will be defined by ultra-high-speed, intelligence, green transformation and
shared mobility through collective breakthroughs. In the next 20–30 years, the
technological revolution will give rise to new leading technologies and general
technologies. Their explosive development will reshape the world economy and
society like never before, lifting quality of life to historic new high.
Notes
1 There are two perspectives to the scope of a technological revolution. One is the
impact on technological system, and the other is the impact on industrial revolu-
tion. A technology revolution is mainly triggered by basic and original technolo-
gies, which are at the core of technological changes and have the most far-reaching
and extensive impact on economic and social development. Measured by the im-
pact of technology, energy, information, and transportation technologies are the
most basic and critical elements in the technology system. Changes in these three
groups will have significant and extensive impact on other technologies, especially
industrial, economic and social development. Meanwhile, previous technological
revolutions have also been measured by their impact on industrial revolution, or
how they led to large-scale commercial application.
2 In the new round of technological revolution, in addition to energy, information
and transportation technologies, major breakthroughs have been achieved in bio-
medical and new materials. However, their economic and social implication is mar-
ginally less significant.
3 Beijing Transportation Development Research Institute. 2020 Beijing Transporta-
tion Development Annual Report, page 63. http://www.bjtrc.org.cn/List/index/
cid/7.html
4 The State Council Development Research Center “Changes in the International
Economic Landscape and China’s Strategic Choices” project: Ten major changes in
the international economic landscape in the next 15 years, China Development Ob-
servation, Issue 1, 2019, p. 38.
5 The State Council Development Research Center “Changes in the International
Economic Landscape and China’s Strategic Choices” research group: Ten major
changes in the international economic landscape in the next 15 years, China Devel-
opment Observation, Issue 1, 2019, p. 39.
6 An Xiaopeng. Reconstruction: The Logic of Digital Transformation, Electronic
Industry Press, 2019, p. 1.
7 An Xiaopeng. Reconstruction: The Logic of Digital Transformation, Electronic
Industry Press, 2019, p. 1.
8 Ren Zeping and Lian Yixi: Tesla’s Secret: The Rise of a Technology Complex,
Zeping Macro, December 20, 2020.
9 “A Planetary Network Comprising 12,000 Satellites – How Will Musk’s Starlink
Project Change the World?” https://www.stmcu.org.cn/article/id-329851
10 Bai Chunli: Main Development Trends and Areas for Key Breakthroughs of Tech-
nological Innovation, Caijing.com.cn, 2019. http://m.caijing.com.cn/article/172609?
target=blank
11 Bai Chunli: Main Development Trends and Areas for Key Breakthroughs of Tech-
nological Innovation, Caijing.com.cn, 2019. http://m.caijing.com.cn/article/172609?
target=blank
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5 Impact of the new technological revolution
on economic development
The new round of technological revolution is evolving from the introduction

stage to the expansion stage. Wide application and commercialization of new
technologies trigger changes of “key factors of production”, accelerate the
growth of emerging industries and the upgrading of industrial chains, promote
changes of global industrial chains and the landscape of trade, boost profound
changes in the mode of production and lifestyle, and deeply change the pattern
of employment and income distribution.
5.1 Accelerating the development of emerging industries and the

upgrading of industrial chains
Wide application and commercialization of the new round of technological
revolution trigger changes of key factors of production. Data become an im-
portant factor of production and digital technology promotes the develop-
ment of digital economy.
First, the new round of technological revolution makes data the key factor
of production. As the Internet and digital technology develops, the process of
information digitization accelerates, and massive, ubiquitous and multi-dimen-
sional big data accumulate fast. In particular, demands of data analysis, stor-
age and computing driven by the digital transformation and cloud adoption of
enterprises and governments spur rapid growth of data related to productivity
and Internet of Things (IoT). According to IDC, global data volume grew to
41.0ZB in 2019. With wider application of AI in more scenarios and popular-
ization of edge computing and IoT, the proportion of enterprise-level data
such as the productivity data and IoT data increases rapidly.1 As the digital
transformation of economic activities speeds up, data have become a key ele-
ment of decision-making in production and other activities.
Second, the new round of technological revolution facilitates rapid develop-
ment of emerging industries. The rapid integration and innovation of digital
technology with other fields gave birth to emerging industries such as
e-commerce, industrial Internet, energy Internet, biochips and new energy ve-
hicles. In 2018, global e-commerce sales value hit $25.6 trillion, accounting for
30% of global GDP that year. In the same year, the value of global B2B
DOI: 10.4324/9781032663180-7
e-commerce reached $21 trillion, representing 83% of all e-commerce, com-

prising both sales of online platforms and electronic data interchange transac-
tions. The world’s top 10 B2C companies in 2018 generated almost $2 trillion
in gross merchandise value (GMV).2 In 2019, global volume of digital econ-
omy reached $31.8 trillion and the volume of digital economy in 47 countries
accounted for 41.5% of GDP.3
Third, the new round of technological revolution speeds up the upgrading
of industrial chains. The industrial Internet spurred by the new round of tech-
nological revolution will connect and expand to enterprises in different indus-
tries and to their internal environment. Enterprises and terminals can cooperate
seamlessly and integrate resources through information network and data flow
connection. Processes such as R&D, hardcopy production, transportation and
logistics, and sales service are integrated, shaping a digital ecosystem with up-
stream, downstream and cross-sector integration and combining traditional
factors of production such as the material flow, talent flow, technology flow
and capital flow at a higher level. The industrial chains integrate, break up and
disappear at a faster pace, forming a high-level digital industrial chain and
supply chain (Table 5.1).
5.2 Facilitating the localization and regionalization of global

industrial chains and trade patterns
IT-based innovation gave rise to a new technology cluster dominated by digital
technology. Data, as a new factor of production, have become relatively more
important, even the most important factor of production. Changes in the rela-
tive importance of factors of production and changes in the modes of produc-
tion led to shift in comparative advantages among economies.
With the development of transportation and information technology, the
cost of transportation and communication decreases significantly, which
makes trade increasingly convenient, changes the original comparative advan-
tages among regions, promotes the reconstruction of R&D, manufacturing,
industrial organization and division of labor, investment and trade around new
technological systems and factors of production. Manufacturing and service
industries are further relocated on a regional or even global scale, leading to
spatial reconstruction and recombination of global value chain, supply chain
and industrial chain. The value chain of goods production is increasingly re-
gionalized, especially in the fields of automobiles, computers and electronic
products. In Asia and Europe, enterprises are increasingly establishing produc-
tion facilities close to the market.
At the same time, the transformation of digital technology makes interna-
tional trade more digital, service-oriented and segmented, which will signifi-
cantly increase the proportion of digital product trade, service trade and
intra-industry trade, speed up the development of cross-border e-commerce,
and change trade mode and global trade landscape. According to the Global
Value Chain Development Report 2019 by the World Bank, the intra-industry
Table 5.1 Industrial Chains of Representative Enterprises in the Digital Age
Company Chips Technology Platforms/ Consumer Products Industry Application Solutions
Impact of the new technological revolution on economic development 105

Frameworks
Facebook Neural network Deep Learning Modules Chatbot Bot, AI Housekeeper Jarvis, Facial Recognition Technology
training hardware Torchenet, FBLearner Smart Picture Management DeepFace, DeepMask,
system Big Sur Flow Application Moment SharpMask, MultiPathNet
Apple Apple Neural Engine Visualized Map MapsenseGPS Siri, IOS Photo Management,
Natural Language Processing
VocalIQ
Amazon Annapurna ASIC AWS Distributed Machine
Smart Speaker Echo, Alexa Voice Amazon Lex, Amazon Polly,
Learning Platform Assistant, Smart Supermarket Amazon Rekognition
Amazon go, PrimrAir Drone
Google Customized TPU, TensorFlow System, Cloud Google Self-driving Cars, Google Voice Intelligence API, Google
Cloud TPU, Machine Learning Home Cloud, Deepmind
Quantum Computer Engine
Microsoft FPGA Chips Distributed Machine Skype Real-time Translation, Xiaoice Microsoft Cognitive Services
Learning Package Chatbot, Cortana Virtual Assistant,
DMTK, Bot Framework Tay, Smart Camera A-eye, Hololens
Holographic Glasses
IBM Human Brain SystemML Watson, Bluemis, ROSS
Simulation Chip
SyNAPSE
Tencent Tencent Cloud Platform, WechatAI, Dreamwrit, Tencent Smart Search Engine “Yunsou”
Angel, NCNN Miying and Chinese Semantic Platform
“Wenzhi”, Youtu AI Open
Platform
Baidu DuerOS Chip Paddle-Paddle Baidu Image Recognition, Baidu Apollo, DuerOS
Unmanned Vehicles, Duer
Alibaba Pingtouge Chip PAI2.0 Smart Speaker Tmall Genie X1, ET City Brain
Intelligent Assistant “Alime”
Source: Evergrande Institute.
trade model based on technology and product differentiation increasingly be-

comes the leading model of value chain trade, and the proportion of trade
based on the comparative advantage of labor cost continues to decline. For
example, the share of labor-intensive manufacturing in global trade decreased
from 55% in 2005 to 43% in 2017. Globally, compared with trade among re-
gions, the proportion of intra-region trade in goods and services is on the rise,
which is most obvious in Asia. In 2017, 60% of Asia’s trade in goods (56% in
2007) and 60% of trade in service (46% in 2007) took place in Asian regions.4
Box 5.1 Production-Consumption Structure of Global Data Factors
As an emerging factor of production in the new round of technological

revolution, the production-consumption structure and global flow of
data reflect the trend of global industrial upgrading in urban areas. From
2005 to 2014, the global cross-border bandwidth increased from 4.7 Tbps
to 211.3Tbps, an increase of 45 times and an annual growth rate of 52%
(Figure 5.1). Developing economies started relatively late, but grew faster
than developed economies. From 2005 and 2014, the bandwidth used by
75 developing economies increased from 1G per second to 164G per sec-
ond. E-commerce market occupies a significant position in global trade
thanks to the growth of bandwidth. It is estimated that 30% of
e-commerce will be cross-border in 2020. Besides, according to Cisco
(2020), the global share of Machine-to-Machine (M2M) connections in
2500
2000
1500
1000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Bandwidth (TBPS)
Figure 5.1 Changes of global cross-border bandwidth.

Source: Mckinsey, Digital Globalization: the New Era of Global Flows, 2016.
2023 will account for 50% of the total global connections. Compared
with the connection of individuals, the data volume and uses of IP ad-
dress of the M2M connection are less, but the economic value is higher.
Moreover, Barnett and Park’s research suggests that the global Internet
structure is mainly controlled by a few core countries connected by the
same language, culture and history, such as the United States, UK, China
and Germany. However, global information production and consump-
tion is still imbalanced. For example, US plays a vital role in the global
information production, producing over 50% of online contents out-
side Europe.
5.3 Promoting intelligent, platform-based, and network-based production

The new round of technological revolution replaces automated production
with intelligent production, and remodels the organization of production from
vertical integration to be a platform-based and network-based model.
First, the technological revolution makes production more intelligent. Ma-
jor breakthroughs have been made in technologies such as Internet of Things,
cloud computing, AI, virtual reality, additive manufacturing, robots, and espe-
cially the cyber-physical systems. These breakthroughs can fully integrate and
optimize resources, talents and information in the virtual and physical worlds,
forming “smart factories” with high flexibility and high resource utilization
rate. Machines and equipment of smart factories have strong data processing
capability. The information, statistics and dynamic analysis provided by these
devices can make production smarter, leaner and more energy-efficient through
interconnectivity and sharing. Ubiquitous sensors, embedded terminal sys-
tems, intelligent control systems, communication equipment and transporta-
tion are integrated into a smart network. As a result, human, machine and
products have continuous interconnectivity, information exchange and interac-
tion between each other through the intelligent network in the virtual and real
worlds, as well as in the digital and physical worlds.5 Smart factories realizes
the vertical integration of information flow, capital flow and logistics through-
out product life cycle within companies, as well as the horizontal integration of
research, production, supply and sales through the value chain and informa-
tion network. Besides, it also enables the end-to-end integration of shared
value chains between enterprises and customers through advanced intercon-
nection methods and social tools. As a result, processes such as product devel-
opment, procurement, manufacturing, distribution, retailing and end-user
interactions become more intelligent and integrated (Table 5.2).6
Second, the technological revolution facilitates platform-based organiza-
tion of production. The platform-based mode gives birth to new industrial
organizations and influential platform companies. According to data from the
China Academy of Information and Communications Technology, as of the
Table 5.2 Comparison of Industry 4.0 in Germany and the US Industrial Internet
Industry 4.0 in Germany US Industrial Internet
Advocated by Acatech (The German Academy General Electric

of Science and Engineering) &
Bosch
Sponsors German government, Acatech Industrial Internet Ally

• Industry 4.0 is part of the • Founded by GE, Cisco, AT&T,
Federal High-tech Strategic Intel and IBM in March, 2014.
Action Plan, sponsored in
conjunction with industries,
non-profit R&D institutes and
universities.
Priorities • Industrial Policy:Germany’s • Interoperability: Ensure
strategic plan to lead in the interconnectivity in various
industrial digital industrial environments.
transformation.
Keys • Engineering-driven--Focus on • More IT Drivers: Break
the network--Intelligent technical barriers, enhance the
production driven by the real integration of the physical and
production system digital worlds, access to big data
• Fully vertical integration and unleash business value.
along the technical routes.
Processes of Focus on the “hard” processes of Focus on the “soft” processes of
industrial production and manufacturing production services with a
chains as well as the “bottom-up” preference of the “top-down”
strategy, shift the production approach to combine
from centralized control to communication and computing.
decentralized enhanced Focus on the design and service
control, and realize in the industrial system,
personalized and digital emphasizing on improving
production services with high service and management
flexibility. performance of production
equipment by the Internet and
the Internet of Things
Typical Siemens, Bosch, SAP and other Industrial companies such as GE,
Companies industrial companies that IBM, Cisco that focus on
focus on industrial automation supplying integrated equipment
and R&D of manufacturing services and systematic service
equipment solutions。
Source: Industrial Internet Group, German Academy of Science and Engineering, Roland Berger,
Sealand Securities Institute.
end of 2019, there were 74 platform-based digital companies valued over $10
billion around the world. Their total valuation reached US$8.98 trillion, up by
41.8% over the previous year. In 2019, the number of platforms valued from $1
billion to $10 billion increased by 108 compared with 2015, an increase of
nearly two folds in number and 151.9% in market value.7 For example, Alibaba
Taobao has a payroll for 8,000 people. Yet it hosts hundreds of thousands of
service providers and tens of millions of online merchants, creates jobs for 3
million logistics workers, and reaches out to nearly 500 million consumers. In
the next 20 years, Alibaba plus small and micro enterprises on its platform may
become the “fifth largest economy” in the world, contributing to the earnings
and development of 10 million small enterprises, serving 2 billion consumers
and creating 100 million jobs globally.
Third, the technological revolution facilitates network-based organization
of production. It enables Internet-based, coordinated and decentralized re-
source allocation, converting mass production to mass customization, and
turning production to a decentralized, flat and virtual exercise. Platform-based
organizations are based on digital technology, driven by data, supported by
platforms, and composed of highly coordinated economic units. Platforms,
consumers and service providers of platform-based economies collaborate in
meshes. For example, Apple has attracted nearly 400,000 developers to its eco-
system, developed millions of apps with hundreds of billions of downloads
since the launch of App Store in 2008. In the field of industrial equipment,
multinational companies represented by GE are accelerating the deployment
of machine interconnectivity strategy, harvesting massive machine operation
data through terminal information collection equipment and integrated data
platforms. This will engender a new network-based system for machine opera-
tion and maintenance.8 Besides, the ubiquitous network shaped by digital
technology makes processes such as R&D, design, production and manufac-
turing more open, cooperative, international and professional. Enterprises can
give unified instructions and standards to upstream and downstream enter-
prises around the world in all processes of the product life cycle through the
network, establishing a unified cooperation platform for digital design, virtual
assembly and testing. The traditionally closed, independent and linear mode
of R&D, production and manufacturing is increasingly open, coordinated and
network-based.9
5.4 Expediting the transformation to a digital, shared and green lifestyle

Digitization is sweeping the world, kicking start another new technological
revolution that has a far-reaching impact on mankind after the industrial rev-
olution. Digital being becomes a new way of living based on information tech-
nology in the modern society. In a digital world, people produce, live,
communicate and behave in brand new ways. Digital technologies represented
by big data, AI and cloud computing are reshaping the urban lifestyle in an
all-round way.
First, wide application of digital technology provides more options and
convenience to urban residents. The rise of e-commerce and platform economy
move the venue of consumption from offline to online, making it a norm. The
modes of consumption such as shopping, service consumption, tourism and
cultural performances are all going through great changes. Development of
instant messaging technology enables contact and communication to take
place anywhere anytime. Online consumption and entertainment such as tele-

medicine, remote learning and remote sports broadcasting are increasingly
common. Digital technology provides opportunities to the poor and the vul-
nerable who were not accessible previously. For example, the introduction of
the digital payment system M-Pesa in Kenya reduced remittance costs by
90%. There are 1 billion people with disabilities globally, 80% of whom live in
developing countries. They can lead a more productive life with the help of
text, sound and video communication. Digital ID System can provide pub-
lic and private services for the 2.4 billion people without formal identifica-
tion records such as birth certificates.10 Besides, the development of
information technology turbocharges platform economy and sharing econ-
omy. Shared housing and shared mobility are becoming common practice.
Communication and social interaction are increasingly virtualized. Rapid
development of remote conference system brings more interaction online,
which makes communication more efficient and timely and makes the net-
work more indispensable.
Second, development of transportation technology, especially its integra-
tion with digital technology, has changed the way of urban mobility. With the
help of big data and AI, shared mobility platforms make the whole operation
process intelligent, including supply/demand prediction, route planning, vehi-
cle scheduling and dispatch, adding to the intelligence, efficiency and conveni-
ence of urban transportation. Ride-hailing and shared bicycles reduce the
number of vehicles and energy consumption, create more gig jobs, and funda-
mentally solve the “last mile” problem in large cities. This helps to reduce travel
costs and time and improve travel efficiency in large and medium-sized cities.
For example, the number of shared trips exceeded 28.4 billion in China, with a
transaction volume of 247.8 billion RMB, up by 23.3% year on year. As of the
end of August, 2019, there were 19.5 million shared bicycles in China, with
more than 300 million registered users and 47 million daily orders on average.11
In addition, rapid development of high-speed railway has changed inter-city
mobility, making travel more convenient and time-efficient, expanding range
of activity and increasing frequency of travels. From 2008 to 2021, the share of
passenger trips via high-speed railway increased from 1% to 74% in the total
railway passenger trips (Figure 5.2).
Third, thanks to the development of new energy technology, urban life and
production are increasingly powered by new energy over traditional energy.
With revolutionary breakthroughs and rapid decline of costs in photovoltaic
and hydrogen energy, the global installed capacity of renewable energy has
rocketed. From 2009 to 2022, the renewable energy output jumped from
1,135,599 MW to 3,381,758 MW globally, among which China’s output went
up from 205,232 MW to 1,160,799 MW (Figure 5.3). From 2004 to 2018, the
installed capacity of PV increased from 1,085 MW to 103,000 MW globally,
and from 9 MW to 44,260 MW in China. Growing penetration of PV, wind
energy and other renewables and substitution of new energy vehicles for con-
ventional vehicles in urban mobility contribute to pollution control and a bet-
ter quality of life.
400000.00 80.00
Unit: 10 thousand people 350000.00 70.00

300000.00 60.00
250000.00 50.00
200000.00 40.00
%
150000.00 30.00
100000.00 20.00
50000.00 10.00
0.00 0.00
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Railway passenger volume
High-speed rail passenger volume
Proporon of high-speed rail passenger volume in railway passenger volume
Figure 5.2 Share of China’s High-speed Rail Passenger Trips in Total Railway Passen-
ger Trips (2008–2021).
Source: Wind.
4000000
3500000
3000000
2500000
Megawatt
2000000
1500000
1000000
500000
World China Europe North America
Figure 5.3 Global Installed Capacity of Renewables (2009–2022).

Source: Wind.
5.5 Changing the pattern of employment and income distribution

The labor market rattled by employment substitution and “technological un-
employment” that technological revolution entails. While improving produc-
tivity and driving economic growth, digital technology has profound impacts
on employment and the labor market, hitting especially hard with the rise of
labor-saving and skill-based new technologies. The short-term disruption is
manifest in “technological unemployment”. The technological revolution
changes working organization and arrangement, giving rise to more plat-
form-based companies. More tasks are performed by individual contractors,
adding to employment flexibility while increasing the risk of jobs and income.12
Frey and Osborne (2017) estimated that 47% of jobs in the United States would
be under high risk of being automated in the next 10 or 20 years. The World
Bank (2016) found that a higher proportion of jobs in Europe, especially in
developing countries, would be more vulnerable to automation in the next 10
years. According to McKinsey Global Institute (2017), China has an automat-
able employment potential of 51%, greater than any other country.13
Box 5.2 Different Views on the Impact of AI on Employment
In general, there are two diverging views on the impact of AI on

employment:
The first view is that in the long run, new technologies such as AI can
create sufficient jobs and safeguard employment. It focuses on the overall
benefits of technological progress. The wide promotion and application of
AI improves the productivity and efficiency of employees, creates new
products, markets, as well as new employment opportunities. For exam-
ple, the research on the historical experience and lessons since the indus-
trial revolution in the 18th century by Mokyr et al. (2015) demonstrated
that technological progress widened the application of computers and
robots, creating new products and services. Product innovation will elevate
productivity and GDP growth so that massive new jobs will be created.
The second view states that in the short term, AI will lead to job loss
and rising unemployment. The application of AI and other technologies
and the automated production in a wider range and scope is bound to
replace workers, raising the unemployment rate. Or to put it more pre-
cisely, there will be less jobs created by new technologies than those they
replace, resulting in employment difficulties and rising unemployment. In
extreme cases, extensive automation brought about by advanced technol-
ogy may lead to widespread unemployment and social unrest.
Source: UN: The Impact of the Technological Revolution on

Labor Markets and Income Distribution.
The digital divide caused by technological revolution widens the opportu-

nity gap and income gap in different communities. Technological innovation is
expected to improve productivity and open up new opportunities. But there are
still many who don’t have access to dividends of digital technology. There is
even an obvious digital divide in poor countries. Globally, nearly 6 billion
people don’t have access to the high-speed Internet and can’t fully engage in the
digital economy. Globally, out of the poorest 40% of households, 21% have no
mobile phones and 71% have no access to the Internet. Women are less likely
to use or own digital devices than men. There is a huge gap of digital device
penetration between the young population (20%) and those over 45 (8%).14 The
digital divide creates huge differences in digital dividends received by different
countries, regions, and communities, and between urban and rural areas, fur-
ther widening income gap. According to IMF, every percentage point of the
proportion of Internet users in the population would result in 0.1-0.4 percent-
age points of per capita income growth in sub-Saharan Africa. Conventional
tasks are replaced due to technological changes, and more jobs are shifting
from medium to either end of the pay spectrum. This reduces the share of la-
bor income in national income, and leads to a greater income gap among work-
ers with different skills. For example, a research of McKinsey Global Institute
(MGI) shows that by 2030, salary of jobs benefiting from AI will increase by
about 13% in relation to the total salary, and the share of jobs negatively af-
fected by the same margin.
5.6 Summary
Wide application and large-scale commercialization of new technology is
changing “key factors of production”, with data gaining importance. Data
promote the digital economy and speed up the rise of emerging industries such
as e-commerce and the industrial Internet. Traditional industrial chains are
converging, breaking up and disappearing at a faster pace, giving way to more
advanced digital industrial and supply chains. From the global perspective, the
new round of technological revolution reshapes regional comparative advan-
tages, driving rapid development of digital trade and trade in service and pro-
moting the localization and regional redistribution of global industrial chain
and world trade. Meanwhile, the new round of technological revolution pro-
motes intelligent, platform-style and Internet-based production mode, prompt-
ing profound changes in production and consumer demand. While changing
production mode, the technological revolution also has impact on consump-
tion mode, employment and income distribution. It expedites the transforma-
tion to a digital, shared and green urban lifestyle. Employment substitution is
coexisting with job creation. Digital divide widens the opportunity gap and
income gap among communities.
Notes
1 IDC: Data Age 2025, The Digitization of the World from Edge to Core. https://
www.seagate.com/files/www-content/our-story/trends/files/idc-seagate-dataage-
chine-whitepaper.pdf
2 UNCTAD Estimates of Global E-commerce 2018 Report.
3 CAICT: A New Vision of the Global Digital Economy (2020), https://dsj.guizhou.
gov.cn/xwzx/gnyw/202010/P020201027531667675294.pdf
4 Mckinsey Global Institute: The Future of Asia: Asian flows and networks are defin-
ing the next phase of globalization, September, 2019, https://www.mckinsey.com.cn
5 Mode of production of smart manufacturing can be defined by 6C: Connection,
Cloud, Cyber, Content, Community, Customization.
6 McKinsey: Paths to Industry 4.0 in China, https://www.mckinsey.com.cn/
7 CAICT: Observation of Platform Economy and Competition Policies 2020
8 Aliresearch: Digital Economy 2.0, 2017. https://i.aliresearch.com/file/20170109/2017
0109174300.pdf
9 Changes in the International Economic Landscape and China’s Strategic Choices,
Development Research Center (DRC) of the State Council: Impacts of Global
Technological Changes on the International Economic Landscape, China Develop-
ment Observation, No. 6 (2019): 15–16.
10 World Bank’s World Development Report 2016: Digital Dividends, Tsinghua Uni-
versity Publishing House, 2017.
11 China Environmental Protection Foundation and Green Mobility Special Founda-
tion: “Annual Report on the Development of Shared Mobility in China (2019)”,
Social Sciences Academic Press, 2019.
12 UN: The Impact of the Technological Revolution on Labor Markets and Income
Distribution, 2017. https://www.un.org/development/desa/dpad/wp-content/uploads/
sites/45/publication/2017_Sept_Frontier_IssuesKeyMessages.pdf
13 Mckinsey Global Institute: A New Era of coexistence for Human and Machines:
Automation, Employment and Productivity. January, 2017, https://www.mckinsey.
com.cn//
14 World Bank: World Development Report 2016: Digital Dividends, Tsinghua Pub-
lishing house, 2017.
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6 Global urbanization trends under
the new technological revolution
Dissemination of the new round of technological revolution, rise of emerging

industries and digital transformation of traditional industries have changed
the driving forces, direction, and quality of urbanization. Therefore, progress
of global urbanization, urban system, urban spatial structure, and urban gov-
ernance will show new trends.
6.1 Rise of new drivers for global urbanization

Industrial transformation or industrialization triggered by technological revo-
lution is the main driver and accelerator of urbanization. The expansion and
application of technological revolution in different regions diverge due to dif-
ference in development stage, urbanization level and institutional condition.
Accordingly, the new round of technological revolution will have a differenti-
ated impact on the process of urbanization in different regions around the
world.
From the perspective of future trends, global urbanization will continue to
improve as the new round of technological revolution facilitates industrializa-
tion and the service industry. The application of the new round of technological
revolution in urban areas and the continuous development of industrialization
and the service sector will further entrench the urban-rural gaps in efficiency,
employment income, public services and living standards, accelerating urbani-
zation. The UN predicts that global urbanization rate will stand at 61.7% by
2035 and 66.4% by 2050. This means that billions of people around the world
will migrate from rural areas to cities in the next 20 years.
The technological revolution has limited influence on the advanced econo-
mies where urbanization rate has exceeded 80%, leaving little room for further
urbanization. Urbanization rate in North America, Latin America and the
Caribbean, Europe, and Oceania is relatively high, with most of the population
living in the urban areas. For example, urbanization rate has exceeded 91% in
Japan and Argentina, and 80% in other countries except for Germany and
Italy (Figure 6.1). Meanwhile, urbanization rate in advanced economies has
grown at an extremely low rate in recent years. For example, major advanced
economies reported less than 0.33% of growth in urbanization rate in 2018,
DOI: 10.4324/9781032663180-8
100
90
80
70
Urbanization Rate (%)
60
50
40
30
20
10
Figure 6.1 Urbanization Rate of Major Advanced Economies (2018).

Source: UN World Urbanization Prospects 2018.
leaving limited space for future urbanization (Table 6.1). Technological factor,
one of the many that affect urbanization, will also have limited impact on the
future urbanization in developed economies.
The new round of technological revolution will speed up urbanization in
developing economies whose urbanization level is still rather low, making them
the main engine for global urbanization. Starting with a low urbanization level
compared to advanced economics, most Asian and African countries have
maintained rapid growth in urbanization in recent years. In 2018, urbanization
rate in Asia, South Asia and Southeast Asia was 49.9%, 35.8% and 48.9%
Table 6.1 Growth in Urbanization Rate of Major Economies (2010–2018) (Unit: %)
US Canada UK France Japan Korea Brazil Argentina Australia
2010 0.21 0.22 0.33 0.32 1.19 0.12 0.35 0.17 0.14
2011 0.21 0.20 0.33 0.32 0.28 −0.02 0.35 0.16 0.14
2012 0.22 0.05 0.33 0.33 0.09 −0.09 0.35 0.14 0.12
2013 0.22 0.05 0.32 0.33 0.09 −0.09 0.34 0.14 0.12
2014 0.23 0.05 0.32 0.33 0.09 −0.09 0.33 0.14 0.12
2015 0.23 0.05 0.32 0.33 0.08 −0.09 0.33 0.14 0.12
2016 0.23 0.05 0.31 0.33 0.08 −0.09 0.32 0.14 0.12
2017 0.24 0.06 0.31 0.33 0.09 −0.07 0.31 0.13 0.12
2018 0.24 0.08 0.31 0.33 0.09 −0.05 0.30 0.13 0.13
Source: UN World Urbanization Prospects 2018.
Global urbanization trends under the new technological revolution 117
100.0
90.0
80.0
70.0
Urbanization rate %
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2035
2040
2045
2050
1995
2000
2005
2010
2015
2020
2025
2030
1950
1955
1960
1965
1970
1975
1980
1985
1990
World Africa
Asia North America
Europe Latin America and Caribbean
Oceania
Figure 6.2 Urbanization Rate of All Continents.

Source: UN Urbanization Prospect (2018).
respectively. Urbanization rate in Africa reached 42.5% in the same year (Figure
6.2), among which sub-Saharan Africa posted 40% of urbanization rate, with an
annual growth over 1.2% in recent years. Going forward, Asia and Africa, espe-
cially East Asia, South Asia and Southeast Asia will lead global urbanization.
According to the United Nations Urbanization Prospects, there will be another
2.5 billion people living in urban areas by 2050, nearly 90% of whom will be in
Asia and Africa, mainly concentrated in countries like China, India, Nigeria,
Pakistan and Congo that will account for about 50% of growth in global
urbanization.
The technological revolution spurs new momentum and Asia is leading the
global urbanization. Asia is a powerhouse of the global growth. With the shift
of export-intensive manufacturing from China to other Asian economies, the
acceleration of trade transformation, and growth of intra-regional trade, the
gravity center of the world economy is moving towards Asia. In particular, Asia
is shaping the future of global digital innovation, providing new impetus for
industrialization and urbanization. Therefore, urbanization rate of Asia will be
significantly higher than that of other regions. It is estimated that by 2050,

urbanization rate in Asia will reach 66.2%, close to the global average. Besides,
as the most populous region, Asia will be home to the largest number of new
urban population, making itself the biggest contributor to global urbanization.
From the perspective of China, the new round of technological revolution pro-
vides a new driving force for urbanization and ensures relatively rapid growth
in urbanization after crossing the threshold of 60%.1 We estimate that China’s
urbanization rate will reach 80% in 2050, with 1 billion people living in cities,
an increase of 150 million. India has maintained rapid economic growth in
recent years. Already a leading country in the application of digital technology,
it is home to 560 million Internet users and a major destination for capital and
investment flow, converting its cities to industrial centers.2 In addition, urbani-
zation rate of populous Indonesia and Pakistan, is expected to increase from
56% and 36.9% in 2019 to 72.8% and 52.2% in 2050 respectively (Figures 6.3).
The new round of technological revolution will boost the momentum in
Africa with rapid urbanization. Many sub-Saharan African countries show
signs of consumption-dominated urbanization or “premature” urbanization,
with higher urbanization rate than industrialized countries at the same level.
Rural residents are flocking to cities, even without the support of established
manufacturing sector. They are driven either by the demand for non-tradable
goods thanks to the surplus from natural resources export or the quest for better
access to electricity, safe water supply and vaccination. This becomes the main
90
80
70
60
Urbanization rate %
50
40
30
20
10
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
China India Pakistan Indonesia
Figure 6.3 Urbanization Ratse of Major Asian Countries.

80
70
60
Urbanization rate %
50
40
30
20
10
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
Democratic Republic of the Congo Nigeria Global average
Figure 6.4 Urbanization trend in selected African countries.

factor in promoting urbanization.3 It is expected that increased demand for

non-tradable goods and improvement of public services caused by surplus
from the new round of technological revolution will mainly concentrate in cit-
ies., hence widening urban-rural gap, fueling migration from the rural areas,
and further accelerating urbanization (Figure 6.4).
6.2 Stronger carrying capacity for population and industry in

metropolitan areas
The technological revolution will influence urban population, the scale of
industrial agglomeration and the form of cities. Urbanization will turn to a
high-quality development stage dominated by metropolitan areas and city
clusters especially after urbanization reaches 50%. The new round of techno-
logical revolution will greatly enhance the carrying capacity of metropoli-
tan areas.
In recent years, population of metropolitan areas in highly urbanized coun-
tries has grown steadily. According to Brookings Institution’s data about major
metropolitan areas, about 36% of global employment growth, and 67% of
GDP growth and 21.9% of population growth were attributable to the largest
300 metropolitan areas from 2014 to 2016. In 2016, nominal GDP, employ-
ment and population of the 300 metropolitan areas accounted for 49.1%,
23.3% and 24.1% of the world, respectively (Figure 6.5). At the moment, more
than half of the world’s population live in metropolitan areas and that
80
70
60
50
40
%
30
20
10
0
Real GDP growth Employment growth Population growth
Figure 6.5 Proportion of the 300 Metropolitan Areas in Global Growth (2014–2016).

Source: Brookings analysis of Oxford Economics data.
proportion exceeds 80% in the United States, UK, Germany, Japan and other
countries. Since 2000, population in the peripheral communities of metropoli-
tan areas has increased much faster than that in the core metropolitan areas in
most countries. Larger metropolitan areas tend to have faster population
growth in their peripheral communities. Taking OECD countries for example.
Population growth in the peripheral communities was 60% faster than that of
core areas from 2000 to 2015, and population growth in commuting communi-
ties in South Korea, the United States, Chile and other countries was more
than twice that of the core areas.4
The new round of technological revolution improves urban infrastructure,
public services and city governance. Metropolitan areas have grown larger as
integrated labor markets, thanks to reduced commuting time, increased com-
muting efficiency, and consequentially longer commuting distance and range.
As population carrying capacity increases, the equilibrium point between
urban agglomeration effect and cost of congestion, and their critical scale con-
tinue to move up. Metropolitan areas are home to larger population with
higher density, showcasing greater agglomeration effects than smaller cities.
Meanwhile, metropolitan areas, as the main venue for employment, innovation
and economic growth, especially where innovation elements and activities are
highly concentrated (Figure 6.6), are adding new dimensions to cities. Driven
by innovation, there will be more service-oriented metropolitan areas with
growing population. In short, acceleration of global urbanization, catalyzed
by the new round of technological revolution, will significantly improve the
60
50
40
30
%
20
10
0
Nominal GDP Employment Population
Figure 6.6 Proportion of Nominal GDP, Employment and Population of the 300 Met-
ropolitan Areas (2016).
Source: Brookings analysis of Oxford Economics data.
carrying capacity of metropolitan areas, further enhance population and

industrial assembly, and reinforce their leading position in urbanization.
6.3 Accelerated duty division evolution along the value chain in the

urban system
According to urban economics, distribution of city scale is pyramid-shaped,
generally following the Zipf’s Law.5 Impact of the technological revolution on
cities is a function of their relative scale and the inter-city flow of population
and industries.
Since 2000, the global distribution of city scale has generally been polar-
ized, with the rise of more large cities with growing population and shrinking
size of small ones. From 2000 to 2018, population growth in mega cities
accounted for about one fifth of the global total. There were 467 cities with a
population between 1 million and 5 million in 2018, accounting for nearly a
quarter of the global urban population. The proportion of those with a popu-
lation between 5 million and 10 million and between 500 thousand and 1 mil-
lion remained relatively stable, with a modest increase in the number of cities.
However, the proportion of those with less than 500,000 residents, especially
those home to less than 300,000 people, dropped significantly (Figure 6.7). In
2018, there were 33 mega cities with more than 10 million people globally,
doubling that in 2000. 27 of them were in developing countries.
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
>10 million 5 million-10 million 1 million-5 million

500,000-1 million 300,000-500,000 <300,000
Figure 6.7 Proportion of Population by City Size.

Source: United Nations Department of Economic and Social Affairs, 2018.
As city scale diverges, the technological revolution will deepen the division
of functions along the inter-city value chain more rapidly. Expansion of high-
speed rail and other mobility modes makes inter-city transportation more con-
venient, affordable and time-efficient. Digital technology leads to convenient
and low-cost communication. E-commerce expands the scope of regional
trade and lowers trading cost. Shorter distance and less barriers bring about
stronger connectivity and higher integration. Different population groups and
elements of value chain may be relocated in central and peripheral cities. Cities
of different sizes engage in collaborative agglomeration, with R&D, design,
management and marketing clustered in central cities and manufacturing relo-
cated to peripheral smaller cities. The division of labor along the value chain is
featured with the agglomeration of producer service sectors in central cities,
and manufacturing in peripheral smaller cities.
As a result of the relocation of value chain, knowledge-intensive cities will
emerge more rapidly. Their prominent feature is that they are home to massive
high-skilled workers and leading research universities, turning themselves into
hubs for knowledge creation, innovation, application and commercialization.6
According to a research of Brookings Institution, in 19 knowledge-intensive cit-
ies, 41% of the population over the age of 15 hold a bachelor’s degree or above.
They are home to 20 of the top 100 universities in the world. Their average
economic output reached $283 billion, and per capita GDP and per employee
GDP stood at $69,000 and $136,000 respectively, ranking first among seven cat-
egories of cities. From 2008 to 2012, these cities contributed to 16% of the
world’s patents, though their population was only 1% of the world total.
Accelerated division of labor along the value chain is featured with the rise
of international consumption cities.7 Center of consumption will be another
core function of international metropolises. Given their rich elements, high-
profile brands, diversified modes and favorable environment of consumption,
and especially a sophisticated market that appeals to consumers worldwide,
they will play a central role in allocating global consumption resources and
championing innovation in consumption. These metropolises will increasingly
be celebrated as world-class consumption portals. Statistics show that con-
sumer spending and GDP in the 140 major consumer cities account for 33%
and 36% of the world total respectively, though they are home to only 13% of
the world population.8
6.4 Accelerated transformation to a smart, inclusive, and green

urban lifestyle
Urbanization not only diverts population to cities and transforms employment
structure but also facilitates the graduation from a rural lifestyle to an urban
one. Impact of the new round of technological revolution is evidently making
urban lifestyle more intelligent, inclusive, green and sustainable.
Profound changes have taken place in urban lifestyle since the inception of
the new round of technological revolution. The Internet, big data, intelligent
transportation, renewables, distributed energy and intelligent mobility are
widely applied in urban infrastructure operation, public services, traffic man-
agement and smart buildings. “Smart Cities” and low-carbon green cities
mushroom across countries. There are currently over 1,000 “smart cities” under
construction globally, where intelligent technologies are applied in security,
mobility, health, energy, water service, waste disposal, economic development,
housing and community management. The integration of digital technology,
energy technology and transportation technology with urban scenarios has
significantly improved the quality of life for urban residents. For example, the
promotion and expansion of digital payment make urban life more convenient
in all aspects. Smart parking Apps can navigate drivers directly to vacant park-
ing spots to save time and trouble. Group delivery mode and smart parcel lock-
ers can mitigate congestion caused by delivery trucks. Real time navigation
systems can help drivers switch to the best route by sending early warning of
jam. Mckinsey Global Institute assessed the performance of about 60 smart
city applications in three sample cities and found that these tools could reduce
fatalities by 8%–10%, accelerate emergency response by 20%–35%, save the
average commuting time by 15%–20%, lower disease burden by 8%–15%, and
cut GHG emission by 10%–15%, among other positive outcomes.9 Smart city
technology also has great potential in improving quality of life. MGI’s research
on the impact of smart city applications showed that some well-being metrics
related to security, time, health, environment, social contact, employment and
living cost can improve by 10%–30%. There are other benefits that can’t be
quantified such as freedom of mobility and relaxation in transit.
Cities will be reshaped by further expansion of the new round of technologi-
cal revolution, embracing new mode of perception, connection and response to
internal and external changes. Urban life will become more intelligent, inclusive,
green and secure. Large-scale application of 5G and intelligent driving technol-
ogies makes urban mobility more intelligent and convenient, disrupting the tra-
ditional travel mode. The traffic patterns will be systemically transformed to fea-
ture greater mobility, new working methods and working time, sustainable
mobile solutions (such as self-driving electric vehicles), improved vehicle usabil-
ity (through car-sharing, for one example) and deliberate design of the logistics
system.10 Satellite relay makes Internet connection more convenient and equita-
ble. Full availability of real-time data makes it possible to develop insight, iden-
tify changes in demand, and select more cost-effective and responsive solutions.
Some intelligent applications can not only respond to the needs of users, but also
improve operation through interaction with the public. For example, they
encourage staggered travel by public transportation, adjust driving routes, save
water and electricity, and mitigate burden on the medical system through preven-
tive care. Internet-based applications can deliver real-time and transparent infor-
mation to users to inform their decisions. These smart tools can save lives, pre-
vent crimes and reduce disease burden. They can also save time, reduce waste,
and even improve the social ties of residents, which are conducive to the efficient
operation of cities. The industrial chain of AI cities includes the basic layer, the
core technology layer, and vertical applications, which can be further divided
into product and smart application systems. Looking forward, super smart cities
will be defined by seven interconnected capabilities, namely, real-time percep-
tion, high-speed transmission, self-learning, independent decision-making, inde-
pendent collaboration, automatic optimization and independent control.11
On the other hand, continuous evolution and wide application of the new
round of technological revolution, especially wide adoption of e-government
and digital governance will ensure efficient supply of public resources and
effectiveness of public services, making public utilities including education,
medical care, social insurance and charity more convenient, inclusive and equi-
table. For example, telemedicine will be used more frequently as a common
exercise to make diagnosis and treatment more affordable and accessible. With
the support of AI assistant, it promises to delivery precision diagnosis and
treatment and address the global shortage of medical resources. Development
of online education offers more equitable access to education at all levels, con-
tributing to equality in overall public services. As the urban middle class con-
tinues to grow, they will benefit from wider coverage and equitable distribution
of high-standard medical care, education and other social service resources.
Besides, the new round of technological revolution will speed up the green
and low-carbon urban transformation. Cities today are operating on the
basis of a linear “make-dispose” model, which could transform to a circular

model with the support of technology. Digital technologies will make it pos-
sible to radically increase virtualization, dematerialization, transparency on
product use and logistics. Core technologies in the energy sector such as
renewables, micro-generation, energy sharing network based on the Internet,
storage of intermittent energy and smart energy management are developing
rapidly. These factors, combined with autonomous driving and smart trans-
portation, will significantly reduce urban fossil fuel consumption, urban pol-
lution and carbon emissions, making urban lifestyle greener and more sus-
tainable. Mckinsey’s research found that deploying a range of applications to
the best reasonable extent could cut emissions by 10%–15%, lower water con-
sumption by 20%–30%, and reduce the volume of solid waste per capita by
10%–20%.12
In summary, physical-virtual integration will provide needed products and
services to targeted recipients in a timely manner, regardless difference in age,
gender, location and language. This will meet people’s needs in all aspects, safe-
guard economic and social progress, enable people to enjoy a comfortable,
dynamic and high-quality life, and usher in a new age of people-centered eco-
nomic and social prosperity.
6.5 Reshaping urban spatial structure through convergence

Urban development is not just more buildings and clustering of residents.
Instead, it will form functional areas within cities, such as industrial areas,
business areas and residential areas, whose geographical locations and distri-
butions constitute the spatial structure of cities.13 Impact of the new round of
technological revolution on urban production, lifestyle and consumption is
changing the production space, living space and ecological space in cities. As
the technological revolution further unfolds, it will exert a more profound
impact on the internal spatial structure.
The new round of technological revolution has triggered new changes in the
urban spatial structure. For example, development of mobile payment based
on 4G network gave birth to new applications such as shared bicycles and cars,
renovating urban mobility and travel scenarios. Bicycles are back to the city,
taking share in mobility back from cars. This reduces burden on traditional
public transport systems, alleviates congestion and solves the “last-kilometer”
issue. In particular, the combination of shared bicycles, buses and subways
saves urban space, makes more efficient use of the space, and expands the
range of service of transportation hubs and stations. In addition to shared
bicycles, BRT is as dependent on breakthroughs in mobile communication, as
accurate perception of vehicles improves the precision of traffic prediction of
traffic and makes mobility scenarios more predictable.
As the new round of technological revolution shifts to its deployment stage
or even explosion stage, internal spatial structure of cities will adapt faster,
probably leading to a new spatial layout. On the one hand, as communication
systems of 5G and 6G develop, the Internet of vehicles, made up of network-

enabled vehicles, autonomous vehicles, intelligent connected vehicles and sup-
porting facilities will leave profound impacts on the existing transportation
system, city functions, and city patterns. With the service of autonomous vehi-
cles, some traffic lanes will be repurposed for alighting, walking or cycling.
Meanwhile, autonomous vehicles will be a game changer for parking service as
they can drive to the suburbs or underground for parking after their passengers
disembark, reducing the need for parking space on the ground. Most freight
logistics and fast lanes will be moved underground, sparing more space for
walking and cycling. Besides, urban space and land use will be adjusted, leav-
ing more space for greening, parks and public service facilities.
On the other hand, versatility of communication terminals leads to greater
efficiency in matching supply and demand for catering, retailing and other con-
sumer services. Streets will be less important as a physical venue for commerce
and services, and more important as a space for experiencing and socializing.
The mutual effect between intelligent technologies and space will redefine the
relationship between technology, space and society.
As technologies develop, the location of education and medical resources,
once a critical consideration in the choice of residence, will be less relevant. VR
teaching will break down the regional and spatial barriers for equal distribu-
tion of educational resources, readjust spatial planning of education and partly
cancel the need for space for centralized teaching. At the same time, iteration
of digital technology enables doctors to make diagnosis and treatment through
cameras and the Internet, which will decentralize the spatial distribution of
medical facilities. With reconstruction of the transportation system, decentral-
ization and redistribution of education and medical care, and decline of busi-
ness in the streets, traditional border between workplace and residence will
blur, space for production, commerce, residence, public services and landscap-
ing will increasingly merge, making urban spatial structure more friendly to the
residents.
6.6 Significant improvement of public governance in cities

Urban governance influences the process of urbanization. Technological revo-
lution can improve the capability of urban governance and promote its reform,
which will ultimately have effect on the level and quality of urbanization. The
new round of technological revolution will transform the urban governance
system and greatly enhance governance capability.
In recent years, governance capability of the public sector has been
enhanced by digital, transportation and energy technologies. For example, the
digital urban planning system ensures efficient workflow, data exchange and
three-party data sharing, improves the transparency and accountability of
environmental planning, empowers citizens for participation, and makes urban
design more rational. Besides, many cities around the world have promoted
e-government, offering services such as online tax return, online business
registration, DIY customs services, etc. E-government has been a priority in

China, covering a vast range of government affairs. It has enhanced transpar-
ency, improved the supervision of government affairs, ensured real-time
inspection of government performance, improved the interaction and feed-
back between the government and residents, and made urban governance
more participatory.
As big data, cloud computing and AI continue to upgrade, urban governance
will be more digitized and intelligent, lifting urban governance to the next level.
First, intra-governmental connection and governance coordination will be
strengthened. With further improvement of digital governance, institutional
adjustments and matching reforms, government agencies will be better coordi-
nated, while the process and the system of government services will be further
optimized. Further development of digital technology will also streamline pro-
cesses, minimizing the government’s discretion and rent-seeking opportunities,
making the allocation of public resources more efficient. Administration and
services will be coordinated across levels, regions and sectors, enabling preci-
sion and efficient urban governance.
Second, urban governance capability will be further improved. In the eco-
nomic sector, development of digital technology can make use of big data to
improve the monitoring of economic operation and enhance government deci-
sion-making. In the public sector, further development of intelligent technol-
ogy will significantly meet the needs of residents despite resources constraints.
It will improve government’s ability to solve traffic congestion, environmental
pollution, carbon emission, and other challenges in housing, education, medi-
cal care, health and so on. The development of intelligent technology can
improve the efficiency of public decision-making and make cities resilient and
safe by monitoring public opinions and city dynamics in real time, as well as
effectively monitoring and managing social and natural disasters, such as
floods, earthquakes and infectious diseases.
Third, more citizens will participate in urban governance. Wide application
of e-government technology and equipment to a vast range of public affairs
will ensure openness and information transparency, and enable residents to
better supervise administrative activities. This will lead to real-time evaluation
of government service performance, more frequent interaction and feedback
between the government and residents, and deeper participation in urban gov-
ernance by residents. Development of digital technology makes it more con-
venient to get feedback from residents and users, so as to measure approval
rate in real time and constantly improve quality of service.
Fourth, urban design, planning and management will be more intelligent.
Information infrastructure grows larger, acquires powerful features and con-
verge into a network. The latest information technology continues to be applied
in urban administration deeply, making it possible collect, aggregate and share
a huge number of data sets that are comprehensive, continuous, systematic,
consistent, relevant and valuable. This lays the foundation for digital twin that
accurately corresponds to physical cities. Physical-virtual convergence and
intelligent interaction will make urban design and planning more intelligent,
rational and effective, and synchronize urban planning, construction and
administration between the real cities and their virtual version.
6.7 Summary
The new round of technological revolution has a profound impact not only on
economic development, but also on the process of global urbanization. While
promoting development, the new round of technological revolution entrenches
the urban-rural gap, especially in some populous countries in Asia and Africa.
It will drive the migration to cities, which will renew the momentum for global
urbanization with developing economies as the engine. Meanwhile, the new
round of technological revolution has improved urban infrastructure, public
services and governance of metropolitan areas whose growing carrying capac-
ity will better accommodate population agglomeration. Measured by its impact
on the urban system, the new round of technological revolution relocates dif-
ferent types of labor force and different elements of the value chain among
cities of different sizes, and accelerates division of function along the inter-city
value chain. The development of digital technology, transportation technology
and low-carbon green technology has made urban lifestyle more intelligent,
inclusive and green, profoundly changing the internal spatial structure of cit-
ies, accelerating the innovation of governance, and significantly improving the
governance capability of cities.
Notes
1 Even though the overdue system reform will offset pulling force of cities to some
extent.
2 Mckinsey Global Institute: The Future of Asia: Asian Flows and Networks are
Defining the Next Phase of Globalization, September, 2019, https://www.mckinsey.
com.cn
3 Henderson, J. Vernon and Kriticos, Sebastian, The Development of the African
System of Cities. Annual Review of Economics, 2018, Vol. 10, pp. 287–314.
4 Sun Zhiyan: China’s future urbanization strategies and policy choices from the per-
spective of technological revolution, Research Report of the Development R esearch
Center of the State Council, No.29, 2019.
5 The Zipf’s Law of urban system states that a country’s largest city is approximately
twice as large as the second-largest city, three times as large as the third-largest city,
and so on.
6 According to Brookings Institute’s research report of “Redefining Global Cities:
Seven Types of global Cities”, 123 global metropolitan economies can be grouped
into seven clusters: global giants, Asian anchors, emerging gateways, factory China,
knowledge capitals, American middleweights, and international middleweights.
7 US scholars including Edward Glaeser first initiated the concept of “Consumer
City” after investigating the consumer markets of major metropolises such as New
York and Chicago.
8 Wang Wei, Liu Tao, “Policy Options for the Construction of an International Con-
sumption Center”, Research Report of the Development Research Center (DRC)
of the State Council.
9 Mckinsey Global Institute: Smart Cities: Digital Solutions for a More Livable
Future, June, 2018, https://www.mckinsey.com.cn/
10 Mckinsey Global Institute: Smart Cities: Digital Solutions for a More Livable
11 Deloitte: Super Smart Cities-AI Leading the New Trend, https://www2.deloitte.
com/cn/zh/pages/public-sector/articles/super-smart-city-2-0.html
12 Mckinsey Global Institute: Smart Cities: Digital Solutions for a more Livable
13 Arthur Gallion, The Urban Pattern: City Planning and Design, New York: Van
Nostrand Rainhold Company, 1983, pp. 14–16.
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Part III
The new round of technological

revolution and China’s
urbanization
The past seven decades since the founding of People’s Republic of China,
especially the past four decades since the inception of reform and opening up,
has witnessed the most rapid urbanization on the largest scale, with urbaniza-
tion rate soaring to 65.2% in 2022. China is distinctive in its urbanization
model and path as it has realized sustainable and rapid urbanization amid
rapid industrialization. This is highly attributed to China’s economic develop-
ment path and industrial restructuring, reform and opening up and its integra-
tion into the global economic system. Going forward, urbanization will enter
a new stage as the economy and society shift from high-speed growth to
high-quality development. The new stage will be featured with great driving
force of innovation and development deriving from the new technological rev-
olution, as well as challenges entailing unprecedented changes in a century, the
competition of world-class city clusters and the catch-up of major cities in
other developing countries. It calls for a new round of economic restructuring,
incubation of new growth drivers, and improvement of governance. There is an
urgent need to seize the opportunities of the new round of global technological
revolution and the transformation and upgrading of China’s economic and
social structure, pace up the construction of a dynamic system for high-quality
urbanization, promote coordinated development around the core driving
mechanisms of “institution, factor of production, industry and technology”,
deepen reform and promote a high-level opening-up, so as to ensure high-qual-
ity development of China’s urbanization.
DOI: 10.4324/9781032663180-9
7 Process, achievements, and issues
of China’s urbanization
The past seven decades since the founding of People’s Republic of China,
especially the past four decades since reform and opening up, has witnessed
great achievements of social and economic development in urbanization, with
urbanization rate soaring to 65.2% in 2022. The urban pattern with city clus-
ters as the mainstay has initially taken shape, enhancing the comprehensive
competitiveness of major cities, substantially improving urban landscape and
residents’ quality of life, and steadily reinforcing urban public services and
governance. Meanwhile, sustainable urbanization in the high-quality develop-
ment stage is challenged by less coordinated development among city clusters,
impediments in the flow of factors, gap in innovation capability, unsustainable
investment and financing model, and flaws in the governance system.
7.1 Process of China’s urbanization

China’s urbanization mode is inherent in its development strategy and evolution
of industrial structure. During the years of planned economy, China went
through rapid industrialization by prioritizing the heavy industry, producing a
large number of industrial cities. However, urbanization lagged behind, failing to
benefit from fast urbanization or spillover from the post-war technological revo-
lution due to constraints of the planned economy. Since reform and opening up,
the socialist market economy with Chinese characteristics has been installed and
improved, speeding up the pace of urbanization. Especially since China’s acces-
sion to WTO, it has been integrated into the international economy and fully
capitalized on the dissemination and spillover of advanced technologies from
abroad. This has transformed, adjusted and upgraded urban industrial structure,
maintained rapid urbanization, and significantly increased urbanization rate.
7.1.1 The initial stage of urbanization (1949–1996, with urbanization rate

under 30%)
Since the founding of the People’s Republic of China in 1949, China’s urbani-
zation development has been progressing with twists and turns. It can be di-
vided into the slow and arduous stage under the planned economy and the
take-off stage during reform and opening up.
DOI: 10.4324/9781032663180-10
134 The new round of technological revolution and China’s urbanization
7.1.1.1 The slow and arduous urbanization stage under the planned economy
China prioritized the development of heavy industry from 1949 to 1957, build-
ing 6 new cities, expanding 20 cities on a large scale, and 74 cities on a moderate
scale to accommodate 694 key construction projects. Its urban population
jumped from 57.65 million in 1949 (urbanization rate: 10.6%) to 99.49 million
in 1957 (urbanization rate: 15.4%). China’s urban development further acceler-
ated from 1958 to 1960, adding an average of 8.33 million urban residents per
year and increasing urbanization rate by 4.4 percentage points in three years.
In general, China’s urbanization was relatively fast and fruitful from 1949
to 1960.
However, China experienced “de-urbanization” from 1961 to 1978 with a
drop in the proportion of urban population. Its urbanization rate dropped
from 24.7% to 17.9% from 1961 to 1965, during which China raised the mini-
mum number of residents in an administrative town from 2,000 to 3,000, and
cut the number of cities from 208 to 171. China suffered a major setback in its
economic and social development from 1966 to 1976, taking a U-turn in ur-
banization. In 1977, China’s urbanization rate dropped to 17.6%, 0.3 percent-
age points lower than that in 1965 (Figure 7.1).
In the age of planned economy, national economy was stagnant due to the
rigid management. Infrastructure was outdated, basic industries couldn’t meet
the needs of national economic development, and a large amount of foreign
20,000 25
18,000
16,000 20
14,000
12,000 15
10,000 10.64
8,000 10
6,000
4,000 5
2,000
0 0
1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977
Urban populaon (LHS, 10 thousand people) Urbanizaon rate (RHS, %)
Figure 7.1 Changes of China’s Urbanization Rate: 1949–1978.

Source: National Bureau of Statistics.
Process, achievements, and issues of China’s urbanization 135
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1974
1975
1976
1977
1969
1970
1971
1972
1973
1961
1962
1963
1964
1965
1966
1967
1968
1957
1958
1959
1960
1952
1953
1954
1955
1956
1978
Proportion of the primary industry Proportion of the secondary industry
Proportion of the tertiary industry
Figure 7.2 Changes in China’s Industrial Structure (1952–1978).

exchange was used to import advanced equipment and technology. During this
period, the industrial policy focused on strengthening infrastructure, develop-
ing basic industries and export sectors. Development from 1952 to 1978 was
dominated by industrialization, during which the proportion of the primary
industry in GDP decreased from 50.5% to 27.7%, while that of the secondary
industry up from 20.8% to 47.7%, and the tertiary industry marginally down
from 28.7% to 24.6% (Figure 7.2). During rapid industrialization, weakening
of the tertiary industry was due to the priority attached to heavy chemical in-
dustry. Urbanization was largely promoted by the construction of industrial
cities, making the tertiary industry a laggard in the national economy.
During the age of planned economy, Chinese cities were mainly established
and located according to the layout of the heavy chemical industry, especially
the layout of projects key to national defense. The population scale and indus-
trial structure of cities were tightly controlled by the planned system. Cities, as
administrative centers, didn’t fully demonstrate their important role in eco-
nomic growth and social governance. This led to an evident mismatch, with
urbanization lagging behind industrialization. Proportion of the secondary
industry increased by about 27 percentage points from 1952 to 1978, but ur-
banization rate increased by only 5.4 percentage points.
7.1.1.2 The take-off stage of urbanization after reform and opening-up
In the early years of reform and opening up, China strictly controlled the sprawl
of large cities, encouraged the growth of smaller ones and developed rural
towns. Eastern regions adopted a small-town development model. With the
emergence of township enterprises, rural residents were motivated to “migrate

from hometown to cities, and graduate from farming to industrial jobs”. As a
result, urbanization rate increased from 17.6% in 1977 to 21.6% in 1983, with an
average annual increase of 0.66 percentage points. In 1984, China officially
started to restructure the urban economy with the policy of “converting rural
townships to towns”,1 and accelerate the flow of rural population to small
towns. In addition, revision of statistical standards in 1983 turned more rural
population to urban residents, further gearing up urbanization. In 1992, there
were 517 administrative cities in China, up by 217 compared with 1984. The
number of administrative towns reached 14,539, up by 7,353 compared with
1980. In 1992, urban population increased to 240.17 million, and urbanization
rate rose to 27.5%.
After Deng Xiaoping made his “Inspection Trip to the South” in 1992 and
China kicked start the reform to establish a socialist market economy in 1994,
a new strategy was deployed to promote the development of central cities
“with special priority given to coastal cities” and spill over to the surrounding
regions. It sparked a boom in urbanization, especially in the eastern coastal
areas. From 1990 to 1996, number of cities increased from 467 to 666, urban
population from 302 million to 373 million, and urbanization rate from 26.4%
to 30.5%, up by an average of 0.8 percentage points per year (Figure 7.3).
As the United States proposed the plan for “information superhighway” in
1993, developed economies successively entered the information age. China
seized the huge potential of information technology and pioneered to develop
relevant industries in the coastal areas by utilizing their cost advantages of
40000.00 35
35000.00 30
30000.00
25
25000.00
20
20000.00
15
15000.00
10
10000.00
5000.00 5
0.00 0
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
Urban populaon (LHS, 10 thousand people) Urbanizaon rate (RHS, %)
Figure 7.3 Changes of Urbanization Rate (1978–1996).

labor and land. The electronic information industry quickly became a pillar
industry in many coastal cities of open economy. During this stage, China still
lagged behind in infrastructure and basic industries and had an urgent need to
upgrade its industrial structure. Industrial policies were focused on strengthen-
ing infrastructure and basic industries, supporting capital intensive industries
and gradually building them into pillar industries. At the same time, China
stepped up opening up and prioritized foreign trade, especially processing
trade. By joining the international division of labor, China gained momentum
for its industrialization and urbanization.
Proportion of the primary industry in GDP continued to decline from 27.7%
in 1978 to 19.3% in 1996. The secondary industry remained relatively stable,
with its proportion slightly dropping from 47.7% to 47.1%. Meanwhile, the
tertiary industry thrived, with its surging from 24.6% to 33.6% (Figure 7.4).
The decline in the proportion of the primary industry was mainly caused by the
farmland contract reform and increase in agricultural productivity. The rapid
rise of the tertiary industry suggested that China’s strategic priority was shift-
ing from heavy chemical industry to labor-intensive industries with compara-
tive advantages. Tertiary industries related to manufacturing and the urban
livelihood (such as transportation, wholesale and retail, catering and hospitality)
developed fast. Measured by industrial upgrading and restructuring, urbaniza-
tion at this stage fared well, mirroring the general law of urbanization worldwide.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Proportion of the tertiary industry Proportion of the secondary industry
Proportion of the primary industry

7.1.2 The explosion stage of urbanization dominated by industrialization

(1996–2011, with 30%–50% of urbanization rate)
In 1996, China’s urbanization rate exceeded 30%, signaling the explosion stage
of urbanization dominated by industrialization. During this stage, China’s ur-
banization was mainly featured with continuous expansion of urban scale, im-
provement of functions, upgrading of industrial organization and wider range
of hub-spoke effect. In terms of urbanization mode, city clusters started to
develop and draw attention. In 2000, China was no longer torn between the
arguments for “small city first” and for “big city first” and started to prioritize
the development of city clusters. The “10th Five-Year Plan” in 2001 proposed
the concept of “city-and-town concentrated areas”. The “11th Five-Year Plan”
in 2006 proposed to “take city clusters as the main form of urbanization”, and
the “12th Five-Year Plan” in 2011 further proposed to “cultivate city clusters
with great range of influence by relying on large cities and focusing on small
and medium-sized ones”. City clusters became a new trend of urbanization
and regional economic development.
At the beginning of the 21st century, China rapidly emerged as the “world
factory”. Globalization not only promoted China’s industrialization, but also
accelerated its urbanization, which became more pronounced after China
joined WTO in 2001. From 2000 to 2011, China’s urbanization rate increased
from 30.89% to 51.83%, with an average annual increase of 1.9 percentage
points, the fastest since the reform and opening up (Figure 7.5). During this
period, many cities in the east scored explosive growth and rapid expansion.
According to the National Bureau of Statistics, China’s urban built-up area
80000.00 60
70000.00
50
60000.00
40
50000.00
40000.00 30
30000.00
20
20000.00
10
10000.00
0.00 0
Urban population (LHS, 10 thousand people)

Urbanization rate (RHS, %)
Figure 7.5 Changes of urbanization rate (2000–2011).

100%
90%
80% 39.8% 44.3%
70%
60%
50%
40%
45.5%
30% 46.5%
20%
10%
14.7%
9.2%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Proportion of the tertiary industry Proportion of the secondary industry

Proportion of the primary industry

expanded from 22,400 square kilometers to 43,600 square kilometers from

2000 to 2011, an increase of 94.3% in 11 years, way faster than before 2000
(urban built-up area increased by 74.5% from 1990 to 2000).
Rapid increase of urbanization rate at this stage was mainly attributed to
strong economic growth and continuous upgrading of industrial structure, as
well as deeper integration into the international division of labor and active
participation in international competition. Therefore, the focus of industrial
policies was transformed to fully support technological improvement and
product upgrading of capital-intensive industries, spur technology-intensive
industries, promote the development of service industry and comprehensively
expand opening up to the outside world. GDP proportion of the primary in-
dustry decreased from 14.7% in 2000 to 9.2% in 2011, for the first time lower
than 10%, an acknowledged indicator for the modern industrial structure. Pro-
portion of the secondary industry changed slightly from 45.5% in 2000 to
46.5% in 2011 and that of the tertiary industry continued to rise from 39.8% to
44.3% (Figure 7.6). Urbanization and industrial restructuring advanced in a
coordinated and synchronized manner, gradually improving the quality of ur-
ban development.
7.1.3 The new stage of urbanization amid industrial transformation and

upgrading (2011 to present, with over 50% of urbanization rate)
In 2011, China’s urbanization rate exceeded 50% for the first time, marking
a new stage of urbanization with industrial transformation and upgrading.
The Central Work Conference on Urbanization on December 12, 2013 pro-

posed to actively and steadily promote a new type of urbanization, strive to
improve the quality of urbanization, fully apply the concept of ecological civ-
ilization to the whole process of urbanization, and resolutely follow the urban-
ization pathway that is intensive, intelligent, green and low-carbon. The
National New Urbanization Plan (2014–2020) issued on March 16, 2014 fur-
ther pointed out that we should embark on the journey of new urbanization
with Chinese characteristics and comprehensively improve the quality of
urbanization.
In the context of deepening reform comprehensively, China accelerated the
building of a new system of open economy and promoted a new pattern of
comprehensive opening-up by approving pilot free trade zones in Shanghai,
Guangdong, Fujian, Tianjin, Zhejiang and so on. Breakthroughs were made in
the opening up of inland and border areas, resulting in rapid growth in the
number of inland central cities (such as Chongqing, Chengdu, Wuhan, and
Zhengzhou). China’s Belt and Road Initiative proposed in 2013 further ex-
tended its economic belt and development corridor, and promoted the network-
style and open regional development, making the Belt and Road Initiative a
new driver for regional economic growth and urban development. In addition,
rapid development of China’s Internet economy gave rise to a new consump-
tion mode of online shopping. Coupled with efficient and convenient delivery
system, the innovative consumption mode integrated many small and medi-
um-sized inland cities into the social division of labor, and triggered the boom
of “Taobao towns” and “Taobao villages”.
Since 2012, building competitive city clusters has become a goal for China’s
development and its prevailing model in urbanization. China stressed spatial
optimization through the development of city clusters at the regional level. The
“13th Five-Year Plan” in 2016 proposed to “take city clusters as the main
form” and “accelerate the construction and development of city clusters”. The
Plan further identified major city clusters and their scope in the national func-
tional zoning, put forward functional focus and development objective of ma-
jor cities in these city clusters, and gave guidance to the sound development of
city clusters and cities within. At this stage, urbanization rate of China contin-
ued to increase by 1 percentage point per year, rising steadily from 52.6% in
2012 to 65.2% in 2022 (Figure 7.7).
At this stage, acceleration of the new round of global technological revolu-
tion directly promoted innovation and application in China, enhanced its indus-
trial innovation capability, and gave birth to a series of new technologies,
industries, business formats and business models, ushering into a new round of
industrial transformation and upgrading. In terms of the industrial structure,
added value of China’s tertiary industry started to outsize the secondary indus-
try in GDP contribution in 2012. From 2012 to 2022, proportion of the primary
industry in GDP continued to decline from 9.1% to 7.3%, from 45.4% to 39.9%
in the secondary industry and ratcheted up from 45.5% to 52.8% in the tertiary
industry. In 2015, share of the tertiary industry rose to 50.5% (Figure 7.8),
100000.00 70
90000.00
60
80000.00
70000.00 50
60000.00 40
50000.00
40000.00 30
30000.00 20
20000.00
10
10000.00
0.00 0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Urban populaon (LHS, 10 thousand people) Urbanization rate (RHS, %)
Figure 7.7 Changes of Urbanization Rate (2012–2022).

100%
90%
80%
45.5% 46.9% 48.0% 50.5% 51.8% 51.9% 53.3% 53.5% 52.8%
54.3% 54.5%
70%
60%
50%
40%
30% 45.4% 44.2% 43.3% 41.1% 40.1% 40.5% 39.7% 38.6% 37.8% 39.3% 39.9%
20%
10%
9.1% 8.9% 8.7% 8.4% 8.1% 7.6% 7.0% 7.1% 7.7% 7.2% 7.3%
0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Proporon of the terary industry Proporon of the secondary industry
Proporon of the primary industry

suggesting a new pattern of industrial development dominated by services.

Urbanization at this stage also attached importance to the service industry and
service economy.
7.2 Achievements of China’s urbanization

Reform and opening up has witnessed the most rapid urbanization on the larg-
est scale, a miracle in human history. Since the 18th CPC National Congress,
the CPC Central Committee and the State Council adopted a new strategy
with people-centered urbanization at its core and quality improvement as the
guidance. Since its announcement, the strategy has scored historical achieve-
ments. Years of development has been translated to breakthroughs in urbani-
zation and urban development, with continuously optimized urban structure
and form, improved urban landscape and residents’ quality of life, and en-
hanced public services and governance. Cities have become the primary vector
of population and high-quality development.
7.2.1 Steady improvement of urbanization level and quality
Before reform and opening up, urbanization progressed slowly due to the huge
pressure to create jobs for urban population, acute shortage of infrastructure
in big cities, and the national conditions of urban-rural dual structure. From
1949 to 1978, the urban population grew from 57.85 million to 172 million, or
from 10.64% of the national population to 17.92%, up by less than 0.3 percent-
age points per year. 40 years of reform and opening up witnessed rapid urban-
ization in China, which was a miracle in human history. From 1978 to 2022,
China’s total population increased by 1.5 times, while its urban population
ballooned by 5.3 times. The proportion of urban population increased from
17.92% to 65.22%, up by 1.08 percentage points annually, and the total urban
population reached 848 million. Since the “new urbanization with Chinese
characteristics” was announced at the 18th CPC National Congress in 2012,
China has paid more attention to people-centered development and proper
urbanization of migrant workers amid urban development. By the end of
2022, share of urbanized permanent residents increased by 13.39 percentage
points compared with 2011, an average annual increase of 1.22 percentage
points (Figure 7.9).
Meanwhile, urban area and built-up area in cities have increased rapidly.
The urban area increased from 178,100 square kilometers in 2008 to 188,300
square kilometers in 2021, up by 5.7%, while the built-up area, a better barom-
eter of urban space expansion, increased from 30,400 square kilometers in
2004 to 62,420 square kilometers in 2021, up by 105.3% (Figure 7.10).
China has experienced continuous expansion of the urban economy, opti-
mization of its industrial structure, and enhancement in comprehensive com-
petitiveness, thanks to constant urbanization. The 2019–2020 Global Urban
Competitiveness Report (GUCR) jointly released by the Chinese Academy of
100000.00 70.00
90000.00
60.00
80000.00
70000.00 50.00
60000.00
40.00
50000.00
40000.00 30.00
30000.00 20.00
20000.00
10.00
10000.00
0.00 0.00
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
44561
Urban population (LHS, 10 thousand people) Urbanization rate (RHS, %)
Figure 7.9 Permanent Urban Residents and Urbanization rate in China (1949–2022).

250000
200000
150000
100000
50000
0
04 05 06 007 008 009 010 011 012 013 014 015 016 017 018 019 196 561
20 20 20 2 2 2 2 2 2 2 2 2 2 2 2 2 44 44
Urban area (square kilometers) Built-up area (square kilometers)
Figure 7.10 Urban Area and Built-up Areas in China.

Social Sciences and the UN-Habitat listed 1,006 cities with more than 500,000
residents in the world. 103 out of the 291 Chinese cities on the list notched up
their ranking, among which Shenzhen, Shanghai, Hong Kong SAR, Beijing
and Guangzhou were listed top 20.
Since 2011, growth of the manufacturing industry has slowed down in the
wake of rapid urbanization dominated by industrialization. As a result, urban
economy has accelerated its transition to be dominated by the tertiary industry.
The tertiary industry and consumption have become main growth drivers for
China’s high-quality development. At the same time, urban functions have
broadened as many cities transform from traditional centers of manufacturing,
trade and transportation to global hubs of innovation, consumption and factor
allocation. In 2015, Shanghai proposed to speed up the construction of a world-
class science and technology innovation center. Beijing, Shenzhen, Guangzhou,
Wuhan and Chengdu have followed suit, rolling out plan to build innovation
centers. Meanwhile, Beijing, Shanghai, Shenzhen, Guangzhou, Chengdu and
Wuhan are building up world-class consumption center cities, aiming to upgrade
urban consumption and contribute to the prosperity of the domestic market.
7.2.2 Continuous optimization of urban structure and form
Chinese cities continue to grow in number and scale. At the end of 1949, there
were 132 cities in China, including 65 prefecture-level cities and 67 county-level
cities. At the end of 2021, there were 691 cities in China, and the number of
prefecture-level and county-level cities rose to 297 and 394 respectively. At the
end of 1949, there were only five cities with more than 1 million non-agricultural
population. In contrast, measured by residents with Hukou, there were 22 cit-
ies with a population over 4 million, 48 cities between 2 million and 4 million,
97 cities between 1 million and 2 million, and 85 cities between 500,000 and
1 million at the end of 2021 (Figure 7.11).
Cities with population above one million continue to grow at a faster pace,
while smaller cities are in the decline. On the one hand, there have been more
million-resident cities, growing from 90 in 2000 to 167 in 2021. The number of
those home to more than 4 million people increased from 8 to 22, including the
four municipalities directly under the central government and sub-provincial
cities. The number of those home to 2–4 million people increased from 12 to
48, including tier-1 and tier-2 cities. The number of those home to 1–2 million
people increased from 70 to 97, indicating growing scale of economically-
dynamic tier-3 and tier-4 cities. On the other hand, the number of cities with a
population under 1 million decreased significantly from 169 in 2000 to 130 in
2017. Among them, the number of those home to 0.5–1 million dropped 103 to
85, and from 66 to 37 for the 200,000–500,000 notch, signaling that those cities
were out of favor for new migrants.
A new pattern of urbanization is taking shape rapidly with city clusters as
the mainstay and coordinated development of central and peripheral cities as
300
250
200
150
100
50
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
>4 million 2-4 million 1-2 million 0.5-1 million
Figure 7.11 Number of Cities in Different Population Scale in China (2000–2021).

the theme. City clusters start to play a central role in urbanization. The tree city
clusters of Beijing-Tianjin-Hebei region, the Yangtze River Delta and the Pearl
River Delta are ramping up construction. Central cities and city clusters con-
tinue to lead development. The “19+2”2 city clusters have been developing
steadily, with constant optimization of the metropolitan areas at their core.
Statistics show that in 2016, the three major city clusters accounted for only
2.8% of China’s land mass. Yet they were home to 18% of national population
and 36% of the total GDP. Central cities remain the powerhouse for the devel-
opment of peripheral sphere, strengthening division of labor and cooperation
within city clusters.
Regional development is better coordinated amid urbanization. Since the
18th CPC National Congress, China has accelerated the development of peo-
ple-centered urbanization. Great efforts have been made to optimize economic
layout and make regional development more coordinated by drafting and im-
plementing regional strategies for the coordinated development of Beijing-
Tianjin-Hebei region, the development of the Yangtze River economic belt,
the construction of Guangdong-Hong Kong-Macao Greater Bay area, the in-
tegrated development of the Yangtze River Delta, and the ecological protec-
tion and high-quality development of the Yellow River Basin. These flagship
strategies have anchored high-quality development in China and the prosperity
of world-class city clusters.
Box 7.1 Development and Classification of 19 City clusters in China
At the Fourth Session of the 12th National People’s Congress in March

2016, Premier Li Keqiang states that China plans to build 19 city clusters
and two urban circles of Lhasa and Kashgar during the 13th Five-Year
Plan. These 19 city clusters will include 241 cities (cities directly under
the central government, designated cities for independent planning status
and prefecture-level cities), accounting for 82% of all the prefecture-level
cities in China. The 19 city clusters can be divided into four categories
based on their economic density and growth. The first group is clusters
with high economic density and high growth rate, such as the city clusters
in the Yangtze River Delta and the Pearl River Delta. The second group
is featured with high economic density but low growth rate, such as
Beijing-Tianjin-Hebei region and Shandong Peninsula city cluster. The
third group include clusters with low economic density but high growth
rate, such as the middle reaches of the Yangtze River, Chengdu and
Chongqing, the Central Plains, Huhhot-Baotou-Ordos-Yulin region,
Central Shanxi, Guanzhong Plain, city cluster along the Yellow River in
Ningxia, Lanzhou-Xining city cluster, the northern slope of Tianshan
Mountain, and the city cluster in Central Guizhou. The fourth group
comprises clusters with low economic density and low growth, such as
Harbin-Changchun megalopolis, central and southern Liaoning city
cluster, the city cluster on the West Side of the Straits, Beibu Bay city
cluster and central Yunnan city cluster (Figure 7.12).
9,000.00 180.00%
8,000.00 160.00%
7,000.00 140.00%
6,000.00 120.00%
5,000.00 100.00%
4,000.00 80.00%
3,000.00 60.00%
2,000.00 40.00%
1,000.00 20.00%
0.00 0.00%
Economic density (10 thousand RMB/square kilometer) GDP growth rate
Figure 7.12 Economic Density of City clusters in 2018 and GDP growth from
1999 to 2018.
7.2.3 Significant improvement in urban landscape and residents’ quality of life
Urbanization has filled the gap in services and infrastructure including water,
power, gas, drainage, sewer, waste treatment and so on, greatly improving ur-
ban mobility and living standard. At the end of 1949, there were 84.32 million
square meters of urban road in China. Only 27 cities provided public transport
service. In 2017, the urban road area reached 7.89 billion square meters. 35
cities had rail transport network by the end of 2018. The 185 rail lines in oper-
ation extended a total of 5,761.4 kilometers, including 4,354.3 kilometers of
subway lines. At the end of 1949, only 72 towns had water plants and there
were only 4 sewer treatment plants across China. By the end of 2017, penetra-
tion of water, gas, sewer treatment, waste treatment and harmless treatment
reached 98.3%, 96.3%, 95.5%, 99.0%, and 97.7% respectively.
Improving housing of urban residents is a hallmark of urbanization in
China. Before reform and opening up, the per capita living space in 190 Chi-
nese cities was only 3.6 square meters. 8.69 million households didn’t have
proper shelter, accounting for 47.5% of the total urban households. In 2021,
the per capita urban living space reached 41 square meters, which was 34.3
square meters more than the 1978 level (Figure 7.13).
45
40
35
30
25
20
15
10 6.70
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2016
2018
2019
1978
1980
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2021
Urban living space per capita (square meter)
Figure 7.13 Changes of Per Capita Living Space in Cities (1978–2021).

7.2.4 Continuous improvement of urban public services and

governance capability
To achieve generally equal access to basic public services, balanced distribution

of infrastructure and fair quality of life for the whole population, China has
made great efforts to optimize the allocation of public resources and promote
the rational flow and efficient agglomeration of factors. During the 13th Five-
Year Plan, more than 100 million new migrants obtained urban Hukou, and
urban permanent residents started to enjoy universal coverage for basic public
services. Nowadays, a sustainable social insurance system is in operation with
wide coverage and basic benefits, urban public services such as medical care
continue to improve, and China steadily approaches its target for equal access
to public services. Progress is achieved in the provision of education, employ-
ment, medical care and decent housing. Urban participants of pension insur-
ance increased from 57 million in 1989 to 503 million in 2022, up by 7.8 times.
Participants of basic medical insurance increased by 22 times from 43 million
in 2007 to 1.0 billion in 2022, among which 362 million urban employees be-
came beneficiaries of the insurance program. In 2018, a total of 10.08 million
urban residents received minimum subsistence allowance (Figure 7.14).
As urbanization rate increases steadily, the urban governance system contin-
ues to strengthen. With “integrated planning”, plan for city clusters and urban
systems, plan for land utilization and plan for ecological environment are coor-
dinated on a single map. Three red lines (respectively for ecological protection,
permanent farmland scoping and urban development) are demarcated
1,20,000.00
1,00,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Urban populaon covered by pension insurance (10 thousand people)

Urban populaon covered by basic medical insurance (10 thousand people)
Figure 7.14 Urban Participants of Pension Insurance and Basic Medical Insurance

(1989–2022).
Source: National Bureau of Science.
according to the integrated planning, constituting a master plan to guide urban

space development and prevent rampant sprawl. In addition, the new genera-
tion of information technologies such as Internet of Things, cloud computing
and big data provide favorable conditions for the deep integration of urban
economic and social systems. Many cities are building the capability of govern-
ment information sharing and collaboration across sectors, industries and re-
gions to promote the application of intelligent information and empower
refined, smart and modern urban governance.
7.3 Outstanding issues and challenges for China’s urbanization in the

new stage
According to the general pattern of urbanization, China is still in the accelera-
tion stage where urbanization rate ranges from 30% to 70%. History of typical
economies shows that many would be challenged by “stagnant industrial up-
grading, decline of resources and environment, and intensified social tensions”
when urbanization rate exceeded 50%. China is at a critical crossroads as its
economy shifts focus from growth rate to quality. Its urbanization also faces
prominent issues, such as increasing inter-city disparity, institutional barriers
to the free flow of factors, difficulties in incubating new growth drivers, and
flaws in urban governance.
Some of these issues were common for advanced economies when they en-
tered a similar stage of urbanization, such as urgent need for economic and
industrial upgrading and transformation, and pronounced defects in social
governance capability. Others are related to institutions underlying China’s leg-
acy model of urbanization. It’s increasingly difficult for them to adapt to and
facilitate the ongoing and future transformation towards high-quality develop-
ment and a new industrial structure. For example, addiction to land transfer
income and local government financial platforms is to finance urban construc-
tion is not sustainable. In addition, some problems are related to defects in the
system and mechanisms. For example, reform of the factors market is overdue.
Competition system and ecological & resources conservation system are
flawed. These issues not only impede the free flow and efficient allocation of
factors, undermine innovation capability and motives, but also make urban
development less inclusive and sustainable.
7.3.1 Outstanding disparity in urban development
Promoting the coordinated development of large, medium, small-sized cities

and small towns has been the direction for China’s urbanization. At present,
China still faces prominent disparity in urban development. Studies show that
80 (24 prefecture-level cities and 56 county-level cities) shrank to varying de-
grees from 2007–2018, accounting for a staggering 12.1% of the 660 sample
cities. On the one hand, cities in different regions vary in urbanization rate and
socioeconomic development. On the other hand, mega cities still have a long
way to go to fully play their role in hub-spoke effect, and improve their ecolog-
ical, security and healthcare functions. Counties and county-level cities are
generally underdeveloped, with limited appeal to the migrants. Overall carry-
ing capacity and functional competence of cities are to be further enhanced.
7.3.1.1 A yawning gap in urbanization rate among regions and provinces

First, eastern, central and western China vary in the stage and level of eco-
nomic development as well as urbanization rate. The eastern region is the most
urbanized, reaching 67.8% in 2018, followed by the central region and the west-
ern region at 56.11% and 52.92% respectively. The eastern, central and western
regions are basically the same in terms of the speed of urbanization, gaining
25, 23 and 24 percentage points respectively from 2000 to 2018 (Figure 7.15).
Second, the north-south gap is widening with some regions particularly
challenged in their development. According to the 2019 China Urban Compet-
itiveness Report, central and eastern regions account for most of the cities with
high industrial competitiveness, showing a healthy trend of regional develop-
ment. However, most cities are just competitive at the lower end of the value
chain. Cities in the north are relatively weaker, enlarging the gap between the
north and the south. Regions such as the Yangtze River Delta and the Pearl
River Delta have embarked on a high-quality development track, and sluggish
growth in some northern provinces further shifted the national economic
70.00 67.80
64.95
65.00
60.01
59.58
60.00
56.10
55.00 53.29
56.11
49.95
50.00 52.17 52.92
48.74
45.00 42.79 42.99
45.30
40.00
41.49
36.22
39.07
35.00
34.55
30.00 33.05
28.41
25.00
20.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Naonal urbanizaon rate Urbanizaon rate in the eastern area

Urbanizaon rate in the central area Urbanizaon rate in the western area
Figure 7.15 Average Urbanization Rate of Eastern, Central and Western Provinces

(2000–2018).
Source: Wind.
gravity to the south. In 2018, the northern regions accounted for 38.5% of total
economic output, down by 4.3 percentage points compared with 2012. From
2012 to 2018, contribution of the Northeast to the national industrial output
decreased from 8.7% to 6.2% and permanent residents in the region decreased
by 1.37 million, mostly young and tech-savvy people. Some cities, especially
resource-exhausted cities and traditional industrial and mining cities lag be-
hind in development.
Third, obvious differentiation is observed within each region and develop-
ment momentum is increasingly polarized. Economic activities and population
are concentrated in big cities and urban clusters. Mega cities such as Beijing,
Shanghai, Guangzhou and Shenzhen continue to expand their lead. Large cit-
ies like Hangzhou, Nanjing, Wuhan, Zhengzhou, Chengdu and Xi’an are well
positioned for development, each representing an engine for regional high-
quality development.
Fourth, urbanization rate of 31 provinces (including provincial-level cities
and autonomous regions) in China is closely correlated to their socioeconomic
development. 12 provinces have higher urbanization rate than the national aver-
age, among which Shanghai, Beijing and Tianjin exceed 80%, even more urban-
ized than some developed countries. In 2018, urbanization rate was 80%–90% in
Shanghai, Beijing and Tianjin, 60%–70% in Guangdong, Jiangsu, Zhejiang,
Fujian, Jiangxi, Chongqing and Liaoning, 50%–60% in Heilongjiang, Shan-
dong, Hubei, Jilin, Ningxia, Hainan, Shanxi, Shaanxi, Hebei, Hunan, Anhui,
Qinghai and Inner Mongolia, less than 50% in Sichuan, X injiang, Guangxi,
Henan, Yunnan, Gansu, Guizhou and Tibet.
7.3.1.2 Lack of hub-spoke effect from large cities
China’s large cities lag behind international counterparts in their energy level
of development. The Tokyo metropolitan area is home to 37 million people
and over $1 trillion of economic volume, more than 30% of national total. The
Seoul metropolitan area is home to over 25 million people, representing half of
the national population. In contrast, there is still much room for improvement
in the agglomeration level of China’s large cities. Beijing’s output per square
kilometer is only equivalent to 1/8 of that in the Tokyo metropolitan area and
1/5 of that in the New York metropolitan area. A comparative study of six
large cities (Beijing, Shanghai, Shenzhen, Chengdu, Tokyo and New York)
shows that Shenzhen has a relatively high population density, yet the popula-
tion density of Beijing, Shanghai and Chengdu is much lower than Tokyo and
New York by this measure.
Within a radium of 10 km from the urban center, population density of
Beijing, Shanghai, Shenzhen and Chengdu stands at 22,200, 37,100, 28,300
and 19,400 people/km respectively, significantly higher than that of Tokyo
(17,200 people/km) and New York (13,500 people/km). It’s the same case from
10 km to 20 km. However, when the radium is extended to 20–30 km, popula-
tion density of Beijing, Shanghai and Chengdu drops remarkably to 4,900,
Table 7.1 Population Density Distribution of Selected Cities in 2019
(Unit: 10 thousand people/km)
City 0–10 km 10–20 km 20–30 km 30–40 km 40–50 km
Tokyo 1.72 1.39 0.83 0.55 0.34

New York 1.35 0.76 0.29 0.18 0.16
Beijing 2.22 1.17 0.49 0.27 0.20
Shanghai 3.71 1.39 0.75 0.50 0.32
Shenzhen 2.83 1.92 1.53 1.26 0.81
Chengdu 1.94 0.80 0.53 0.43 0.26
Source: World Pop.
Note: The metropolitan areas of Beijing, Shanghai, Shenzhen, Chengdu, Tokyo and New York are
divided into circles with a radium of 30 km, 50 km, 80 km and 100 km with Tiananmen Square,
Shanghai municipal government, Shenzhen municipal government, Chengdu municipal govern-
ment, Ginza and Empire State Building as the center.
7,500 and 5,300 people/km, much lower than Tokyo. The trend remains un-
changed for the 30–40 km and 40–50 km circles (Table 7.1).
The density distribution curve indicates a larger population gap between
inner and outer circles of China’s big cities. Taking 10 km as the dividing line,
the curve is steeper in Shanghai and Chengdu, whose population density within
10 km is 2.66 times and 2.41 times that of 10–20 km respectively, and popula-
tion density in circles father away from city center drops sharply. The curve is
less steep in Beijing and Shenzhen, whose population density within 10 km is
1.91 times and 1.47 times that of 10–20 km. When taking 30 km as the dividing
line, Beijing posts the biggest gap between the inner and outer circles, whose
population density of 20–30 km is 1.78 times that of 30–40 km, much higher
than the corresponding circle in international counterparts and other domestic
cities. In contrast, the two international cities have a smaller gap of population
distribution between the inner and outer circles and a relatively flat curve of
the overall population density distribution (Figure 7.16).
7.3.1.3 Laggard overall development in counties and county-level cities
According to the Codes for the Administrative Divisions above County Level in
the People’s Republic of China released by the Ministry of Civil Affairs in May,
2019, apart from the municipal districts, forest districts and special economic
zones, there are 1,879 county-level administrative divisions in China (excluding
Hong Kong SAR, Macao SAR and Taiwan region of China), including 375 coun-
ty-level cities, 1,335 counties, 117 autonomous counties, 49 banners and 3 autono-
mous banners. Among them, the top 100 counties register strong momentum of
development, contributing to 25% of total GDP of county-level administrative
regions and 10% of national GDP with less than 2% of China’s land mass and 7%
of its population. However, most counties and county-level cities below the top
100 are sluggish in development, constituting the weakest link in coordinated
Figure 7.16 Features of Spatial Distribution of Population density in Domestic and

Foreign City Clusters (Unit: 10 thousand people/km).
Source: World Pop.
regional development. According to China’s County Economic Development

Report (2018), the indebtedness of about 15% of counties (cities) was above the
warning line. At regional level, counties (cities) in the western region were most
debt-ridden, and counties (cities) in the central region were the least so. At pro-
vincial level, counties (cities) in Guizhou had the highest debt-to-GDP ratio
and debt-to-asset ratio, driven by large-scale investment in recent years. Coun-
ties (cities) in Guangdong had the lowest debt burden thanks to strict control of
debt scale in the province.
7.3.2 Difficulties in incubating new growth drivers
History in typical countries shows that successful industrial transformation

and the rise of new growth drivers are key to healthy urbanization when they
graduate to the second part of the acceleration stage with urbanization rate
above 50%. Industrial development and urban development advance in tan-
dem with each other. When China accelerates its industrial restructuring, some
cities are left behind because of the latency between the fall of incumbent pil-
lars industries and rise of new ones. They are heavily in debt without sustaina-
ble financing mechanism for urban development. All these add to the difficulty
in incubating new growth drivers.
First, industrial upgrading is overdue as modern service industries such as dig-
ital economy are not growing fast enough. Over the past few years, many cities
were engaged in blind sprawling, readjusting spatial layout just to meet planned
targets for industry and population. However, such an exercise is not resilient
to changes in urban industrial structure. Once incumbent industries start to
decline, vacancy jumps in new development zones and industrial parks, leading
to low population density, higher cost of urban operation, and extra difficulty
in urban resurrection. Slow in their transformation and upgrading, some old

industrial cities and resource-oriented cities are on the verge of decline, suffer-
ing weaker momentum in legacy industries, job loss and population outflow.
China has entered a development stage dominated by the service industry in
general, with added value of the tertiary industry accounting for 53.9% of
GDP in 2019. Economic theories and international experience show that when
the share exceeds 50%, growth rate will moderate, while development will be
switch to a quality-focused and sustainable pathway. At the same time, the new
round of technological revolution represented by digital economy is unfolding
rapidly. In the super large domestic market, deep integration of digital econ-
omy and service industry can boost the productivity of service industry and
cultivate new products, services and business models, fueling the development
of new growth drivers. However, producer service industry in many cities is
underdeveloped, weighing down innovation and competitiveness in the service
sector, diluting the integration with the digital economy, compromising quality
and efficiency, and decelerating the development of new growth drivers. In
2019, added value of the service industry in 11 of 70 large and medium-sized
cities in China, including Beijing, Guangzhou, Shanghai, Hangzhou, Nanjing
and Shenzhen, accounted for more than 60% of their GDP. The share was
more than 50% in another 28 cities such as Tianjin, Wuhan, Zhengzhou and
Chengdu, and below 50% in the other cities. At regional level, the share of
added value of the service industry was 58.7% in the eastern region due to its
solid momentum of digital economy, 52.1% in the central region and 48.7% in
the western region.
Second, urban investment still focuses on infrastructure and public service fa-
cilities, and “new infrastructure” such as the new generation of IT industry, smart
transportation and energy infrastructure is underfinanced. In the initial and ac-
celeration stages of urbanization, infrastructure and public service facilities
were backward. Cities mainly invested in such infrastructure as railway, high-
way and airport, as well as basic public service facilities. This investment had
extensive spillover effect and helped create favorable conditions for manufac-
turing and other industries. However, when urbanization rate exceeds 60%,
sustainable urbanization in the new stage is less anchored on scale expansion
of infrastructure and public service facilities than industrial transformation
and upgrading, agglomeration of high-end factors of production, and the
R&D and dissemination of new technologies.
Currently, an absolute majority (over 80%) of infrastructure investment still
goes to traditional infrastructure and public service facilities and share of
“new infrastructure” is below 20%. Priority of fixed asset investment has not
yet been shifted to areas that support industrial transformation and upgrad-
ing, technological innovation and accumulation of human capital, such as
high-quality education, medical care, cultural system and premium financial
services. According to the PPP Projects register of the Ministry of Finance,
total scale of PPP investment at the end of the first quarter in 2020 was about
17.6 trillion Yuan. Traditional infrastructure projects (railways, highways,
ports, docks, airports, etc.) accounted for about 40% of the total at 7.1 trillion
Yuan. Projects related to real estate development and land reserve (apartments,
renovation of shantytowns and dilapidated buildings, land reserve and others)
accounted for about 20% at about 3.4 trillion Yuan. “New infrastructure” in-
vestment was only 0.5% of the total with an amount less than 100 billion Yuan,
and related projects (rail transit, industrial parks, waste-incineration power
plants, etc.) received 2.6 billion Yuan of investment, about 14.7% of the total,
scoring less than 16% in combination.
Third, the funding mode for urbanization is still government-led instead of
market-driven, amplifying debt and financial risks. Traditional funding mode
for urbanization is led by local governments and mostly financed by land trans-
fer income. Municipal bonds issued by LGFVs create huge contingent liabili-
ties. The underlying risks are passed on to the local governments as they are
guarantors for most of the debts and will have to provide bailout in case of
default (Figure 7.17).
In the next stage of urbanization, it is hard to maintain the government-led
mode for funding and investment. First, land transfer income is becoming inad-
equate and less stable as a source of funding. In the past decade, cost of land
acquisition, resident replacement and urban construction has kept growing in
relation to the total income of land transfer, now close to 80%. Moreover, 30%
of the remaining 20% income is earmarked by the central government for spe-
cial expenditure,3 further reducing the fund available for urban construction. In
addition, nearly half of local government debts are repaid with land transfer
income, which is not an ideal source of funding as the income has fluctuated a
lot with economic cycle and turbulence in the real estate market. Second, issuing
40.00
35.00
30.00
25.00
Trillion Yuan
20.00
15.00
10.00
5.00
0.00
2018-03
2018-06
2018-09
2018-12
2019-03
2019-06
2019-09
2019-12
2020-03
2020-06
2020-09
2020-12
2021-03
2021-06
2021-09
2021-12
2022-03
2022-06
2022-09
2022-12
2023-03
Figure 7.17 Local Governments’ Balance of Debt (March, 2018–March, 2023).

Source: Ministry of Finance.
municipal bonds through LGFVs is subject to strict control and regulation. Since
2017, sharp rise of local government debts has become targeted in the battle to
control systemic risks. Local governments can no longer raise fund with munic-
ipal bonds issued by their financial platforms. Instead, they could only entrust
the central government to issue bonds on their behalf, which effectively caps the
scale of debt financing. In the stage of high-quality development, investment
priorities should be adapted to cultivate new growth drivers and fix weaknesses,
innovate the financing mechanism for urbanization, better match government
assets and liabilities, free up government assets to generate income, strive a bal-
ance between the cost and terms of government debts and the cash flow and
return of financed projects, and provide more long-term financing instruments,
so as to finance urban construction with a reasonable cost and matching
duration.
7.3.3 Intensive global competition
In recent years, China has sped up the relocation of some labor-intensive in-
dustries to other developing countries and emerging economies, indicating
changes in comparative advantages in China’s new development stage of in-
dustrial development. It is not only conducive to the transformation and up-
grading of China’s industrial structure, but also to the economic and industrial
development of other countries. However, if the manufacturing industry goes
offshore too fast in the short term, it may disrupt China’s urban economic de-
velopment, and rapid flow of population and industry will increase the risk of
“hollowing out” of industries. In addition, many large cities in developing
countries are introducing more preferential policies to court multinational en-
terprises and cross-border capital investment. They are also dedicated to the
transformation and upgrading, from OEM hubs and call centers to regional
portals for technology development and premium service outsourcing. The de-
velopment prospect of Chinese cities will be strained with many industrial
fields overlapping with the foreign competitors.
The external environment of China’s urbanization will go through profound
changes including shocks unseen in a century, and competitive innovation amid
the new round of technological revolution. Chinese cities will be exposed to
ever growing pressure to develop world-class city clusters. With intensified glo-
balization and industrial restructuring driven by the technological revolution,
Chinese city clusters will enter a new stage of high-quality development domi-
nated by innovation and the service industry, catching up with leading city clus-
ters of the world. However, the five recognized world-class city clusters (the city
cluster of the US Atlantic coast, the city cluster of the Great Lakes region, the
city cluster of Japan’s Pacific coast, the London city cluster and the city cluster
of northwest Europe) are all dominated by advanced manufacturing and high-
end modern service industries, ranking high on the global value chain with their
industrial structure, and benefiting from rich resources of education, finance
and top notch talent necessary for technological breakthroughs. The five
world-class city clusters, thanks to their advantages of leading technology, in-

frastructure, financing and business environment, are better positioned to make
technological breakthroughs and form an advanced platform economy. If Chi-
na’s major city clusters can’t gain an upper hand in emerging industries and
businesses arisen out of the new round of technological revolution, there will
be more choke points in the development of core technologies, leading to wider
technical gap with foreign competitors and weaker competitiveness in the long-
term. In addition, some developed countries have scaled up technological em-
bargo on China, covering critical technologies such as chips, integrated circuits
and high-end software. This will undermine industrial restructuring and indus-
trial chain security in major coastal cities, and block the construction of inno-
vation centers in many cities in China.
7.3.4 Institutional barriers to the full development of factor market
China’s market of land, labor, capital, technology and other traditional factors
is increasingly dominated by market forces after years of reform. The new
round of technological revolution is boosting the market of new factors such
as data and remarkably improving the efficiency of allocation. However, devel-
opment of the factors market still lags behind the goods market in general,
suffering from limited scope of market-based allocation, stagnancy in price
reform, and institutional barriers to the free flow and allocation of factors in
cities, across cities and between urban and rural areas.
1. Rural migrants face many limitations in receiving Hukou in large cities, a

prerequisite for equal access to basic urban public services.
According to the Migrant Workers Monitoring Survey Report 2018 issued by

the National Bureau of Statistics, the total number of migrant workers in 2018
was 288.36 million, among which 115.70 million worked in their hometown
and 172.66 million left their hometown for employment, including 135.06 mil-
lion migrating to cities. In recent years, China deepened the reform of the Hu-
kou system, lifting settlement restrictions in small and medium-sized cities and
small towns with less than 1 million permanent residents. In addition, the Key
Tasks for the 2019 New Urbanization Construction stated that “settlement re-
strictions should be completely lifted in large cities with 1 to 3 million perma-
nent residents, adequately loosened in larger cities with 3 to 5 million permanent
residents, and completely abolished for key groups of population”.
Restrictions of the Hukou system has prevented many new migrants from
properly settling down. They remain in force in the large cities that are most
attractive to new migrants. According to the survey, 78.2% of new migrants in
Beijing are willing to settle down, 74.3% in Shanghai, and 64.4% in other cities
directly under the central government in 2017. In contrast, other cities and towns
are much less attractive to new migrants, with 25.6% of them willing to settle down
in counties and 28.9% in other prefecture-level cities except the cities directly
under the central government, provincial capitals and sub provincial cities. In
big cities whose Hukou is most sought after, migrant workers and their families
don’t enjoy the same basic public services as their urban counterparts includ-
ing education, employment, health care, elderly nursery and housing. In this
sense, benefit of urbanization is inadequate for rural migrants, who are not
fully covered by public services and welfare programs. Most of them end up
leaving the big cities where they have worked stayed.
2. Market mechanism doesn’t unlock its full potential in allocating urban and
rural land, leading to a dual structure and low efficiency of land use.
With advancement of the new type of urbanization and full implementation of

the strategy for rural revitalization, collective and state-owned construction
land is now treated the same, enabling collective land to be traded in the con-
struction land market, leveling the playing field for the commercialization and
development of urban and rural land. Rental housing developed on collective
land was first piloted in 2017 to increase the supply of public rental housing in
parallel to occupant-owned housing. The program has tentatively freed up va-
cant rural homesteads and land of township enterprises, and repurposed them
for the development of public rental housing and facilities either on a lease or
as a capital contribution.
Pilot operation so far reveals that rural collective land is still biased against
in the land market compared to state-owned land, facing restrictions in thresh-
old of transaction and scope of application, etc. Generally, progress is lagging
for market trading of rural collective construction land. It’s difficult to develop
rental housing on such land because banks are reluctant to accept collective
land as collateral and even if they offer a credit line, the collateral is often un-
dervalued. Besides, special agreement needs to be negotiated for the transfer of
development right, more burdensome than the trading of state-owned land.
The nationwide distribution mechanism for new construction land quota
needs to be optimized as the current quota management is not flexible enough.
The quota is in severe short supply in areas with more developed economy. In
response, China has taken a series of pilot efforts. Surplus quota for urban and
rural construction land is allowed to be transferred to other city clusters, sub-
ject to control of land use purpose. On March 1, 2020, provincial governments
were delegated by the State Council to review and approve the conversion of
rural land, except for permanent basic farmland, to construction purpose. Se-
lected provincial governments were also tentatively delegated to convert some
permanent basic farmland to construction purpose, and to review and approve
land requisition. Despite the pilot efforts, a cross-provincial trading system of
new construction land quota is not up and running. Central cities and key city
clusters are still thirsty for land quota.
3. The market of data is flawed and immature, discounting the potential of

data assets and the digital economy.
According to the White Paper: China’s Digital Economy Development and Em-
ployment (2019) released by China Academy of Information and Communi-
cations (CAICT), China’s digital economy was worth 31.3 trillion Yuan in
2018, accounting for more than 1/3 of national GDP at 34.8%, and contribut-
ing to 67.9% of GDP growth. It is estimated that the scale of China’s digital
economy will reach 60 trillion Yuan in 2025, becoming a key driver of the na-
tional economy. However, data, unlike land, capital and technology, are a new
factor of production in the technological revolution, still in a nascent develop-
ment stage in China. The market of data is still to be improved in terms of
market allocation, property rights definition and protection mode.
First, it is difficult to define the property rights of data, and a reasonable re-
muneration mechanism is absent. In the era of Internet of Things,
everything is interconnected with each terminal generating various kinds
of data, which makes it harder to define the rights to the sea volume of
data collected by the Internet technology. At present, rules on the prop-
erty rights of data in China are ambiguous as there’s no clear definition
about the ownership of data and their corresponding usage right and
right to proceeds. As the Contract Law, the Law against Unfair Compe-
tition, the Anti-Monopoly Law and other legislation don’t have clear
provision regarding the property rights of data, it is difficult to effectively
protect the right to proceeds. As a result of legislative and regulatory
void and the consequential blurred scope of rights, circulation mecha-
nism of data is poorly established, deterring people from opening data
sources or sharing and trading data. Therefore, it is difficult to set a rea-
sonable market price for data, further undermining the right to proceeds.
Second, public data are not adequately shared, leaving data silos isolated from
each other. Data security, standards and scope of application are still in
infancy in China. Therefore, it is still prudently exploring how to open up
and share data. The market and trading rules of data are not sophisti-
cated, leaving abundant room for improvement in resource integration
and coordinated development and utilization across industries, sectors
and organizations. Scenarios of standardized data development and uti-
lization in agriculture, industry, transportation, education, security,
urban management, public resource trading and other sectors are under
construction. Public data collection, the sharing and exchange need to be
enhanced. Regulations are to be clarified regarding the opening and
effective circulation of public data on business registration, transporta-
tion and meteorology. Government agencies struggle to coordinate, inte-
grate and utilize public data with miscellaneous social data.
Finally, the security protection mechanism of data element is not perfect. The
security protection system and security review system of data classifica-
tion and grading are important institutional safeguards to ensure the
market value of data elements under the big data background. China
attaches great importance to the security protection of data elements and
is promulgating and implementing the Personal Information Protection

Law and the Data Security Law soon. In general, however, there are
prominent problems in the protection of data elements in China as the
government governance ability of data elements needs to be improved,
and there are many security risks such as data breach, personal privacy
infringement, unfair competition, monopoly and abuse in the process of
data flow, transaction and allocation, which may cause income losses and
unfair distribution of data elements.
4. Innovation factor is not active enough to support high-quality urban devel-

opment, and innovation mechanism needs to be strengthened.
Innovation-driven development is the most important pillar for China’s future

urbanization. In recent years, China has advocated self-reliance in science and
technology as a strategic lever for national development. Strategies to build up
national strength with science, technology, education, talent promotion, and
innovation have been implemented to stay abreast with global scientific fron-
tiers, boost economic growth, meet key needs of the nation and safeguard peo-
ple’s lives and health. The new round of technological revolution will have
wide-ranging impacts on urban transportation, energy, consumption and pro-
duction, spurring wide application of innovation factors in cities with the ad-
vent of new industries, business formats and business models. However,
motivation for talent development and innovation and institutional mecha-
nism for scientific and technological innovation fall short of the need for
high-quality economic and social development, detrimental to the role of in-
novation factor in the technological revolution and the rise of innovation-
oriented cities.
Due to rigid management of scientific research and mechanism of commer-
cialization, inventors and innovators are entitled to a fairly low share in the re-
turn of technological innovations. This dampens the motivation to translate
innovations into development drivers, hence reducing their economic and social
benefits. The market environment in still in its infancy where enterprises are
empowered to champion technological innovation, with outstanding weak-
nesses in the “soft” environment. It’s imperative to step up protection of intellec-
tual property, strengthen policies to provide basic assurance for fair competition,
and formulate more innovation-friendly tax measures. Before these issues are
fixed, large cities will remain weak in innovation, unable to accumulate innova-
tion factor, motivate innovation and disseminate innovation know-how.
7.3.5 Weaknesses in urban governance system
In China’s rapid urbanization, profound changes have taken place in urban

social and economic structures, form of social organization and distribution of
social interests. Social tensions are rising in some fields. Many city governments
struggle with ambiguous scope of functions, overlapping roles, and abuse or
absence of authority. Some are assuming functions and duties of social organ-
izations. While others suffer from gaps in social governance.
First, focus on economic development over ecological protection. In China’s

urbanization, many cities focus less on ecological protection and safe and
healthy development than on economic growth, not fully committed to
the philosophy that “lucid waters and lush mountains are invaluable as-
sets”. According to the Brief Introduction of China’s Ecological and Envi-
ronmental Quality 2019 released by the Ministry of Ecology and
Environment, 337 cities at or above prefecture level didn’t met the stand-
ard of fine particulate matter. Less than half of Chinese cities managed
to reach the air quality target. The “2 + 26” cities in the Beijing-Tian-
jin-Hebei region and surrounding area recorded 53.1% of blue-sky days
around the year. Five of the seven major river basins (Yellow River, Son-
ghua River, Huaihe River, Liaohe River and Haihe River) were mildly
polluted, and 28% of the 107 monitored lakes (reservoirs) were found to
be slightly or moderately eutrophic. 32.6% of the county areas were
ranked poor or very poor in their ecological health. Heavy metal pollu-
tion was a major threat to farmland. Redevelopment of the contami-
nated land posed substantive environmental risks. Capability of waste
treatment and disposal remained backward.
Second, focus on urban construction over management and services. Risks
and hazards are growing in cities, especially in megacities as traditional
urban planning, construction and management methods are viable to
meet the needs of urban development and the residents. Urban manage-
ment is inefficient and public services fall short of demand. For example,
housing, employment, education, health care, social security and other
services for migrant workers and their families are not incorporated in
the existing public service system, nor are they coordinated by any dedi-
cated departments. In addition, income and wealth gap continues to
widen rapidly from a high level in urbanization. Stakes among different
social groups are more complex and diverse. Inequality in education and
employment is increasingly prominent, threatening to freeze up identifi-
cation and stratification.
Third, excessive administrative controls and absence of a diverse governance
system. Social governance is still dominated by excessive administrative
controls, without adequate capability and means for social governance
through guidance, counseling, coordination, education and services. A
governance model with diversified actors such as social organizations is
still under construction. Public financial input is insignificant compared
to the need for modernized governance and public services.
7.4 Summary
China’s urbanization mode is inherent in its development strategy and evolu-
tion of industrial structure. As the most populous country, China has experi-
enced urbanization of the largest scale in human history, scoring historical
achievements. The transformation from high-speed growth to high-quality de-
velopment marks a key point of inflection for its urbanization. Prominent
challenges include growing disparity in urban development, overdue incuba-
tion of new growth drivers, institutional barriers to the free flow of factors, and
weaknesses in urban governance system.
Notes
1 Report on the Adjustment of Administrative Towns adopted and circulated by the
State Council in November 1984.
2 19+2 city clusters refer to Beijing-Tianjin-Hebei region, the Yangtze River Delta,
Pearl River Delta, Shandong Peninsula city cluster, West Side of the Taiwan Straits,
Harbin-Changchun megalopolis, central and southern Liaoning city cluster, the
Central Plains, middle reaches of the Yangtze River, Chengdu and Chongqing,
Guanzhong Plain, Beibu Gulf city cluster, Central Shanxi, Huhhot-Baotou-Ordos-
Yulin region, Central Guizhou, Central Yunnan, Lanzhou-Xining city cluster, city
cluster along the Yellow River in Ningxia and the northern slope of Tianshan
Mountain, as well as two urban circles with Lhasa and Kashgar as the center.
3 10% for affordable housing, 10% for water conservancy and 10% for education.
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8 Impact of the new round of technological
revolution on China’s urbanization
The new round of technological and industrial revolution is thriving, charac-

terized by the application of 5G, AI, cloud computing, big data, new energy,
new energy vehicles, digital economy, sharing economy, etc. As world-class city
clusters such as London, New York, Paris, and Tokyo increase R&D input and
speed up layout of new technology industries, technological competition
among them will further intensify. The transition to high-quality urbanization
in China highly overlaps with the expansion of the new technological revolu-
tion in time. New breakthroughs and fast propagation and application of tech-
nologies will optimize the spatial layout and form of China’s urbanization,
upgrade urban industries, improve competitiveness, and modernize govern-
ance capabilities.
8.1 Optimizing the spatial structure of urbanization

The new round of technological revolution will bring more people to cities and
speed up China’s urbanization. Urban population will continue to grow rapidly
by 2035, thus providing strong impetus for high-quality urbanization. The trans-
fer of various technological factors to rural areas will enhance their industrial
competitiveness, improve urban–rural coherence and promote in-depth urban–
rural integration. Meanwhile, the new round of technological revolution reshapes
and restructures cities by engendering new industries, business models and fac-
tors of production. With faster development of high-tech industries and pro-
ducer service industries in large cities and central regional cities, China’s major
city clusters will accelerate their integration into the global urban system and
become more competitive by participating in the race for new industries and new
business models.
8.1.1 Higher urbanization rate and further urban–rural integration
Digitalized information and knowledge travels more widely and is more

time-sensitive. Information infrastructure such as unified communication base
DOI: 10.4324/9781032663180-11
stations and broadband networks in urban and rural areas promotes the spa-
tial interconnection between cities, towns and rural areas. The effective sharing
of information resources, to a certain extent, narrows the urban–rural gap in
industries, talent, technology, and resources. Modern logistics, transportation
and other technologies further reduce the cost of urban–rural communication.
Agricultural production, supply and sales are supported by more information
technology. Thanks to full access to market information, agricultural produc-
ers and operators can optimize resource allocation, which improves agricul-
tural productivity and operational efficiency. Mechanized production based on
big data, 5G, and other information technologies brings new agricultural
machinery and information technologies to rural areas, making agriculture
more technology-empowered, enhancing the scale of agricultural production
and operation, and promoting the modern transformation of agriculture.
Decreasing demand for agricultural labor amid the new round of technological
revolution will channel more rural population to cities, providing sufficient
human capital for urban industrial transformation.
Development of large city clusters and metropolitan areas will enable large
cities to gather and integrate more consumption resources. As a result, con-
sumption structure will further upgrade, generating and expanding new types
of consumption, energizing innovation in consumption and business models,
and spilling over across the country, including rural areas. The top five cities by
the penetration of online shopping are Beijing, Shanghai, Shenzhen, Guang-
zhou and Chongqing, an order consistent with the level of consumption
upgrading and urbanization (see Figure 8.1).
Figure 8.1 Cascade Effect of Online Shopping in China.

Source: Aurora Big Data.
Impact of the new round of technological revolution on China’s 165
8.1.2 Narrowing regional disparity in urbanization rate
The new round of technological revolution will make the eastern region more
attractive to high-end talents. The eastern area is more developed, with high
concentration of resources, especially innovation factors, advanced infrastruc-
ture and high urbanization rate. In the new round of technological revolution,
the eastern area is the first to benefit, forming new business models and trans-
forming it industrial structure. Emerging digital and smart technologies have
mainly given rise to knowledge-intensive industries such as cloud computing,
smart manufacturing, and modern service industries, while labor-intensive
industries such as catering, retailing, and production are in decline. Traditional
service industries are turning from labor-intensive to knowledge-intensive,
which in turn leads to growing demand for high-end talents and receding
demand for lower-skilled labor. Meanwhile, urban residents in eastern prov-
inces are the first to enjoy outcomes of high-tech industries. Improvement in
living standards makes the area more attractive.
The new round of technological revolution paces up urbanization in central
and western regions. Smart manufacturing and services fueled by technological
progress relocate labor force, moving low-skilled labor back to central and
western cities for employment and entrepreneurship. Industrial productivity
gain leads to industrial expansion, while transfer of technology and industries
from eastern area generates new job opportunities, in particular in cities.
Meanwhile, cities in central and western regions are more attractive to local
rural migrants, with housing price lower than eastern cities, and more job
openings, higher labor income and better public services than neighboring
rural areas. In other words, urbanization in central and western China is driven
by both inter-city and urban–rural migration.
8.1.3 Divergent pace of urbanization in different types of cities
Fueled by the new round of technological revolution, small- and medium-sized

cities will be further urbanized, with a higher speed in mid-sized cities, while
large cities will see their urbanization level off. As population in mega-cities
approaches saturation, their urbanization will progress very slowly. In 2005,
more than 80% of Shanghai and Beijing population lived in urban areas. That
number arrived at 86.5% and 88.1%, respectively in 2018, signaling that these
two cities entered the advanced stage of urbanization with sluggish progress
thereafter. Emerging transportation technologies, such as high-speed rail,
make inter-city trips cheaper and more time-efficient. Given limited bearing
capacity of large cities, population is gradually moving to peripheral smaller
cities. In Beijing, for example, the population is growing slowly in recent years,
but neighboring cities of Langfang and Baoding see a rapid growth in resi-
dents. With convenient inter-city mobility attributable to technological pro-
gress, mega-cities are not expected to be further urbanized.
Industries in medium-sized cities will be supported by the new round of

technological revolution. On one hand, it will engender new industries and
expand the scale of industries. On the other hand, information technology ena-
bles the relocation of industries from mega-cities to smaller cities, further
expanding industrial scale, thus attracting flow of labor and accelerating pop-
ulation growth. Thanks to transportation and information technology, resi-
dents in smaller cities are better informed and can move to more developed
areas at a lower cost, leading to slower population growth in central, south-
western, and northwestern cities.
Cities will become more divergent in their development amid the new round
of technological revolution. As technological and industrial transformation
improves efficiency, inter-city disparity in efficiency, job opportunities, income,
and public services will widen, motivating population and industry outflow
from some small- and medium-sized cities. Cities that have led the transforma-
tion, such as Shenzhen, will constantly appeal to high-caliber talents, while
declining cities or those falling behind in transformation will suffer a rapid
population outflow.
8.1.4 More pronounced economic clustering in large cities and metropolitan areas
The industrial revolution brought about by the new round of technological

revolution is highlighted by the rapid development of the digital economy,
which will be a powerhouse of constant industrial revolution and efficiency
gain. Digital economy and new business models that combine digital technol-
ogy and manufacturing industry will mainly be present in and around big cit-
ies, especially in metropolitan areas. These regions will become the center of
efficiency, job creation, platform economies, unicorn enterprises, and other
start-ups. Attracted by their competitive advantages, population will continue
to cluster in metropolitan areas in the long term.
Thanks to the propagation of information technology, construction of rail
transit, and the rise of smart cities, bearing capacity of large cities, especially
mega-cities, has further increased. First, as shared mobility thrives, an advanced
intelligent inter-city transportation system will effectively match passengers
with vehicles to downsize urban fleet, thus alleviating congestion and provid-
ing smooth travel experience. Second, information technology, along with bet-
ter urban planning and governance capability, will better match population
with transportation network and residential layout. This will significantly
improve the bearing capacity of cities and expand urban scale within estab-
lished spatial scope. Urban population density will increase, augmenting scale
effect and density effect of population, and assembling more and higher-ca-
liber population to metropolitan areas.
The new round of technological revolution, while promoting agglomeration
and development of large cities and metropolitan areas, can also play a role in
functional adjustment of large central cities and coordinated development of
large, medium and small cities within city clusters. A closely linked division of
labor is key to the coordinated development of cities of different tiers in city

clusters. Major technological breakthroughs in information, transportation,
energy and biology are most likely to appear in large central cities, which will
further concentrate innovative factors in them, accelerating the development
of modern urban functions and the converting them from production centers
to centers of factor allocation and services. These cities will host corporate
headquarters and become regional, national even international hubs of trade,
financial service, innovation, and consumption. Their local industrial mix will
be dominated by advanced manufacturing and modern services.
Finally, rapid development of the new round of technological revolution,
especially rapid development and application of new information, transporta-
tion and energy technologies, will not only transform and upgrade traditional
manufacturing and service industries for greater efficiency but also reconfigure
industrial layout. Large cities will no longer remain industrial centers. Their
manufacturing industries will be readjusted and relocated. Meanwhile, build-
ing on their comparative advantages in space, resources and labor supply,
small- and medium-sized cities will develop their industries in line with local
conditions, forming an industrial supply chain with viable geo-economic rela-
tions and sound division of labor. This is conducive to the specialization and
economic efficiency of industrial development. More importantly, modern
information and transportation technologies will better connect large cities
and surrounding smaller cities by shortening the time and distance of inter-city
travels. Metropolitan areas will grow faster with a higher degree of integration,
facilitating the rise of Chinese metropolitan areas in the competition with their
international counterparts.
8.2 Promoting industrial upgrading and competitiveness in cities

Urbanization has to be anchored upon on a solid industrial foundation, mak-
ing continuous industrial upgrading the only choice. To prevent urban decay
and promote urban revitalization, the only solution is to encourage continuous
innovation and facilitate rapid development of emerging industries with
empowering technologies and policies, and trigger a new cycle of urban devel-
opment through renewal of industrialization. Science and technology innova-
tion is booming. The new round of technological and industrial revolution is
reshaping global pattern of innovation and economic structure. This will gal-
vanize China’s strategic emerging industries, further integrate technologies
into industrial sectors, optimize the construction and operation of urban infra-
structure and housing, promote urban industrial upgrading, enhance compet-
itiveness, and navigate China to the era of digital economy.
8.2.1 Strong support for the development of strategic emerging industries
China’s 14th Five-Year Plan proposes to expedite the development of the new
generation information technology, biotechnology, new energy, new materials,
high-end equipment, new energy vehicles, green and environmental technology,

aerospace industry, and marine equipment industry, etc. The new round of
technological revolution can provide strong technical support for the develop-
ment of these industries. First, enhancing the core competitiveness of IT indus-
try through industrial Internet, big data, AI, advanced communication, inte-
grated circuits, ultra-high-definition display, and other innovations and
applications. Second, growing biological industry through the application of
biomedicine, bio-agriculture, bio-manufacturing, and gene technology. Third,
increasing the share of new energy production, such as nuclear, solar, wind,
hydrogen energy, and biomass through R&D and application. Fourth, conduct-
ing genetic engineering for material development and acquire leadership in vir-
tue of advanced inorganic non-metallic materials, high-performance composite
materials, new functional rare earth materials, information functional materi-
als, nanomaterials, and other frontier materials.
Data continue to engender new growth drivers in digital economy. The new
generation information technology such as AI, quantum information, mobile
communication, Internet of Things, and blockchain are applied on a wider scale.
Transportation networks continue to improve. Energy saving, environmental
protection, and other new technologies are achieving breakthroughs in applica-
tion. Manufacturing industries are becoming more intelligent, service-oriented,
and green. Clean, efficient, and sustainable energy technologies will trigger
global energy transformation. Intelligent manufacturing, new energy vehicles,
smart city, smart phones, and other new business models and modes are rapidly
emerging and iterating, constituting a new economic engine. These new technol-
ogies and industries will inaugurate new factors of production and new indus-
tries. For example, smart and digital technologies have given rise to mobile pay-
ment, smart manufacturing, Internet of Things, and other industries, which are
increasingly applied in decision making on the macroeconomy, production and
operation, and personal consumption. More than ten million feeds are posted
per minute on the social platform WeChat; tens of billions of transactions are
made per day on the e-commerce platform Alibaba; more than 100 billion trans-
actions are closed over mobile payment systems every year. Facelift of interac-
tion and consumption continuously renews growth momentum.
8.2.2 Deeper integration of Internet, big data, and AI with industries
The new generation of information technology should be used to transform

industries along the value chain. In recent years, Chinese enterprises of Inter-
net, AI, and other data technologies have made inroad into various industries,
coordinating development of emerging and traditional industries. Industrial
Internet, for example, derives from deep integration of new generation IT and
modern industrial technology. By building a basic network that connects
machines, materials, people, and information systems, Industrial Internet real-
izes comprehensive sensing, dynamic transmission, and real-time analysis of
industrial data, informs decisions, and enables intelligent control. This improves
efficient allocation of manufacturing resources, contributes to the networking,

digitalization and intelligence of the manufacturing industry, and is the core
agent for the escalation of Internet from consumption to production.
New generation information technology such as big data, AI, Internet of
Things are deeply integrated with the manufacturing industry, constantly
changing its mode of production and organization. Manufacturing industries
are more digitalized, networked, and intelligent around the world. China’s
leading edge in 5G and other IT sectors can be combined with traditional man-
ufacturing industries to cultivate intelligent manufacturing. Technologies such
as 3D printing, simulation analysis, and industrial Internet of Things are
applied in leading intelligent manufacturing sectors such as automotive, aero-
space, and defense industries, while other industries are also catching up. As of
June 2020, 51.1% of critical processes in key manufacturers were based on
numerical control and penetration of digital R&D design tools reached 71.5%.
The 14th Five-Year Plan will herald the beginning of the transformation and
upgrading of China’s manufacturing industry driven by 5G and industrial
Internet, an era of ubiquitous connectivity and control.
New information technologies will effectively digitalize China’s service
industry, transforming and innovating trade in service. With further open-
ing-up and the boom of Internet economy, China is speeding up its integration
into the global consumer market. Driven by new sales models such as cross-bor-
der e-commerce, overseas shopping proxy and live commerce, Chinese con-
sumers bear growing awareness and approval of overseas products, spurring
explosive growth of inbound e-commerce. Meanwhile, enactment of E-Com-
merce Law of the People’s Republic of China in 2019 has also improved the
market and regulatory environment for greater compliance of cross-border
e-commerce. Inbound cross-border e-commerce transactions reached RMB
2.5 trillion in 2019, 10.3 times that of 2012, with an average annual growth rate
of nearly 40% (Figure 8.2). Customers of inbound cross-border e-commerce
arrived at 125 million, 12.5 times more than that of 2013.
The combination of IT-enabled cross-border e-commerce and China’s huge
domestic market has underpinned the sustained expansion of the domestic
consumer market. China is expected to contribute to nearly 1/3 of the global
consumption growth by 2030 (Figure 8.3). More high-quality consumer goods
and services will be imported to China, further optimizing domestic supply
and bridging the gap with foreign markets. Meanwhile, leading consumption
cities such as Shanghai and Beijing will act as global hubs to strengthen ties
between domestic and foreign markets, thus empowering China to upgrade
and innovate consumption.
8.2.3 Enhanced construction and operation of urban infrastructure and housing
One potential breakthrough of AI is smart urban construction. Technologies

such as smart manufacturing and additive manufacturing will change extensive
production model by incorporating user needs into the process for customization.
30000
25000
20000
100 million Yuan
15000
10000
5000
0
2012 2013 2014 2015 2016 2017 2018 2019
Figure 8.2 Transaction Volume of China’s Inbound Cross-border E-commerce (2012–2019).

Source: China E-Business Research Center.
Note: Unit: 100 million Yuan.
35
30
25
20
15
10
0
USA and Western Northeast Oceania China Latin South Southeast Eastern Sub- Middle East
Canada Europe Asia America Asia Asia Europe and Saharan and North
Central Asia Africa Africa
Figure 8.3 China’s Contribution to the Growth of Global Consumption.

Source: Mckinsey: Urban World: The Global Consumers to Watch.
This will boost demand for designated energy, which will help reduce carbon
emission. Urban infrastructure and housing will be built in totally different man-
ner, dramatically improving safety and quality and reducing cost.
Intelligent technologies will disrupt the way to monitor, operate, maintain,
and upgrade infrastructure. Operation and maintenance of infrastructure
cover roads, bridges, and other transportation facilities, as well as electricity,
gas, water supply, drainage, and heating that are essential to the functionality
of cities. Priority of urban infrastructure is shifting from large-scale construc-

tion to maintenance, safety, and efficiency.
Underground space in Chinese cities is severely underutilized compared to
developed countries. Now that most cities are overcrowded, development of
underground space offers a relief. Clarity of ownership, technologies of plan-
ning, design, development, construction, security, hazard prevention, and effi-
cient operation, and innovation in ventilation and illumination provide policy
and technological assurance for urban underground space to be safely devel-
oped and operated.
8.2.4 Green and low-carbon urban development driven by new energy technology
As a major engine of China’s GDP, cities are also the leading energy consumers.
In 2017, cities consumed about 3.85 billion TCE, accounting for 88.3% of
national total consumption. To meet the growing energy demand, most pri-
mary energy including coal and natural gas and electricity need to be shipped
or transmitted from where they are produced to load centers. Fossil fuels remain
an important source of energy for urban consumption. Energy consumption in
urban areas is still dominated by coal, while the share of renewables is relatively
low. Distributed solar energy, wind energy and biomass have not reached scale
in application, and their reserve for future development is also limited.
The extensive use of wind and solar energy in traditional industries and the
development of hybrid cars can reduce pollution in economic activities. Tech-
nological development is speeding up the commercialization and civil applica-
tion of green technology. Green transit is passenger friendly, helping reduce
energy consumption in commuting. Some regions adopt dual purpose plan for
both workplace and residence.
Energy-saving and environment-friendly buildings can reduce their stress on
the environment. Green buildings are covered with vegetation and powered
with solar and wind energy. Green building standards for urban development
are formulated to guide systematic projects for energy conservation and emis-
sion reduction. Green technologies and related industries will be developed so
as to promote green buildings on a large scale. Legacy buildings can be refur-
bished with solar panels and other green building materials, while new build-
ings should be planned and constructed as part of a green building system for
residential communities and functional areas according to local conditions
and in a people-centered manner.
8.2.5 Expansion of new consumer markets driven by innovative technologies and

business models
New consumption mainly refers to brand-new consumption philosophy, con-

tent and mode in the context of economic globalization and new technological
revolution. In recent years, new technologies and business models have become
the main driver of new consumption. New technologies represented by the
16.00 120.00
14.00 100.00
12.00 80.00
10.00
Trillion RMB
60.00
8.00
%
40.00
6.00
4.00 20.00
2.00 0.00
0.00 -20.00
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Online Retail Sales (trillion RMB, LHS)
Growth Rate of Online Retail Sales (%, RHS)
Growth Rate of Total Retail Sales of Consumer Goods (%, RHS)
Figure 8.4 China’s E-retailing Sales and Growth Rate (2007–2022).

Source: China Statistical Yearbook (2007–2018), Ministry of Commerce.
Internet, big data, cloud computing, AI, and new business models led by plat-
form economy and sharing economy have energized consumption innovation,
profoundly changing the perception and practice of consumption. One typical
case is e-retailing. In 2022, China’s online retail sales reached 13.8 trillion
RMB, and the share in total retail sales of consumer goods has increased from
1.1% in 2008 to 27.2% (Figures 8.4 and 8.5).
30
27.2
25.8 25
24.5
25 23.6
19.6
20
15.5
15
%
12.9
10.6
10
8
6.3
4.3
5
3.3
1.1 2
0.6
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Figure 8.5 Share of E-retailing in Total Retail Sales of Consumer Goods (2007–2022).

Source: National Bureau of Statistics, Ministry of Commerce.
Sports
Gaming
Agriculture
Social network
Advertisement and marketing
Utility software
Tourism
Localized life services
Realtor
Education
Hardware
Culture and entertainment
Logistics
Medical and health
E-commerce
Commercial service
Finance
Car and transportation
0 5 10 15 20 25 30
Number of unicorns
Figure 8.6 Industrial Distribution of Chinese Unicorns in 2018.

Source: IT Juzi.
Thanks to accelerated application of new technologies, online shopping,

group purchasing, and online payment are thriving, giving rise to new hot
spots, experience and models of consumption. The consumer sector has
become the most active “testing ground” for innovation and entrepreneurship.
In 2018, China was home to 203 unicorns (privately held startups valued at or
over $1 billion), ranking second in the world. One hundred thirty six unicorns,
or 67% of the total, are engaged in consumer-related fields, such as automobile
and transportation, e-commerce, culture and entertainment, local services, and
health care, most of which are about new consumption (Figure 8.6).
8.3 Accelerating modernization of urban governance

Rapid development of big data and related technologies makes it possible to
gather massive city-level data and conduct large-scale analysis and comput-
ing. Research on urbanization and urban development also graduates from
traditional qualitative approach to quantitative analysis, projection and opti-
mization. This change will significantly transform city planning, design, oper-
ation, and management, largely solve problems in urban development, and
make cities more sustainable. Precise, dynamic and intelligent urban plan-
ning, construction, operation and management through big data, and AI
based on quantitative models that mirror the spatial, economic, and social
dimensions of cities will be the most important technological change in urban
development.
For historical reasons, China missed opportunities in previous global tech-

nological revolutions. As a result, China’s concept and model of urban govern-
ance remain dated. Since reform and opening up, China’s urban governance
has graduated from a top-down method, which was based on the overall con-
trol of resources allocation through planned economic units, to institutional
and technical governance, which emphasizes institutional innovation and tech-
nological development (Jun and Gao, 2019). Rapid urbanization in China has
been strongly supported by such changes. As the new technological revolution
comes to full swing, it will provide new historical opportunities for China to
modernize its urban governance system and capability.
8.3.1 Intelligent urban governance with big data
Intelligent urban governance can be realized with the help of information tech-
nology. Big data is both an important factor of production and a principal
factor of social governance. First, from the perspective of service supply, big
data is more time-sensitive than traditional data. By capturing and analyzing
real-time information, it ensures that personalized government service is deliv-
ered online in time. Second, unlike traditional fragmented governance model,
big data makes more comprehensive, systematic, and regular governance pos-
sible. Third, accurate profiling of residents at all levels helps better understand
their general needs, optimize risk control, and make urban governance more
people-centered.
China has many success stories in improving effectiveness of urban govern-
ance through technological means. For example, the “grid governance” model
divides a city into cells and, by virtue of digital information platform, responds
to the management needs of individual cells in a timely manner. This model
was first piloted in Dongcheng District of Beijing in 2004 and has been gradu-
ally promoted nationwide under the guidance of the Ministry of Housing and
Urban–Rural Development. Similar cases include “Tianyan Project” imple-
mented by municipal public security departments, integrated e-government
platform promoted in several provinces and cities, and the “System of Citizen
Health Information” implemented in Xiamen and other cities.
8.3.2 Higher efficiency in public service provision through technological innovation
Technological innovation, especially mobile Internet, innovates how public ser-

vice is supplied, diversifies the forms of public products, and improves the effi-
ciency of public service provision. Wide application of digital and intelligent
technologies has greatly digitalized cities and reshaped urban management
models. This is typified by sustainable transportation, which coordinates differ-
ent modes of transport and maximizes systemic benefits. Besides, green low-
carbon buildings and intelligent water services, together with the construction
of urban information system (city brain), extensively and deeply integrate infor-
mation technology in urbanization, and improve the overall efficiency citywide.
Hangzhou is a role model of future smart city with its “city brain”. The
most typical application is in transportation. Alibaba, by taking advantage of
its technical strength in cloud computing, big data and AI, has built an inte-
grated urban platform for computing, data resources and AI open services,
which has instant access to all information over the citywide network from all
video terminals. It combines four AI vision platforms for real-time sensing and
automatic monitoring of traffic events and accidents in Hangzhou. After two
years of operation, Hangzhou City Brain 2.0 covers more than 1,300 traffic
lights and 4,500 cameras to deliver inclusive sensing of the local traffic based
on 7 major signals. It can give command to more than 200 traffic police officers
via mobile terminals. In the ranking of large and medium-sized cities prone to
traffic congestion, Hangzhou has dropped from the 5th place in 2016 to 35th in
2018, with constantly improving traffic efficiency, dropping accident rate, and
higher public satisfaction. In addition to mitigating congestion, Hangzhou
City Brain also helps discover and deal with police affairs, automatically
detecting more than 30,000 events that deserve police attention and interven-
tion on a daily basis, with an accuracy rate above 95% and average response
time of 10 seconds. Quick response to and efficient handling of emergency
situations have remarkably improved urban security.
8.4 Challenges to urbanization posed by the new round of

technological revolution
The ongoing technological revolution yields substantial dividend to China’s
urbanization. But it also poses challenges that deserve special attention. Fail-
ure in international competition will widen the gap between Chinese city clus-
ters with their world-class counterparts. Meanwhile, as other developing coun-
tries become more competitive, they may encroach on China’s development
potential and comparative advantages. In addition, the new round of techno-
logical revolution will have major impact on the incumbent urban employment
structure and formats, which may widen inter-city and intra-city income gap
and exacerbate inequality.
8.4.1 Changes in urban employment structure and income distribution
The new round of technological revolution may bring about two major changes
in the labor market. First, labor skills are more diversified, equipping the labor
force with a complex knowledge system. In the era of intelligence, the techno-
logical infrastructure environment in which people live undergoes significant
changes, with big data and cloud computing growing exponentially. The cogni-
tive system and total knowledge of human beings are constantly updated and
developed, and the structure of the labor force is also transformed. Labor force
of all sectors need to acquire fresh knowledge and skills so as to keep pace with
technological progress and requirement of the new era. The combination of
AI and production has also upended the role of workers, who are becoming
controller, supervisor and manager of the production process. Competent

workers often need to master a variety of hard and soft skills to meet the chal-
lenges brought about by technological progress. Second, more workers are
engaged in intellectual labor, making innovation capability a key qualification.
Emerging technologies are optimizing the structure of labor force. More peo-
ple with higher level of knowledge will join the labor force, working as techni-
cians, scientific researchers, and managers. The labor market has huge demand
and higher requirement of such laborers. Deep integration of AI will reduce
laborers in the production process. Meanwhile, high-tech, emerging and service
industries will demonstrate great potential and appeal to those with knowl-
edge, professional skills, and innovation competence. More laborers will take
up high-end occupations such as product design, R&D programming, finan-
cial investment, and high-tech equipment operation. Innovative, multidiscipli-
nary, high-tech, and skilled talents will claim a larger share in the labor force.
The technological revolution will also substitute conventional urban jobs.
In recent years, in response to the hike in labor cost, the pressure to improve
quality and efficiency, and higher career expectation of the younger genera-
tion, robots, especially industrial robots, are deployed on a significantly larger
scale. More factories are replacing workers with machines. Since 2015, indus-
trial robots have been used in 36 sectors and 87 subsectors, mostly in automo-
tive, electronics and other manufacturing industries. Industrial robots are
increasingly embedded in large-scale production lines to generate a manifest
substitution effect. After the outbreak of Covid-19 pandemic in 2020, robots
started to move into the service sector, such as drones, unmanned delivery vehi-
cles and intelligent delivery cabinets in express and logistic service, robots for
temperature measurement, drug dispensary, cleaning and disinfection in med-
ical services, etc. The services sector rapidly transforms to unmanned opera-
tion with higher intelligence.
According to a research report published by the McKinsey Global Institute
in January 2021, by 2030, 516 billion man-hours of work may be replaced by
automation technology, equivalent to 87 work days (8 work hours per day) per
worker. Workers in relevant sectors will be pressed to acquire new skills. By
that time, the demand for manual skills will fall by 18 percent, while the demand
for high-end technical skills may rise by 51 percent, and as many as 220 million
Chinese workers, or about 30 percent of the workforce, may need to change
occupation.
In the developed eastern area, the service industry will be the main job crea-
tor. However, income polarization in the service industry, growing concentration
of the market, and widening income gap within large companies will exacerbate
urban income inequality in this area in the short term. In contrast, the manufac-
turing industry will remain an important sector for job creation in central and
western regions, making them vulnerable to income erosion caused by industrial
transformation in the short to medium term. In addition, these regions need to
race against emerging economies in Southeast Asia and Africa for industrial
capacity relocated from the eastern area, further widening income gap.
0.6
0.5
0.4
0.3
0.2
0.1
0
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Figure 8.7 China’s Gini Coefficient, 1981–2015.

From 1978 to 2008, the income gap of urban residents widened year by
year, basically apace with China’s urbanization (Figure 8.7). The urban–rural
Gini coefficient shows a similar upward trend. According to calculation by
Bhattacharya (2018) et al. based on data in 2012, resident income varied
among Chinese provinces and was highly polarized within provincial border.
The Gini coefficient of developed provinces such as Guangdong, Shanghai,
Beijing, and Jiangsu is much higher than that of less developed ones such as
Guizhou, Gansu, and Guangxi.
According to the China General Social Survey (CGSS) 2008–2015, China’s
Inequality of Opportunity (IOR) index decreased from 0.254 to 0.176, down
by 30%; while the contribution of IOR to income inequality dropped from
46.36% to 34.88%, a decrease of 12 percentage points. In the rural area, the
contribution of IOR to income inequality declined by 14 percentage points,
while that in cities rose by almost 8 percentage points. Urban–rural gap by this
measure is gradually narrowing (Figure 8.8).
8.4.2 Widening digital divide in the information age
Urban–rural digital divide was first proposed by the U.S. Department of Com-
merce in 1995, referring to the gap between urban and rural areas in terms of
access to and use of information technology typified by network technology in
the transition from an industrial society to an information society, as well as
factors that affect the access and use, such as users’ awareness and access envi-
ronment. In the context of accelerated development of the digital economy,
0.7 46.36 50
45.44 45
0.6 42.28
38.68 40
0.5 36.52 35
34.69 34.88
31.67
30
0.4
27.08
24.27 25
0.3 20.98 20
16.54 15
0.2
10
0.1
5
0 0
2008 2010 2013 2015
based on national samples based on urban samples

based on rural samples national share of inequality
urban share of inequality rural share of inequality
Figure 8.8 Income Inequality Index and the Share of Inequality of Opportunity in

China.
Source: Li Ying, Evolution Trend, Formation Mechanism and Mitigating Measures of Inequality
of Opportunity in Income Distribution in China, 2019.
“digital divide” specifically refers to the inequality between groups and regions
measured by their access to and use of the Internet.
Digital divide can first be perceived as a generational gap in the use of infor-
mation technology. The younger generation is the primary beneficiary of Inter-
net amid the new round of technological revolution. They have been the first to
accept and use new hi-tech products and services. Yet lack of knowledge and
living habits have made it take longer for the older generation to adopt new
products and services. Moreover, many products and services are not friendly
to the aged population. For example, there are few mobile phones customized
for the elderly. Many public facilities only grant access through hi-tech means
and approaches. Even IT products and services claiming to be “for the elderly”
are inferior in safety and quality. These only widen the generational gap in the
use and sharing of technology.
Digital divide also exacerbates the isolation between modern cities and tra-
ditional rural community, reinforcing the entrenched social duality. Though
rural community is rapidly embracing information technology, it still lags far
behind the urban area in the penetration and application of technology. This
will further widen the gap in education and cultural activity, hindering inte-
grated urban–rural development. Moreover, urban–rural digital divide is a
barrier for migrant workers, especially the middle-aged and elderly ones to pick
up new skills, undermining the employability of surplus rural labor.
8.5 Summary
The new round of technological revolution has all-round, far-reaching and
in-depth impact on China’s urbanization. It will bring disruptive changes to
the operation, management, and construction of Chinese cities. Part of the
impact is not detected yet. In general, however, the technological revolution
presents more opportunities than challenges. It will influence the quality and
speed of China’s urbanization, narrow regional disparity in urbanization and
accelerate the development of metropolitan areas and city clusters. It will also
bring forth a multi-center city network, improve urban governance and reduce
inequality in urbanization. Besides, the new round of technological revolution
will help Chinese cities integrate into the global city system and compete with
international city clusters, guiding China toward high-quality urbanization.
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9 China’s urbanization (2020–2050) in the
new round of technological revolution
According to the “three-step” plan formulated on the 19th National Congress

of the Communist Party of China (CPC), China will build a moderately pros-
perous society in all respects in 2020, basically achieve socialist modernization
by 2035, and become a great modern socialist country by 2050. During
2020–2050, China will graduate from a middle-income country to a moder-
ately developed high-income country with significant changes in economic,
social and industrial structures. The economic and industrial structures will be
more balanced and effective, with the service industry and consumer spending
as the primary driver and innovation a defining feature of economic growth.
Expansion of the new round of technological revolution is concurrent with
China’s pursuit for high-quality development, offering significant opportuni-
ties for the next stage of urbanization. Guided by the “three-step” strategy,
China’s urbanization in 2020–2050 will be people-centered and quality-
oriented, with an inherent pattern of coordinated development between large,
medium-sized, and small cities led by city clusters. This will blaze a trail of
urbanization with Chinese characteristics featuring quality and efficiency, a
scientific and reasonable growth model, ongoing improvement in the urban
system and significant enhancement in governance capability.
9.1 A new stage of China’s economic and social development

Since the middle of the 12th Five-Year Plan, China’s high-speed growth has
moderated. According to the 14th Five-Year Plan, China’s per capita GDP will
reach the level of moderately developed countries by 2035, moving on from a
mid-income country to a high-income country. Assuming China’s annual
growth rate levels off to 4% in 2020–2035 and 2% in 2035–2050, its GDP will
reach 452.7 trillion yuan in 2050, equivalent to 90.5 trillion dollars (assuming
USD/CNY=5). For a projected population of 1.27 billion, per capita GDP will
reach 356,000 yuan, or 71,000 dollars.
9.1.1 Forecast of China’s economic structure
In 2020, added value of the service industry accounted for 54.5% of China’s
GDP, and the GDP contribution by consumption reached 54.7%. Reflecting
DOI: 10.4324/9781032663180-12
China’s urbanization (2020–2050) 181
Table 9.1 Growth and Structural Changes in 2020–2050: Baseline Scenario
2010 2018 2020 2035 2050
GDP growth rate 10.6 6.7 2.2 4.0* 2.0*

Urbanization (%) 50.0 61.5 63.9 72.4 81.6
Total GDP (at current price, trillion
41.2 91.9 101.4 270.2 452.7
yuan)
USD/CNY average exchange rate 6.6 6.3 6.9 5.5 5.0
Total GDP (at current price, trillion
6.3 13.1 14.7 49.1 90.5
USD)
Per capita GDP
At current price (Yuan) 30,808 65,534 71,828 197,515 356,457
At current price (USD) 4,666 10,402 10,410 35,912 71,291
GDP expenditure composition
Investment rate (total capital
47.0 44.0 42.9 31.2 23.7
formation)
Consumption rate (household
consumption and government 49.4 55.3 54.7 68.8 76.3
consumption)
Industrial structure
Primary industry (%) 9.3 7.0 7.7 5.0 3.0
Secondary industry (%) 46.5 39.7 37.8 32.0 27.0
Tertiary industry (%) 44.2 53.3 54.5 63.0 70.0
Source: Projection by DRC IME based on data from the National Bureau of Statistics and other
sources.
Note
* GDP growth in 2035 and 2050 will be affected by multiple factors. This is just a rough estimation
about the average annual growth rate in 2020–2035 and 2035–2050.
on industrial transformation in developed economies and considering China’s

current situation, it is estimated that by 2035 and 2050, consumption will ac-
count for 68.8% and 76.3% of national GDP, respectively (Table 9.1), marking
China’s growth more endogenous and consumption-driven.
History shows that, with economic growth and higher income, the indus-
trial structure of developed economies followed a common pattern in transfor-
mation. The share of added value of the primary and the secondary industries
in GDP gradually declined while that of the tertiary industry gradually rose to
a dominant position. In 2017, the share of the tertiary industry in the United
States, United Kingdom, and France all exceeded 70%, and that of the second-
ary industry dropped below 20%. In contrast, the manufacturing sector, espe-
cially advanced manufacturing, has maintained significance in Germany and
Japan. Their secondary sector has a remarkably higher share than other devel-
oped countries (Table 9.2).**
Between 2020 and 2050, China’s industrial structure will continue its adjust-
ment and transformation. While the tertiary sector expands and develops, the
secondary and primary sectors will continue to decline. A new industrial
Table 9.2 The Share of Added Value in Major Developed Countries (1997–2017): %
1997 2002 2007 2012 2017
United States
Agriculture 1.34 0.97 1.07 1.16 0.92
Industry 23.13 20.64 21.45 19.16 18.21
Service 71.81 74.88 73.9 76.15 77.37
Germany
Agriculture 1.03 0.9 0.78 0.85 0.83
Industry 28.58 26.38 27.24 27.28 27.44
Service 61.11 63.12 61.91 61.69 61.78
Japan
Agriculture 1.56 1.39 1.06 1.14 1.21
Industry 34.11 30.54 29.88 26.75 29.16
Service 64.2 68.06 69.09 71.59 68.98
United Kingdom
Agriculture 1.04 0.91 0.57 0.66 0.65
Industry 24.05 21.72 19.68 18.63 17.56
Service 65.29 67.35 69.79 70.08 70.93
France
Agriculture 2.34 2.01 1.61 1.63 1.55
Industry 21.53 20.65 19.14 17.87 17.21
Service 65.4 67.41 69.01 70.28 70.3
Source: WIND, original data from World Bank.
structure will gradually take shape, reliant mainly on the producer service indus-
try and with accelerated fusion of the primary, secondary and tertiary indus-
tries. Reflecting on the history of industrial transformation in developed
economies and considering China’s current situation, the baseline scenario pro-
jects that added value share of the tertiary industry will reach 63% and 70% of
national GDP in 2035 and 2050, respectively, up by 8 and 15 percentage points
compared to 2020. The share of the secondary industry will be 32% and 27%,
roughly 6 and 11 percentage points lower than in 2020. The share of the primary
sector will be 5% and 3%, a drop of 3 and 5 percentage points, respectively.
Considering potential fluctuation, uncertainties and risks in China’s future
growth, three scenarios (1%, 1.5% and 2.25%) are set for GDP growth in 2050,
with 1.5% as the baseline, and incremental capital output rate (ICOR, a meas-
ure of capital efficiency) as the main indicator for comparison. Scenario 1 is a
bear case: by 2050, China’s economy will grow at 1% (yoy) with capital effi-
ciency be equivalent to Japan’s current level (ICOR=24). Scenario2 is the base-
line case: by 2050, China’s economy will grow at 1.5% (yoy) with capital
efficiency equivalent to Germany’s current level (ICOR=16). Scenario 3 is a
bull case: by 2050, China’s economy will grow at 2.25% (yoy) with capital effi-
ciency equivalent to the current level of US(ICOR=10).
Table 9.3 shows the projected investment ratio, consumption ratio, net
export and industrial composition in the three scenarios. Overall, when invest-
ment ratio decreases slightly, lower ICOR and higher return on capital can
support a higher growth rate and a larger share of the tertiary industry.
Table 9.3 Forecast of Major Economic Indicators in 2050 in the Three Scenarios
Scenario 1 Baseline Scenario Scenario 3
GDP growth rate (%) 1 1.5 2.25

Incremental capital output rate (ICOR) 24 16 10
GDP spending structure
Investment ratio (total capital
formation) 24 24 22
Net export 1 0 −1
Consumption ratio (household
consumption and government
consumption) 75 76 79
Share of GDP, production approach
Primary industry 3 3 2
Secondary industry 30 27 23
Tertiary industry 67 70 75
Note: Incremental capital output rate (ICOR) = (Investment/GDP) ÷ GDP growth rate. It’s a main
indicator of capital efficiency or marginal return on capital.
Therefore, ICOR will be highly relevant to the size and structure of GDP,
hence a valid metric of the quality of economic and social development.
9.1.2 Forecast of China’s population and demographic structure
The total population is expected to decline from about 14.1 billion to 1.368 bil-
lion in 2020–2035, and further down to 1.27 billion in 2050, according to forecast
of different institutions. Urbanization rate will reach 72.4% in 2035 and 81.6% in
2050, with 990 million and 1.036 billion urban population, respectively.
With rapid increase of urban population, family size becomes smaller. Av-
erage urban family size decreased from 3.2 persons in 1998 to 2.85 in 2010, 2.84
in 2015 and 2.62 in 2020 (Figure 9.1). In the medium to long term, average
family size will continue to shrink due to decrease in childbearing age popula-
tion, less desire for parenthood, and continuous ageing. On average, urban
family size will fall to about 2.5 in 2035, and further to about 2.3 in 2050.
Chinese will age faster in 2020–2050. The trend has picked up since 2003. In
2020, over 18.7% of the total population was over 60. The total number and
proportion of elderly population will continue to shoot up. The share of peo-
ple over 60 years of age is expected to rise to 28.3% in 2035, and 36.6% in 2050.
Accordingly, dependency ratio will grow from 40% in 2020 to 50% in 2035 (an
annual increase of 0.67 percentage point), and 65% in 2050 (an annual increase
of 1 percentage point) (Table 9.4).
9.2 Significant gain in quality and efficiency of urbanization

In the stage of high-quality development, in spite of moderation of growth
rate, fundamentals of China’s economy remain unchanged. Strong resilience,
great potential, abundant maneuverability, the massive domestic market and
3.5
3
2.5
2
1.5
1
0.5
0
1998 2000 2010 2015 2020 2035 2050
Average Urban Family Size
Figure 9.1 Average Urban Family Size.

Source: The Fifth, Sixth and Seventh National Census, data of 2015 from China Family Develop-
ment Report (2015) by NHFPC in 2016.
Table 9.4 Evolution in Demographics and Family Structure (2020–2050)
2010 2015 2017 2020 2035 Exp 2050 Exp
Population (million) 1,341 1,375 1,390 1,412 1,368 1,270

Share of people over 60 years 13.3 16.1 17.3 18.7 28.3 36.6
(%)
Dependency ratio (%) 34.1 36.5 37.4 40 50 65
Urbanization rate (%) 50 56.1 58.5 63.9 72.4 81.6
Urban population (million) 671 771 813 902 990 1,036
Average urban family size 2.85 2.84 2.8 2.62 2.5 2.3
(persons/family)
Urban household (million) 235 271 290 344 396 451
Note: Data include the 31 Provinces, Autonomous Regions, Municipalities and Servicemen on the
Mainland of China.
huge human capital provide favorable conditions for further urbanization. The
domestic market will be fully utilized to unlock its potential. Growing urbani-
zation means better jobs, higher income and high-quality public services for
migrants from rural areas, hence motivating and upgrading consumption. At
the same time, there will be constant demand for investment in urban infra-
structure, public service facilities and housing, adding to the momentum of
economic growth.
Unlike the initial period of reform and opening up, China’s urbanization is at
a new stage of industrial transformation and upgrading. It’s already a middle-
income country by GDP. According to international experience, middle-income
countries all have urbanization rate over 50% and high-income countries are all
above 70%. In 2035, China is expected to reach 72.4% in urbanization, and its
GDP per capita will reach 36,000 dollars. In accordance with the general devel-
opment pattern, the service industry will be the major powerhouse of urbaniza-
tion. Focus of urban development will pivot from speed and scale to quality,
significantly improving the quality and efficiency of urbanization.
9.2.1 New engines of urbanization

After rapid urbanization and industrialization for four decades since the re-
form and opening up, structural tensions are more prominent, such as ill-
planned urban sprawl, low efficiency in land use and absence of sustainable
growth engine. In 2000–2018, China’s urban built-up area expanded by 1.6
times and urban constructed area increased by 1.5 times, while urban popula-
tion only grew by 80%. During the 14th Five-Year Plan period, China’s urban-
ization will continue to grow rapidly. By 2050, China’s urbanization rate will
stabilize around 80%, creating more material wealth and, more importantly,
better harmonizing internal structures.
Future urbanization will be more effective, coordinated and optimized, fix-
ing urban-rural, regional and inter-city disparities, and facilitating industrial
transformation and upgrading for more balanced development. The new
round of technological revolution will enhance high-quality and efficient de-
velopment of Chinese cities. Those cities enjoying economy of scale and well-
established infrastructure can rely on technology, knowledge, talent, capital,
institution and other innovation factors to fuel development, and accelerate
the concentration of such elements in turn. At the same time, innovation-driven
growth will accelerate the transformation of industrial structure. Particularly
in difficult times, urban industries can rely on the massive consumer market to
become more knowledge-intensive and technology-intensive. This transfor-
mation will revitalize the regional economy, incubate new systems, enterprises
and products, and constantly improve the competitiveness of cities.
9.2.2 Profound changes in industrial structure and employment mix
Potential is huge to upgrade industries and develop the service sector in the
next phase of urbanization. In 2020, China’s service industry accounted for
only 54.5% of GDP by added value and nearly 50% of employment, far below
the average of 74% and 75% in developed countries. Upgrading of traditional
industries and development of emerging industries require the concentration
of innovation factors and the dissemination of knowledge to continuously im-
prove the quality of urbanization. The service industry will create most jobs in
the future. As China continues to urbanize, greater population agglomeration,
new lifestyles, and higher living standard will underpin the demand for con-
sumer services. Optimal allocation of factors of production, closer ties be-
tween the three industries and refined division of labor will generate more
demand for producer services. In addition, with technological advances

and deeper mechanization in agriculture, as well as changes in production or-
ganization and operating modes, agricultural productivity will continue to rise,
providing sufficient labor force for urban sectors.
Anchored on digital and intelligent technologies, the new round of techno-
logical revolution will trigger profound changes in urban industrial structure
and employment mix. Growing appetite for talent in information processing,
R&D, design, and management will create a large number of office and labo-
ratory jobs, concentrating employment in R&D, design and management.
China’s leading digital technology companies, such as Alibaba and Tencent,
are housed in office buildings in major cities. Even for manufacturers like
Huawei, most employees work in R&D, design, finance, human resources and
marketing departments, rather than at assembly lines. Among Huawei’s 180,000
employees, 80,000 are dedicated to R&D.
9.2.3 Faster transition to green and low-carbon urbanization
As leading energy consumer and carbon emitter, cities are accountable for en-
ergy saving, emission reduction and green development. Moreover, green de-
velopment will be a strategic priority for China’s future urbanization. In his
speech at the Climate Ambition Summit on December 12, 2020, President Xi
Jinping stated that China would work hard to reach carbon peak by 2030 and
achieve carbon neutrality by 2060. By 2030, China will lower carbon intensity
of GDP by over 65 percent from the 2005 level, increase the share of non-fossil
fuel energy in primary energy consumption to around 25 percent, increase the
forest stock by 6 billion cubic meters over the 2005 baseline, and bring the total
installed capacity of wind and solar power to 1.2 billion kilowatts.
It is predicted that, in addition to traditional hydropower, China will make
far better use of clean energy by 2049, including wind, solar, nuclear, hydrogen
and biomass energy. Large-scale wind/solar/thermal integrated power plants,
pelagic wind farms, ultra-large wind turbines, high-parameter solar thermal
power plants, and large-scale industrialized biomass refinery systems will cut
the levelized cost of electricity (LCOE) of photovoltaic and wind power gener-
ation by 71% and 58%, respectively (Chen, 2018). The coal-centered energy
mix will be replaced by a new one based on renewables.
The energy revolution can promote the supply and consumption of low-
carbon energy in cities. Energy source will transition from coal to solar, hydro,
wind, nuke and other zero-carbon options. On the consumption side, share of
electricity will surge, and flexible consumption will be advocated to better
match the intermittent supply of renewable electricity. At the same time, roof-
top PV, distributed intelligent charging piles and power-heat-gas cogeneration
and coordination require fundamental changes in power transmission and dis-
tribution, configuration and control of urban energy systems, and how build-
ings consume energy.
9.3 A more scientific and rational urban development model

Metropolitan areas and city clusters will host major population agglomera-
tions. Meanwhile, rural-urban migration is gradually replaced by inter-city mi-
gration. The urban system with metropolitan areas and city clusters the
mainstay is improving constantly.
9.3.1 Optimal spatial layout
In 2020–2050, a new spatial pattern will gradually take shape, enabling coordi-
nated development of large, medium and small cities through the rise of city
clusters. In 2035, functional distribution within city clusters will be further op-
timized to create synergy. By 2050, the Yangtze River Delta, the Pearl River
Delta, and the Beijing-Tianjin-Hebei region are expected to host 30% of na-
tional population and over 60% of GDP. City clusters will also rise in central
and western regions, such as the Chengdu-Chongqing area, the Central Plains,
the middle reaches of the Yangtze River, and the Harbin-Changchun area,
thanks to their resources reserve and environmental bearing capacity. Their
rise will make economic and population distribution more balanced. It’s esti-
mated that by 2050, 19 city clusters will account for more than 80% of China’s
urban population and about 65% of urban construction land. The Beijing-
Tianjin-Hebei region, the Yangtze River Delta, the Pearl River Delta, the
Shandong Peninsula, the West Coast Economic Zone, and the Chengdu-
Chongqing area all report a growing share of the service industry in the local
economy and rising disposable income per capita, signifying collaborated de-
velopment within the clusters. Meanwhile, other city clusters in northwestern
and northeastern China, such as Harbin-Changchun, mid-southern Liaoning,
Lanzhou-Xining and Ningxia city clusters along the Yellow River will fall be-
hind in development with sluggish growth of the service industry and house-
hold income.
Advances in transportation technology have shortened the distance between
cities, lowered mobility costs and increased the capacity of transportation sys-
tems. This will intensify agglomeration effect in city clusters. Motivated by dif-
ferential rent, citizens are willing and able to travel longer distance and more
frequently. The distance between capital-Yangtze River Delta economic circle
and Yangtze River Delta-Pearl River Delta economic circle is mostly above
1,000km. With economy development, business travelers will have growing de-
mand for three-hour fast travel and one-day round trip. The new generation of
high-speed transportation system will provide large scale mobility services
with high capacity, speed and reliability and low cost, promising to expand the
2-hour travel range of cities from 500km to 800–1,000km. This will further
concentrate population in urban clusters, enlarge their footprint and reshape
regional cooperation and competition.
Growing application of autonomous vehicles is expected to significantly im-
prove road capacity, but it will also lead to more traffic flow. It remains unclear
whether traffic congestion will be eased. Self-driving vehicles will enable the
elderly, children and people with disabilities to enjoy private motorized mobil-
ity, conducive to social equity. Roland Berger, an international consulting firm,
believes that the “Automotive Industry 4.0 Era”, characterized by autonomous
driving, sharing and connectivity, will add 32 million “drivers” in the United
States. Optimists believe that self-driving vehicles will do more good than
harm. Despite the additional vehicle mileages, autonomous driving may help
meet or create new travel demand with the current transport facilities. How-
ever, whether the technology will mitigate congestion remains uncertain. It de-
pends on the strategy of demand management and the balance between newly
induced demand and the marginal benefits of autonomous driving.
Future development will give more priority to the quality of life and sus-
tainability. In this context, transportation should provide more support for
economic and population growth, free mobility, travel speed, safety, system
resilience and environmental sustainability. In other words, it should be safer,
faster, greener and more efficient. Next-generation IT, AI, energy technology
and materials science will be central to the new technological revolution. They
will revolutionize transportation tools, systems and services, making them
smarter, greener and more shareable. IT and AI technologies are making trans-
portation, infrastructure, system operation and management automatic, re-
sponsive and intelligent.
9.3.2 More sustainable urbanization
Technological advances in transportation, energy, and information bring forth

a historic opportunity for sustainable urban development. By 2050, China will
make better use of its urban space, further refine urban planning, and offer a
more habitable urban environment. Urban sprawl will be curtailed and develop-
ment funding will be less reliant on land transfer income. Future urbanization
will strike a balance between social, economic and ecological benefits, make
urban planning more future-ready and binding, adopt a reasonable and sus-
tainable intensity for development, and create urban space for harmony be-
tween human and the nature. Green production and green consumption will
prevail, raising the penetration of energy- and water-efficient products, recycla-
ble products and green buildings. A sustainable investment and financing model
for urban development will take root, with a focus on improving overall urban
competitiveness and meeting higher needs of the residents. The investment and
financing system will rely on market forces to attract private capital while tap-
ping policy fund via municipal bonds, local revenues and development financing.
9.3.3 Rise of world-class city clusters and metropolises
China’s urbanization will consummate in 2050. By then, the Yangtze River

Delta, the Pearl River Delta, the Beijing-Tianjin-Hebei region, the Chengdu-
Chongqing area and other major city clusters will adopt an open pattern of
urban development, joining the club of world-class city clusters. Megacities

like Beijing and Shanghai will be core of the city clusters. They will move to a
higher level of development. With upgrade city functions, they will pivot local
industrial mix to high-end service and advanced manufacturing, better enabled
to allocate factors, anchor innovation, and spill over into neighboring areas. As
China opens wider to the world, these cities are also growing to be world-class
metropolises. Regional central cities in the Yangtze River Delta, the Pearl
River Delta, the Beijing-Tianjin-Hebei region, the Chengdu-Chongqing area
and the middle reaches of the Yangtze River are on track to a higher level of
development, growing to be innovation centers with strong capability of tech-
nology application and dissemination. Their new industrial structure will be
dominated by mid- and high-end manufacturing and producer services. An-
other category of cities has traditional advantages in agriculture. To build on
their resource endowment and development basis, they will develop specialized
and innovative industrial clusters for scale operation, so as to scale up cooper-
ation with central cities and beyond along the industrial chain and supply
chain. With growing concentration of industries and population, these advan-
tageous city clusters will be the engine for economic growth and high-quality
urbanization.
9.4 Marked enhancement in urban governance

Modern urban governance is typically characterized by inclusiveness and
openness. According to the evolution of international metropolises, the most
dynamic and innovative cities are often the most open and inclusive ones,
which are well adapted to the openness, mobility, complexity and heterogene-
ity of urban communities. As China unlocks its potential in urbanization, new
urban population will raise diversified service demands. To better meet the
needs of various urban residents, it’s essential to constantly adjust and restruc-
ture urban governance.
Modern urban governance will boost high-quality urbanization in China.
Optimal urban governance structure is increasingly the key to stabilizing urban
structure and harmonizing the needs of different interest groups. For example,
decentralized urban management at the community level enables citizens to be
more engaged in local affairs and autonomous activities, hence a stronger sense
of ownership. They will be better motivated to voluntarily construct, maintain
and protect the city as their homeland. Deep integration of the Internet, big
data, AI and other technical means can significantly improve China’s urban
governance and management, as well as the efficiency of public services. Smart,
accessible and resident-friendly governance and public services will provide
remedy for “urban diseases”.
Thanks to the new round of technological revolution, spatial barriers will
be broken down by developed logistics and transportation system. As resources
and factors can flow freely from one city to another, urban development will no
longer be confined to local endowment. Multiple cultures coexist and interact
with traditions, giving urban life a note of diversity. Inter-city opening no

longer suffices to meet the aspiration for open and inclusive development. With
advanced international cities as benchmark, Chinese cities will align to interna-
tional standards. Fairness and sharing are the ultimate goals of high-quality
development, which is measured by people’s access to welfare benefits and de-
velopment opportunities, and how equally they participate in the economic
construction. China’s urban governance will be more people-centered. Social
security, education, healthcare, and infrastructure will be improved continu-
ously to modernize governance capability and system.
9.5 Summary
China, currently a middle-income economy, will become a high-income country
during 2020–2050. With the moderation of economic growth, its economic and
demographic structure will experience major changes, resulting in higher qual-
ity of development. Its endogenous growth model, which is service-centered
and innovation-driven, will become more entrenched and mature. With fast
ageing of the population, family size will become smaller. This chapter gives
projections for China’s investment ratio, consumption ratio, net export, and in-
dustrial composition in 2050 under three scenarios. The incremental capital-
output rate (ICOR, a measure of the productivity of capital) in China during
2020–2050 will be an important variable for the structural transformation of
the economy. As investment ratio declines, higher ROI will boost economic
growth and increase the share of the tertiary industry.
Impact of the new round of technological revolution on China’s urbaniza-
tion is evident. This, on the one hand, gives rise to new engine of urbanization,
optimizes urban industrial and employment structure, and promotes green and
low-carbon transformation. On the other hand, it will nourish an urbanization
model that coordinates cities of different sizes to enhance urban governance.
Fueled by the new technological revolution, China’s urbanization will gain
more quality and efficiency in 2020–2050, engendering science-based develop-
ment models, building up governance capability, and giving rise to world-class
city clusters and metropolises.
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China Power Enterprise Management, 19, 90–91, 2018.
10 Strategic path and policies for China’s
high-quality urbanization in the new era
By seizing the dual opportunity from the new technological revolution and
China’s economic and social transformation and upgrading, technology, fac-
tors of production, industries and institutions will be coordinated as an inte-
grated engine for high-quality urbanization. The massive domestic market will
be fully utilized to accelerate the research and development and application of
new technologies, generate a strong spillover effect, and move the manufactur-
ing industry up the value chain through transformation. More rapid develop-
ment of the service industry, mainly driven by producer and consumer services,
will fully empower innovation and development. At the same time, the innova-
tion-oriented institutional reform will be deepened to lift the opening up of
cities to the next level, and remove institutional barriers to urban–rural, in-
ter-city and inter-regional free flow of population, capital, data and other fac-
tors of production. These efforts will further modernize urban governance,
effectively address income disparity and other challenges, and accelerate the
formation of a new pattern of high-quality urbanization mainly typified by
city clusters.
10.1 Enhancing the innovation capacity of cities

In the face of major and rapid technological and industrial shifts, innovation-
and future-oriented development strategy is key to long-term competitive ad-
vantages of Chinese cities. Considering that metropolises, especially mega-cities,
are usually more competitive in innovation, it is imperative to turn large cities
to innovation centers with world-class competitiveness. Through the dissemi-
nation of innovative knowledge and the extension of innovative industries to
the upstream and downstream of industrial and supply chains, innovation po-
tential of small and medium-sized cities around large ones will be unleashed.
10.1.1 Strengthening strategic technological competence of cities and building up

international hubs of scientific innovation
Taking large cities as cornerstone for the development and optimal layout of
R&D institutions, optimize resource allocation and sharing among research
DOI: 10.4324/9781032663180-13
institutes, universities and enterprises, strengthen basic research, prioritize in-

digenous innovation, promote interdisciplinary integration, and improve the
supply system of common basic technologies. Promoting forward-looking and
strategic projects in frontier areas such as AI, quantum information, integrated
circuits, life science & health care, brain science, biological breeding, aerospace
technology, deep earth and deep sea science, etc. Supporting Beijing, Shanghai
and Guangdong-Hong Kong-Macao Greater Bay Area to build state-level
comprehensive science centers and regional innovation centers, turning them
into international hub for scientific and technological innovation.
10.1.2 Scaling up collaborative innovation along the industrial chain, improving

cooperation between the corporate, academic and educational sectors, and
seeking breakthroughs in key technologies
Relying the huge market and talent reserve to build new platforms for techno-
logical cooperation and encourage innovation in business model. Helping
large cities with scientific and technological competence to focus on frontiers
such as AI, quantum information, integrated circuit, life science & health
care, brain science, biological breeding, aerospace science and deep-earth and
deep-sea science to implement state-level future-ready projects with strategic
importance.
10.1.3 Exercising strict intellectual property protection, enabling intellectual

property court to play its role, and implementing a punitive damages system
Improving financial support for innovation and promoting industrialization

and large-scale application of new technologies. Enhancing intellectual prop-
erty protection for effective transfer and commercialization of scientific and
technological achievements.
10.1.4 Improving incentive policies for the commercialization of innovation outcomes
Improve mechanisms to incentivize and secure innovation, building a benefit

sharing system that adequately recognizes the value of knowledge and technol-
ogy and other innovation factors, improving mechanisms to safeguard intellec-
tual property rights and benefits for scientists and researchers, and constantly
increasing their share of benefit from commercialization.
10.1.5 Improving incentive mechanisms for innovation to fully motivate innovators
Deepening the reform of talent development system to cultivate, recruit and

make best use of talents in an all-round way, nurturing more world-class cham-
pions and innovation teams, and building a reserve of young talents with inter-
national competitiveness. Establishing an evaluation system of technological
talents based on their innovation competence, quality, effectiveness and contri-
bution, improving the innovation incentive and assurance mechanisms, building
Strategic path and policies for China’s high-quality urbanization 193
a benefit distribution mechanism that recognizes the value of knowledge, tech-

nology and other innovation factors, and improving the benefit sharing mecha-
nism for service inventions. Cultivating people talented for innovation,
application and high-end skills, implementing special program to update knowl-
edge and hoe skills, and expanding the reserve of high-caliber engineers and
skilled talents. Giving support to leading research universities and prioritizing
talent development for basic research. Adopting a more open human capital
policy to recruit outstanding talents from home and abroad.
10.2 Strengthening industrial support for urbanization

As the powerhouse of high-quality urbanization, the new round of techno-
logical revolution will profoundly change and upgrade urban industrial struc-
ture. It is necessary, therefore, to seize the historical opportunity, improve the
innovation capacity of cities, upgrade traditional manufacturing industries,
incubate a large number of high-tech, knowledge-intensive emerging indus-
tries, especially modern service industries, and renew the momentum of
urbanization.
10.2.1 Accelerating the development of strategic emerging industries
Expediting the development of the new generation of information technology,

biotechnology, new energy, new materials, high-end equipment, new energy ve-
hicles, green and environmental technologies, aerospace industry and marine
equipment industry, etc. Advancing integration of the Internet, big data, and
AI in various industries, galvanizing advanced manufacturing clusters, promot-
ing strategic emerging industries as growth engines that have unique character-
istics and supplement each other to constitute a reasonable industrial structure,
and nourishing new technologies, products, business models and business for-
mats. Ensuring the healthy development of platform economy and sharing
economy. Encouraging M&A and reorganization to prevent low-efficient re-
dundant construction.
10.2.2 Focusing on intelligent manufacturing to empower the integrated development

of information technology and the manufacturing industry
Harnessing the new round of technological revolution and the industrial trans-
formation, promoting the application of information technology in manufac-
turing, such as AI, 5G and industrial Internet, and realizing digitalized,
network-based and intelligent development of the manufacturing industry by
recalibrating the whole industrial chain. Opening up manufacturing capability
as a platform, leveraging on industrial Internet to share manufacturing re-
sources and production capacity online and optimize allocation, and facilitat-
ing the development of platform economy, sharing economy and other new
business formats.
10.2.3 Transforming traditional industries with technological innovation
Unleashing potential of traditional industries with green and intelligent up-

grading, including propagation and application of new technologies, processes,
materials, equipment, and business models. Deepening integration of ICT with
industrialization and gearing up innovation capability of traditional indus-
tries. Substituting robots for human in in labor-intensive industries, accelerat-
ing technical reengineering and renewing equipment to increase productivity.
10.2.4 Driving the development of the service industry with the dual engine of
producer services and consumer services
Energizing producer and consumer services to create more job opportunities.

Upgrading manufacturing industries and meeting the aspiration for a better
life. Prioritizing producer services including R&D and design, third-party
logistics, financial leasing, information technology services, energy conserva-
tion and environmental protection services, e-commerce, legal services and ser-
vice outsourcing, professionalizing producer services and moving them up the
value chain, enabling market players to participate in service supply, facilitat-
ing deep integration between modern service industry, advanced manufactur-
ing and modern agriculture, and accelerating digitalization of the service
industry. Upgrading the consumer service sector to provide diversified and pre-
mium services, accelerating the development of services related to people’s
daily life, including culture, tourism, education, entertainment, sports, medical
care, health care, elderly nursery, child care, house-keeping and property man-
agement, increasing the supply of welfare and essential services, promoting
standardization and branding of the service industry, and meeting growing
need of urban residents for developmental and recreational consumption. To
this end, it is necessary to expand market access in the service sector, open it up
for international investment and operation, create a level playing field, and
provide a broader space for the development of the service sector.
10.2.5 Pacing up digital development
Developing the digital economy, promoting digital industrialization and indus-

trial digitalization, deeply integrating the digital economy and the real econ-
omy, and building digital industrial clusters with international competitiveness.
Highlighting the construction of digital society and digital government to
make public services and social governance more digitalized and intelligent.
Setting up basic systems and standards for the property right, transaction and
circulation, cross-border transmission and security protection of data re-
sources. Expanding access to basic public information and data in an orderly
manner through the construction of a unified open platform for national data
sharing. Taking measures to ensure national data security and better protecting
personal information. Improving digital literacy of the population, realizing
full coverage of information service, and actively participating in the formula-
tion of international rules and standards in the digital field.
10.3 Improving the spatial structure of urbanization with city Cluster

as the main form
Efficiency and vitality of urbanization hinge on proper flow and efficient con-
centration of various factors, as well as a development model with city clusters
as the main form. To this end, systematic planning and concerted promotion
are needed to set the course of development, enhance bearing capacity of de-
veloped areas and improve the spatial layout of urbanization.
10.3.1 Promoting urban planning as the guide
Scoping urban development boundary and demarcating urban space accord-

ing to local resources and environmental bearing capacity, setting limit for de-
velopment intensity, and reserving buffer for future optimization of layout and
functionality. Defining the cells for spatial governance, and demarcating eco-
logical area, agricultural area, urban area, ecological conservation red lines,
permanent prime farmland and urban development boundaries at the county
level. Coordinating institutional mechanisms and infrastructure construction,
leveraging on railway construction to optimize the layout of major infrastruc-
ture, especially emerging infrastructure, leading innovation platforms, educa-
tion and medical facilities, key industries with strong externality, and other
major production facilities and public resources. Further optimizing the allo-
cation of public resources, and facilitating proper flow and efficient concentra-
tion of factors of production, so as to ensure equal and universal access to
basic public services and infrastructure, and reduce disparity in living standard.
10.3.2 Enlarging development space for competitive urban areas
Measuring competitive strengths of central cities and city clusters to steadily

expand their economic and population bearing capacity and enhance their in-
novation and development, turning them into leading driver of urbanization.
On one hand, giving support to key city clusters and central cities to sharpen
their international competitive edge, improve innovation capability, move up
the global industrial chain, and create world-class innovation platforms and
growth powerhouses. On the other hand, helping less developed cities fill gaps,
attract and host industries relocated from key city clusters and central cities,
and gradually join the global division of labor to gain development space. Op-
timizing economic layout to orchestrate regional development.
10.3.3 Forming a strategic spatial pattern for urbanization comprising “two

horizontal axes and three vertical axes”
The two horizontal axes are the Land Bridge Corridor in the north and the
Yangtze River Corridor. The three verticals are the Coastal Corridor, the Har-
bin-Beijing-Guangzhou Railway Corridor, and the Baotou-Kunming Railway
Corridor. The strategic spatial pattern will be anchored on urbanized areas
prioritized by the state for development, with important contribution from
other urbanized areas along the horizontal and vertical axes. Further develop-
ing the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-
Hebei Region, or even the whole Bohai Economic Rim. Forming large and
regional city clusters in the Harbin-Changchun area, the Jianghuai Region, the
Central Plains, the middle reaches of the Yangtze River, the Beibu Gulf, the
Chengdu-Chongqing area and the Guanzhong-Tianshui Economic Zone, etc.
10.3.4 Improving the urban and rural land system for efficient land use
Allocating land resources flexibly and setting up land reserve for future indus-
trial upgrading, and adapting to diversified and uncertain industrial formats
amid the new round of technological transformation. Complying with space
planning and land purpose control, promoting reasonable repurposing of land
and tentatively increasing the supply of mixed-purpose land. Actively exploring
the system to market rural collectively-owned commercial land, accelerating the
establishment of an integrated market for urban and rural construction land,
unifying the rules and platforms for trading, and improving the system to set and
publish benchmark land price and price of designated land lots according to
market price. Piloting trans-regional trading of land quota to verify a national
system for land quota trading. Increasing land quota for leading cities or those
with substantial potential, mainly for the development of innovative industries.
10.4 Accelerating the formation of world-class city clusters and metropolises

Development of world-class city clusters and metropolises is a strategic task for
China’s urbanization. They will become the most important platform to partic-
ipate in international competition and cooperation. International metropolises
such as New York, London and Tokyo have set strategic goals for their devel-
opment. New York, for example, has devised a strategic plan to build “a strong
and fair city”. London bears the ambition to be “a top global city” and Tokyo
aspires to build “a world-class metropolis”. China’s five major city clusters, in-
cluding the Yangtze River Delta, the Greater Bay Area, the Beijing-Tianjin-He-
bei Region, the Chengdu-Chongqing area, and the middle reaches of Yangtze
River, are eligible to become world-class city clusters. Major cities such as
Shanghai, Beijing, Shenzhen, Guangzhou, Chongqing, Hangzhou, Chengdu,
and Wuhan have the potential and strengths to become metropolises.
10.4.1 Enhancing the capability to aggregate global innovation resources and

commercialize innovation outcomes
As experience of major metropolises shows, innovation resources usually con-

centrate in large cities, thanks to their favorable environment for innovation
and abundant knowledge-intensive industries and education resources. Global
leaders of information technology and life sciences are also increasingly clus-
tered in a few regions and cities. After long-term development, large Chinese
cities such as Shanghai, Shenzhen, Beijing and Hangzhou have acquired the
condition to gather high-end innovation factors worldwide and breed world-
class centers. First, incubating small and medium-sized technology companies.
Germany is home to more than a thousand hidden champion companies in
niche sectors, while over 90% of small and micro enterprises in Tokyo are tech-
nology companies. To benchmark global standard, a favorable policy environ-
ment should be provided for innovation-oriented small and medium-sized
enterprises (SMEs), and synergy created between large and small enterprises in
innovation and commercialization. Second, encouraging open, integrated,
trans-disciplinary and trans-sector innovation. Such innovation is a defining
feature of the new round of technological revolution. China has the world’s
most comprehensive industrial system and strong industrial supporting capa-
bility. New technologies such as industrial Internet help the system to maxi-
mize the effect of convergence and innovation. There are numerous industries
distributed within major city clusters, closely connected along the industrial
chain. Breakthroughs in a single industry or even a single product and technol-
ogy may rapidly spill over into upstream and downstream industries. There-
fore, city clusters should empower open and integrated innovation to seek
breakthrough of choke point technologies and develop common technologies
that underpin multiple industries. Third, encouraging joint and collaborative
innovation across regions. In major innovative city clusters in the United
States, Japan and the United Kingdom, core cities and their periphery consti-
tute regional innovation belts. China’s five major city clusters should learn
from international practice. Innovation capability should be concentrated and
distributed at the regional level rather than the city level. Regional innovation
belts can be set up to promote joint innovation, where neighboring cities can
contribute their strengths and resources, supplement each other in innovation,
and collectively gain global influence.
10.4.2 Cultivating future industries and developing an industrial structure that

matches the profile of world-class city clusters and metropolises
World-class city clusters and metropolises bear the greatest potential to engen-
der new global industries, products and business models.
First, taking preemptive measures to develop frontier industries such as bi-
otech, recyclable technologies, intelligent manufacturing, and big data infor-
mation platforms. The five major city clusters and central cities should guide
and develop these industries according to their local advantages. Second, en-
hancing competitiveness of the industrial ecosystem. International industrial
competition is evolving from company and product level to ecosystem level.
China has an obvious edge in this regard, and can expand industrial chains in
and among city clusters, so as to form a flat and platform-shaped system for
the division of labor. Third, prioritizing the development of modern service
industry. The service sector contributes to 70% of GDP and employment in in
metropolises. In the service sector, modern urban services have the most
prominent role to play. Therefore, major city clusters and central cities will
adopt an industrial pattern for integrated development of primary, secondary
and tertiary industries, with a special focus on service-oriented economy. It will
promote the development of modern services such as innovation, finance, edu-
cation and health care.
10.4.3 Removing the barrier between administrative divisions and augmenting

synergy between central and peripheral cities
The urban area, population size, and provision of infrastructure and public
services of each Chinese city is determined based on administrative division. In
order to enhance comprehensive competitiveness and promote further integra-
tion, a series of measures have been carried out in major city clusters such as
the Yangtze River Delta, the Greater Bay Area, the Beijing-Tianjin-Hebei Re-
gion, and the Chengdu-Chongqing Area on infrastructure, industrial layout,
public services, urban planning, land use, etc. However, in general, their com-
petitiveness is still severely limited by administrative division. First, accelerat-
ing the formulation of a unified plan for land use, urban and industrial
development for city clusters. To make that happen, planning and implementa-
tion should escalate to the city-cluster level, so that economically dynamic
large cities can receive a larger quota of new land for construction and devel-
opment. Comprehensive consideration of infrastructure investment will help
to connect dead-end roads and pave the last mile for urban mobility. Second,
offering residents of city clusters equal access to basic public services as soon
as possible. Basic public services, social security, and social governance in city
clusters will be further integrated to provide better and equitable services ac-
cording to the principle of joint contribution and shared benefits. Public ser-
vice resources will be allocated according to the size of permanent population
instead of administrative level. This will promote the sharing of high quality
resources, such as education and health care. Third, establishing a unified and
open market system. Measures will be taken to cope with regional fragmenta-
tion, industrial monopoly and market barriers, revoke regulations and prac-
tices detrimental to the development of a unified market and fair competition,
and create a cluster-wide market environment with open and uniform rules,
commonly acknowledged standards, and free flow of factors of production.
Major city clusters should take the lead in mutual recognition of the accumu-
lated years of residence and social security contribution as a prerequisite to
grant local Hukou. They should also remove the urban–rural Hukou barrier to
facilitate orderly flow and reasonable distribution of the population for social
integration.
10.5 Improving the quality of urban development

The new round of technological revolution provides an important opportunity
to improve the quality of urban development. New technologies should be
widely applied in new infrastructure construction, urban renewal, and urban

transformation and upgrading. With growing competitiveness of cities and
more people enjoying a safe, healthy and high-quality urban life, the quality of
urbanization will be significantly improved.
10.5.1 Devising a systematic layout and speeding up the construction of

new infrastructure
Following the guidance of technological innovation and leveraging on the in-
formation network to harness the new round of technological revolution,
speed up the construction of new infrastructure such as 5G network, big data
centers, AI and industrial Internet, new energy loading and storage facilities,
and smart energy systems, and provide support for digital transformation,
smart upgrading, green development, and integrated innovation of cities.
10.5.2 Speeding up the enhancement of modern urban transport system
Focusing on large cities as hubs and key nodes to improve comprehensive

transport corridors, multimodal transport hubs and logistic networks, acceler-
ate the building of rail transit network in city clusters and metropolitan areas,
and enhance intra-city-cluster, inter-city-cluster and urban–rural connectivity.
Providing support for high-quality urban development led by large city clusters.
10.5.3 Filling gap in urban infrastructure
Prioritizing efforts to fix weaknesses in public works, public safety, ecological

protection, public health, reserve of emergency supply, disaster prevention and
mitigation, people’s livelihood, neighborhood service, and new energy charg-
ing piles. Conducting hardware upgrading and intelligent transformation for
gas, electricity, water supply and other public services to ensure safe and
healthy functioning of cities.
10.5.4 Accelerating urban renewal
Speeding up urban renewal and renovation of old residential areas to ensure

structural safety, strengthen basic functions, preserve historical heritage and
improve the living environment. Promoting organic renewal of cities and im-
proving people’s living conditions, living environment and quality of life in
multiple dimensions, so as to raise their well-being and sense of gain. Formu-
lating laws, regulations, rules on implementation and supporting policies on
urban renewal and renovation of old residential areas to clarify criteria and
targets, improve the model of renovation, create new mechanisms for invest-
ment and financing, and strengthen the coordination of financial, fiscal, land,
and urban planning policies. Repurposing underused industrial land, non-
residential land, open space and wasteland in and around old residential areas
for high efficient development. Revising the procedure on repurposing land use
to encourage wholesale land transfer and moderately lifting floor area ratio in
development plan. Centralizing project plan, design, renovation and operation
to maintain financial viability.
10.5.5 Galvanizing the transformation of urban development

Harnessing technological advances in information, energy and materials, and
making full use of new technologies, products, processes and materials that are
information-based, intelligent, green and energy-efficient, so as to further pro-
mote green building, precision design and precision construction. Adopting
new methods to construct based on building information model and building
standards, promoting prefab and assembled construction, advancing pub-
lic-private cooperation in housing fabrication, and embedding ICT application
in construction and management. For better quality of residential properties,
investing more in scientific research, establishing platforms for technological
innovation, facilitating the integration and application of new technologies
and materials in construction, identifying lighthouse R&D centers, production
bases and projects, and improving supporting facilities of large residential
projects.
10.6 Fully utilizing new technologies to improve urban governance

As comparative study indicates, strong governance capability of the govern-
ment, fair economic distribution, a large share of middle-income population,
and a sound social security system provide the basis for political and social
stability. China’s urbanization rate is increasing from 60% to 80%. At this crit-
ical juncture, it is urgent to enhance urban governance capability, better re-
spond to rising demand and conflict of interest, improve residents’ sense of
ownership, and make cities more inclusive.
10.6.1 Steadily advancing smart cities
Smart cities are characterized by the use of IOT, cloud computing, big data,
spatial geographic information integration and other new information technol-
ogies. As a new concept and model to promote urban planning, construction
and management, it is an integrated platform for the application and demon-
stration new technologies. First, building smart government by integrating and
sharing government information systems. Promoting the model of “Internet
plus government services”, prioritizing targeted governance, and guiding all
regions to upgrade urban governance with the new generation of information
technology including big data and IoT. Advocating a data-based new model of
urban management to deliver precision management, people-friendly services
and better governance. Second, integrating AI, block chain, cloud computing
and big data to strengthen government capability of social governance and
public services. Facilitating intelligent transformation and coordinating the

operation and management of public infrastructure such as electricity, gas,
transportation, water and logistics. Putting an inclusive public service system
into operation. Third, using information intelligence to establish a system that
integrates multi-dimensional data for city-wide management round the clock.
Establishing a traceable market supervision and service system in fields of food
and drug, consumer product safety, inspection and quarantine. Developing an
intelligent analysis system for environmental information, an early warning
and emergency response system and a public service system for environmental
quality management, and implementing intelligent remote monitoring.
10.6.2 Building inclusive cities with precise provision of urban services
Due to difference in earnings, education and occupations, urban groups in

large and medium-sized cities, especially mega-cities, will raise diversified de-
mands or have conflict of interest, posing a great challenge to urban social
governance. To this end, a comprehensive approach should be taken. First,
providing precise urban services. In addition to public facilities and services to
meet basic needs for clothing, food and mobility, providing urban residents
with targeted public services in response to their needs for a higher level of
consumption and services, such as education, housing, and medical care. Sec-
ond, Treating families with and without Hukou equally and including both in
the integrated urban public service system. Equalizing public services with re-
forms of Hukou, education, medical service and other systems. Gradually ex-
tending the public housing program households without Hukou, and ensuring
proper shelter for employees of environmental sanitation, public transport and
other industries.
10.6.3 Decentralizing urban governance and resources to the community level
First clearly defining the power and responsibility of community (sub-district)

offices and grass-root autonomous organizations according to laws, scoping
the public affairs and services to be undertaken by grass-root autonomous or-
ganizations, strengthening their self-governance, and enabling them to better
participate in social governance. Second, motivating community-level govern-
ance institutions, and recruiting high-caliber and experienced social workers to
deliver adequate and professional services in the field. Third, scaling up gov-
ernment procurement of grass-root public services. Including social and rou-
tine services at the community level in government procurement, and ensuring
the procurement is sufficiently financed.
10.7 Deepening innovation-oriented institutional reform

China’s urbanization if catalyzed by its huge domestic market and institutional
dividends from the new round of reform. To ensure quality of urbanization, it
is necessary to remove barriers to the free flow of resources, implement innova-

tion-oriented institutional reforms, allow market forces to play a decisive role
in resources allocation, and lubricate the flow of factors of production and
channel them to advantageous areas, so as to improve the efficiency of re-
sources allocation and international competitiveness of major city clusters.
10.7.1 Deepening institutional reform of Hukou and land management, etc.

First, deepening reform of the Hukou system. Scrapping Hukou restrictions
in cities with population between 1 million and 3 million, fully relaxing
requirements on the eligibility to receive Hukou in cities with popula-
tion of 3 million to 5 million, and revoking Hukou restrictions on key
groups of population. Adjusting and improving point-based Hukou
granting policy in megacities by assigning more weight to the years of
social security contribution and residence. Making public services more
accessible to those with permanent residence status, equivalent to Hukou
holders.
Second, forming a nationwide unified, open and competitive market of com-
modities and factors. Setting up a national negative list for market access,
removing discriminatory restrictions on market access and barriers
against non-local enterprises, products and services, breaking down ad-
ministrative monopoly, and eliminating local protectionism. Promoting
regional market integration, establishing and improving mechanisms for
regional market integration, regional cooperation and benefit sharing,
and guiding the free flow of goods and services across regions. Imple-
menting systems of competition oversight to identify and eliminate un-
fair competition on a regular basis, preventing abuse of administrative
power that excludes or restricts competition, and safeguard fair competi-
tion in the market.
Third, centralizing the pension insurance system for nationwide coordination.
Implementing unified national administration of pension insurance to
better allocate assets, identify new destinations of investment, and mate-
rialize multiple benefits from the social safety net and market forces.
Building on provincial-level coordination conducted in 2020 to set up a
national administration system, which will harmonize standards and
practices, enable regions to supplement each other, and keep the whole
system viable. Making good use of surplus in developed areas via the
central transfer system to help deficit-ridden areas and pay basic benefits
in time and in full amount.
Fourth, reforming the land management system. Allocating more construc-
tion land resources to central cities and key city clusters. Allowing pro-
vincial governments to coordinate and allocate quota of urban and rural
construction land, subject to national space planning and confirmation
of rural land rights. Linking the quota of construction land to the num-
ber of new migrants that settle down in megacities and large cities so as
to motivate them to grant Hukou to rural migrants. Deepening reform of

land transfer system and land use model and gradually converting collec-
tively-owned commercial land to residential development, so as to in-
crease land supply for housing in large and medium-sized cities.
Encouraging redevelopment of underused and idle urban land to en-
hance the efficiency of land use.
10.7.2 Speeding up the development of open cities
China’s experience shows that opening up is essential to the rise of cities. China
has developed a new pattern of all-round, multi-level and wide-range opening
up to the world, a leading contributor to its high-quality urbanization. In the
next stage of development, it should adapt to the new round of technological
revolution and intensified competition among city clusters worldwide, follow
advanced international rules and standards, focus on institutional opening up,
create a favorable environment for the development of open-up cities, and bet-
ter compete with cities around the world.
First, gradually designating more cities to host free trade zones and industrial
parks. Free trade zones and industrial parks enjoy the frontier of open-
ing up in China, essential to the global competitiveness of their host cit-
ies. Drawing on the experience of free trade zones in Shanghai, Tianjin,
Fujian and Guangdong, more pilot policies and reform measures will be
implemented in new free trade zones and industrial parks. Proven experi-
ence and practices from their pilot operation will be replicated in other
cities according to national strategy, so as to lift opening up of Chinese
cities to the next level.
Second, fully implementing pre-establishment national treatment with a nega-
tive list. Streamlining administrative procedures that govern foreign in-
vestment projects and the incorporation and alteration of foreign-fund
enterprises, so as to shift focus to supervision during and post establish-
ment. Improving market access system for foreign investment and the
management system for pre-establishment national treatment plus a neg-
ative list. In accordance with risk assessment and terms of the U.S-China
Economic and Trade Agreement (Phase One), gradually easing restric-
tion on foreign investment in key service sectors, and providing fair, rea-
sonable and non-discriminatory market access treatment in areas such as
banking, securities, insurance and electronic payment.
Third, encouraging urban industries to go global and improving the perfor-
mance and efficiency of outbound investment. Scaling up trade in service
with facilitation and liberalization. Transforming urban service industry
and fostering new competitive advantages with big data, cloud comput-
ing, IoT, mobile Internet and other emerging technologies. Simplifying
the management of overseas investment by adopting a notification-based
mechanism, except for prescribed special circumstances. Encouraging
cities to invest overseas by leveraging on their own industrial strengths,

facilitating high-speed railway, nuclear power and other advantageous
sectors to take the lead, and supporting domestic investors to build and
manage cooperative industrial parks offshore.
10.7.3 Proactively responding to challenges arising from urbanization

In transforming and upgrading the industrial structure of Chinese cities, the
new round of technological revolution destroys jobs and creates new ones at
the same time. Income disparities continue to widen between cities, regions,
industries and groups. China’s future urbanization need cope with income gap,
digital divide and other challenges.
First, growing middle-income population. According to the criteria of the

World Bank, about 400 million Chinese are categorized as middle in-
come. In the future, free flow of labor among regions, industries, enter-
prises and between urban and rural areas, from the lower end to the
higher end of productivity spectrum, will increase individual and house-
hold income at the micro level and raise labor productivity at the macro
level. Deepening reform in relevant fields will remove institutional barri-
ers that block horizontal and vertical flow of laborers, so as to put in
place an olive-shaped distribution structure.
Second, strengthening the redistribution mechanism mainly through taxation,
social security, and transfer payment. Better regulating income with taxa-
tion, reforming personal income tax, improving the property tax system,
promoting structural tax reduction, and lowering tax burden on low- and
middle-income residents and small and micro enterprises. Improving the
taxation system for property ownership and transaction, gradually ex-
panding the pilot reform of property tax on housing, refining differenti-
ated tax policy for housing transactions, and strengthening administration
of stock house transactions. Steadily increasing social security benefits,
centralizing the administration of social security, and implementing a
unified national social security system.
Third, removing vested interest in monopoly sectors. To narrow inter-sector
gap, a major component of income disparity, accelerating mixed owner-
ship reform and practicing a new style of state-owned assets supervision
and administration that focuses on macro-management as a shareholder.
Addressing vested interest in monopoly sectors by eliminating all barri-
ers, explicit or hidden. Encouraging market competition in key industries
such as electricity, telecommunications, railroad, oil and gas, etc.
Fourth, pressing ahead with equal access to basic education, medical care and
other public services. Creating a favorable policy environment and public
service platform so that everyone will have the opportunity to realize their
potential through hard work, thus moving up the social ladder and block-
ing inter-generational transmission of poverty. Assigning a reasonable
proportion of central and local public finance to education, enabling stu-

dents to be schooled nearby, and ensuring equal access to basic education
resources at primary and secondary school level. Ensuring decent basic
education for children from financially challenged households, so as to
minimize negative effect of the economic status, occupation and social
status of their parents on their future success.
Fifth, guarding against growing digital divide in multiple dimensions. Constantly
upgrading urban and rural network infrastructure, further deploying and
upgrading fiber optic broadband, 4G/5G and other new communication
networks, and narrowing digital divide in central and western regions and
rural areas. Focusing on teenagers to prevent digital divide related to gen-
der, income and professions. Disseminating basic knowledge and informa-
tion technology as a policy priority in urbanization.
10.7.4 Engineering a modern regulatory model conducive to the expansion of the new

round of technological revolution
Driven by the new round of technological revolution, new industries, business

formats and models keep emerging, pushing the limits of incumbent regula-
tory and policy regime, and raising the need for a new system that is compati-
ble with the new context. International experience shows that a rigid regulatory
system threatens to suffocate new industries, business formats and models,
hence undermining the technological revolution and the commercialization of
its outcomes. Facing growing innovation amid the new round of technological
revolution, it’s advisable to be prudent in regulation while encouraging innova-
tion and facilitating competition. This regulatory principle will advance the
technological revolution, to the benefit of economic and social progress and
people’s livelihood.
First, formulating targeted regulatory policies on privacy protection in re-

sponse to technological development. With data sovereignty laws effective
in Europe and the United States, and the fallout of the Facebook data
scandal, the world has become more concerned about user data and pri-
vacy protection. China needs to move quickly to adopt international
practices in this new frontier. Application of AI in autonomous driving
and industrial robots has been controversial. As technologies mature,
laborers will be replaced by machines on a larger scale. How to assess
economic, social, ethical and moral changes brought about by intelligent
technologies and ease panic is a major challenge for the technological
revolution. It is also a critical topic that deserves international dialogue.
To ensure rule of law in the digital economy, laws and regulations on
personal information protection and cybersecurity will be enacted or up-
dated according to local conditions, so as to safeguard technological de-
velopment and fix potential challenges in urbanization.
Second, stepping up oversight of the platform economy and safeguarding fair

competition. With rapid development of the Internet, information tech-
nology and transportation modes, China is home to influential Internet
platforms such as Alibaba, Tencent, JD and Meituan. The platform
economy makes life easier for residents and improves the efficiency of
social operation. But operators can also use data, algorithms and other
technical means to reach monopoly agreement, coerce merchants into
exclusive cooperation, impose unfair terms and conditions on regulars,
and wage price wars to gain market share. Therefore, it is urgent to
strengthen regulation of the platform economy. Specifically, actions to
exclude or restrict competition will be prevented and eliminated, so as to
maintain an open and inclusive environment for fair competition. Mar-
ket access barriers will be lowered for more parties to participate in com-
petition while platform operators will be guided and motivated to invest
more resources in technology and business model innovation and quality
improvement. Protecting the legitimate interests of all parties on the plat-
form is a regulatory focus. With their legitimate interests safeguarded, all
parities on the platform, including operators and consumers, will equally
benefit from technological progress and economic development, and
contribute to the healthy development of the platform economy.
Third, updating regulatory philosophy and methods to accommodate new
business formats. Rise of new business models in information, energy,
and transportation sectors has drawn broad concern, raising new issues
regarding regulatory facilities, services, policies and standards provided
by the government. Ride-hailing service, for example, has blurred the
border between taxis and private cars. The traditional practice to admin-
ister the industry based on qualification review and licensing is anachro-
nistic in the “Internet +” era. It’s time to shift regulatory focus to the
operation process, including dynamic pricing mechanism and real-time
supply-demand algorithm of the operators.
10.8 Engineering indicators to assess the quality of China’s urbanization

China has made remarkable achievements in urbanization, but the overall
quality is not high and the focus has been put on short-term growth. In the
quest for high-quality development, China’s future urbanization is expected to
be innovative, coordinated, green, open and inclusive, which will be assessed
and guided by an indicator system on the quality of urbanization.
10.8.1 Indicator for innovative development
This indicator is divided into innovation input and innovation performance.

Innovation is a complex system that involves institutional and technical as-
pects. Considering difficulty in measuring innovation directly, the indicator is
based on innovation input and performance. The former is measured by the

number of R&D personnel per 10,000 people for talent input and the innova-
tion input index for capital input, while the latter is measured by the number of
invention patent filings per 10,000 people for invention output and contribu-
tion of scientific and technological progress for the underlying economic value.
Together, this indicator measures general innovation capability and potential.
10.8.2 Indicator for coordinated development
This indicator mainly shows of urban–rural and industrial structures. In terms

of urban–rural structure, urbanization rate, a traditional metric of urban de-
velopment, reflects the gap between urban and rural population, while urban–
rural per capita income ratio indicates the gap in material living standard
between urban and rural areas. In terms of industrial structure, it is necessary
to maintain coordination and shared progress between and within industries.
Therefore, the share of non-agricultural output and that of high-tech output
are selected to represent the transformation and upgrading of industrial struc-
ture. The manufacturing and service industries can fully unleash the market
potential in cities, including abundant labor force on the supply side and sub-
stantial consumer needs on the demand side. On the upper end of the value
chain, high-tech industries are essential to the long-term competitiveness of
cities and their position and influence in the global value chain.
10.8.3 Indicator for green development
From the perspective of resources and environment, this indicator measures

percentage of treated sewage, overall energy consumption per 10,000 yuan of
GDP, green coverage of built-up areas and percentage of days with good or
moderate air quality. The first two dimensions measure harmless treatment
and recycling of urban resources and the efficiency of resources consumption,
while the second two depict landscaping and ecological construction in cities
and its effectiveness.
10.8.4 Indicator for open development
For high-quality development, cities need go beyond national border to fully

mobilize international resources in the context of globalization. This indicator
is compiled in terms of dependence on trade, dependence on foreign invest-
ment, proportion of foreign population and the ability to earn foreign ex-
change from tourism. Foreign trade is measured mainly in terms of import and
export of goods and services and foreign investment, while international ex-
change is measured primarily based on people-to-people exchanges. This indi-
cator shows competitiveness in the global open environment and attitude to
and capability of opening up.
10.8.5 Indicator for inclusive development
The three secondary indicators of social security, education and medical care,
and infrastructure are compiled to provide an objective and comprehensive
assessment of social development of cities and the welfare of their residents.
Social security is measure by urban employment rate, and the share of urban
workers with basic pension insurance and medical insurance. Education and
medical care is measured by number of full-time teachers per 10,000 people,
number of students per 10,000 people and number of licensed physicians (as-
sistant physicians) per 10,000 people. Infrastructure is measured by number of
broadband Internet subscribers per 10,000 people and number of books held
in public libraries per 10,000 people. With high-quality development of cities,
people will be more aspired for a better life. Joint efforts are needed to address
unbalanced and insufficient development of cities (Table 10.1).
To eliminate incommensurability caused by the design and calculation of
the indicators, it is necessary to non-dimensionalize tier-3 indicators in meas-
urement. Since they are all positive single indicators (higher value suggests bet-
ter performance), equalization method is used to first calculate dimensionalized
value of each tier-3 indicator with the following equation:
x ip
y ip =
xp
yip is the demensionalized value of indicator i of city p; xip is the actual value of
the indicator i of city p; x p is the mean value of indicator i.
The linear weighting model scores each indicator according to the following
equations.
Q w Y
1
i i
Yi w y
1
ij ij
Q is the comprehensive score about a city’s high-quality development; wi is the

weight coefficient of indicator i (tier-2); Yi is the score of indicator i; wij is the
weight coefficient of indicator j (tier-3); yij is the nondimensionalized value of
indicator j under indicator i.
Meanwhile, as the five indicators supplement each other in an integrated
entirety, equal weight (20 points) is assigned to each tier-1 indicator, which is
further distributed among sub-indicators in a balanced manner.
Table 10.1 The Indicator System to Assess the Quality of China’s Urban Development
Primary Indicators Secondary Indicators Tertiary Indicators Notes
Innovative Innovation input Number of R&D personnel per 10,000 Number of R&D personnel/total

development people population*10,000
Innovation input index Investment in innovative research/GDP
Innovation Number of invention patents per 10,000 Number of applications for invention patent/
performance people total population*10,000
Contribution of scientific and technological Total factor productivity
(S&T) progress
Coordinated Urban–rural structure Urbanization rate Urban population/total population
development Urban–rural per capita income ratio Urban per capita income /rural per capita
income
Industrial structure Share of output value of industries Output value of primary industry/total output
of the economy
Share of output value of high-tech industries Output value of high-tech industries/total
output of the economy
Green development Energy conservation Percentage of treated sewage Amount of treated domestic and industrial
and emission sewage/total amount of sewage discharged
reduction Overall energy consumption per 10,000 yuan Primary energy supply/GDP
of GDP
Ecological Green coverage of built-up areas Green coverage of urban built-up areas/total
development built-up areas
Percentage of days with good or moderate Number of days with Air Pollution Index
air quality (API) <=100/ number of days in a year
Open development Foreign trade Dependence on trade Aggregate imports and exports/GDP
Dependence on foreign investment Foreign investment/GDP
International Proportion of foreign population Foreign population/total population
exchange Ability to earn foreign exchange from Foreign exchange earnings from tourism/GDP
tourism
(Continued)
Table 10.1 (Continued)
Primary Indicators Secondary Indicators Tertiary Indicators Notes
Inclusive Social security Urban employment rate Urban workers employed/(urban workers
development employed + urban workers seeking
employment)
Proportion of urban workers covered by Number of urban workers covered by basic
basic pension insurance pension insurance/number of urban workers
Proportion of urban workers covered by Number of urban workers covered by basic
basic medical insurance medical insurance/number of urban workers
Education and Number of full-time teachers per 10,000 Number of full-time teachers (in higher
medical care people education institutions + secondary
vocational schools + primary and secondary
schools)/total population * 10,000
Number of students per 10,000 people Number of students (in higher education
institutions + secondary vocational schools)/
total population
Number of licensed physicians (assistant Number of licensed physicians (assistant
physicians) per 10,000 people physicians)/total population*10,000
Infrastructure Number of broadband Internet subscribers Number of broadband Internet subscribers/
per 10,000 people total population*10,000
Number of books held in public libraries per Number of books held in public libraries/total
10,000 people population*10,000
Source: DRC IME.
10.9 Summary
According to international experience and China’s trajectory of urbanization,
it is essential to make timely and effective institutional and policy adjustments
at different stages of development to meet challenges and ensure healthy
urbanization. As China approaches the advanced stage of urbanization, the
incumbent development roadmap is no longer viable. New drivers of urbaniza-
tion are on the rise, including effective inter-city and urban–rural allocation of
resources, productivity gains from the prosperity of city clusters, potential
demand in the huge domestic market and institutional dividends of reform
and opening-up.
The new round of technological revolution provides a strong impetus for
high-quality urbanization in the new era. We should seize the development
opportunities during the expansion stage of the technological revolution,
transform and upgrade urban industrial structure, optimize the spatial pattern
of urbanization with city cluster as the main form, improve urban governance
system and deepen innovation-oriented institutional reform.
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Postscript
Institute of Market Economy (IME) has been one of the earliest institutes
established under the Development Research Center (DRC) of the State Coun-
cil, PRC. It has engaged in policy research programs on market systems, con-
sumption, circulation, service industry, property market, etc. It has played a
vital role in supporting China’s reform and development of pricing, circula-
tion, futures market, housing system, and modern market system with pioneer-
ing intellectual support.
While working on the joint research project Urban China: Toward Efficient,
Inclusive and Sustainable Urbanization between DRC and the World Bank, I
gained a deeper appreciation for the role urbanization in China’s path to mod-
ernization. The research topics of IME, such as consumption, circulation, ser-
vice industry, property market, and market systems, are closely related to
urbanization. In 2016, I became the director of IME and started to advocate
for basic research on urbanization among my colleagues. I strongly believe that
we need deepen our understanding of the laws of urbanization to accurately
capture the mid- to long-term trends of consumption, circulation, service
industry, and property market. This understanding will help us identify the
desired economic and social conditions and institutional environment, refine
policy recommendations, and lay a solid foundation for China’s development.
My proposal to focus on basic research on urbanization was met with
enthusiasm and support by Dr. Long Guoqiang, Vice President of DRC. He
recognized that urbanization was a defining theme of global development, hav-
ing originated from the Industrial Revolution and fueled by episodes of tech-
nological revolution. With the ongoing boom of technology worldwide, it
poses a novel academic challenge to study the dynamics of urbanization in
China and the world in connection with technological revolution. Thanks to
the in-depth communication and joint leadership of Dr. Long Guoqiang and
Mr. Arnoud Balhuize, Chief Commercial Officer of BHP Billington, as well as
the endorsement of President Li Wei of DRC and Mr. Andrew Mackenzie,
CEO of BHP Billington, a three-year cooperative research agreement was
signed in January 2018 between IME and BHP on New Technological Revolu-
tion and China’s Urbanization.
DOI: 10.4324/9781032663180-14
Postscript 213
To conduct this cutting-edge research, the research team, mostly from IME,
held brainstorming sessions to define the research approach and framework.
The goals were to identify the inherent mechanism and trajectory of urbaniza-
tion and its effect on the scale, industrial mix, system, and governance of cities
by reflecting on the interaction between technological revolutions and corre-
sponding chapters of urbanization; shed light on how the new technological
revolution may affect economic and social progress and urbanization by delv-
ing into its main content and evolution, and make a projection on emerging
trends and challenges of the successive wave of urbanization; and contextual-
ize the laws of urbanization and the impact of the new technological revolu-
tion with China’s national condition to highlight the major trends and pros-
pect of China’s urbanization in the new era of development. The findings of
the research were expected to inspire strategic thoughts and policy measures
for high-quality urbanization in China.
Throughout the three years of hard work, we were fortunate to have received
unreserved support and guidance from the DRC leadership, including CPC Sec-
retary Mr. Ma Jiantang, Vice President Wang Anshun, and Vice President Long
Guoqiang. The success of the program wouldn’t have been possible without
valuable inputs from Research Fellow Wu Jinglian and Liu Shijin of DRC, Pro-
fessor Wu Hequan, Academician of the Chinese Academy of Sciences, Mr. Xu
Lin, Chairman of the Sino-U.S. Green Fund, as well as experts and leaders
from National Development and Reform Commission, Ministry of Housing
and Urban-Rural Development, Ministry of Industry and Information Tech-
nology, Ministry of Transport, Ministry of Science and Technology, and
Financial and Economic Committee of National People’s Congress, etc. We
would also like to thank Prof. Li Shantong and Dr. Zhang Jin for reviewing this
book and giving revision suggestions. In addition to IME staff, the team also
comprised experts from Research Department of Innovation Development and
Research Department of Industrial Economy of DRC, Rural Development
Institute of the Chinese Academy of Social Sciences, Energy Research Institute
of National Development and Reform Commission, China Center for Informa-
tion Industry Development under Ministry of Industry and Information Tech-
nology, Tongji University, and B eijing Jiaotong University, among others.
From March 2018 to December 2019, extensive field research was con-
ducted at home and abroad, covering Chengdu-Chongqing, Beijing-Tianjin-
Hebei, Yangtze River Delta, Pearl River Delta (including Hong Kong SAR)
and other large domestic city clusters. They also visited major cities in Singa-
pore, the United Kingdom, France, Germany, Sweden, Czech Republic, and
other countries. To further enrich the research, the team engaged in interna-
tional seminars and visiting scholar programs, collaborating with fellow
research institutions such as the World Economic Forum (WEF), the Organi-
zation for Economic Cooperation and Development (OECD), Oxford Univer-
sity, the Brookings Institution, and the Development Strategy Research
Department of BHP Billiton for in-depth exchanges. Throughout the research
program, the team hosted eight large-scale seminars and over ten workshops to
214 Postscript
gather insights from government agencies, research institutions, universities,

and representative enterprises.
The research efforts have produced a range of deliverable, including one
executive summary, one master report, seven topical reports and five country
reports. The topical reports explore the impact of previous technological revo-
lutions on urbanization, scan the current revolution for key technological
trends, and measure its potential impact on and challenges to urbanization.
These reports branch into the perspectives of information technology, energy
technology, transport technology, metropolitan area development, urban-rural
integration, and the history of technological revolution. The country reports
focus on the urbanization journey and lessons of the United States, the United
Kingdom, Germany, Japan, South Korea, and Latin America and provide val-
uable takeaways for China. The master report has three parts. Part I takes
stock of the interaction between technological revolutions and urbanization. It
systematically analyzes how technological revolutions have catalyzed urbani-
zation, shaped urban industrial structure, improved urban functions, and
gauged urban systems and institutions. Part II outlines the main trends of
innovation in the current technological revolution and its impact on global
urbanization and economic and social development. Part III offers an over-
view of China’s urbanization, highlights emerging characteristics in the new
era, and makes targeted policy recommendations on harnessing technological
revolution and safeguarding high-quality urbanization in China.
The master report’s framework and style were set by Wang Wei and Deng
Yusong. Its authors are Wang Ruimin (Chapter 1), Liu Xin, Zhao Yong (Chap-
ter 2), Deng Yusong (Chapter 3), Zhao Yong (Chapter 4), Zhao Yong, Niu
Sanyuan (Chapter 5), Zhao Yong (Chapter 6), and Shao Ting (Chapter 7–10).
The first draft went through dozens of collective review and redrafting. When
the final draft was complete, the executive summary was authored by Wang
Wei, Deng Yusong, Wang Ruimin and Niu Sanyuan. Wang Qing, Liu Tao, Qi
Yunlan, Li Hanqing, Wang Likun, Wang Nian, and other colleagues also con-
tributed the field research, seminars, and workshops.
The intellectual outcomes and related discussions have provided valuable
references and inputs for the State Council and its ministries in formulating the
14th Five-Year Plan of Economic and Social Development, the 14th Five-Year
Plan of New Urbanization, and the 14th Five-Year Plan for National Urban
Infrastructure Construction, as well as other policy documents. The research
program has won recognition at home and abroad and shown its influence on
the designation of research topics on urbanization in China and at interna-
tional organizations.
During the China Development Forum 2021 at Diaoyutai State Guesthouse,
I had the honor of chairing the special panel on New Technological Revolution
and Urbanization. Vice President Wang Anshun of DRC gave a welcome
remark, and Mr. Mike Henry, CEO of BHP Billiton, Mr. Xu Lin, Chairman of
the Sino-US Green Fund, Mr. Jonathan Woetzel, director of McKinsey Global
Postscript 215
Institute, and Professor Pan Jiaofeng, president of Institute of Science and

Development, the Chinese Academy of Sciences took the floor to share their
insights. On behalf of the research team, Mr. Deng Yusong, deputy director of
IME, introduced main findings and key perspectives of the program. Partici-
pants spoke positively about the research, acknowledging its innovative research
topic, future-ready viewpoints and observations, knowledge generation, and
informative impact on policy making.
In March 2022, I had the opportunity to addressed DEV TALK, an OECD
virtual forum, to help with the setting of global development agenda and nar-
rate China’s story via a world-class policy and academic platforms. During the
forum, I introduced key findings of our research and had a heated discussion
with fellow panelists. The results of the forum were particularly rewarding and
encouraging for the research team.
It’s worth noting that an article based on the main findings and viewpoints
of the research, titled New Technological Revolution and China’s Urbanization
2020–2050 – Impact, Prospect and Strategy, was published in the 11th issue of
Management World, a highly authoritative core journal in China, in 2022. As
of the end of May 2023, more than 4,000 electronic copies of the article had
been downloaded. The influential Caixin Weekly also carried a special column
on the research and distributed hard copies to NPC deputies and CPPCC
members attending the 2022 annual sessions.
Last but not the least, I want to express my sincere thanks to the following
institutions for their generous support and valuable contributions to this
research program:
BHP Billiton
World Economic Forum (WEF)
Organization for Economic Cooperation and Development (OECD)
China Development Research Foundation (CDRF)
Rural Development Institute, Chinese Academy of Social Sciences
Energy Research Institute, National Development and Reform Commission
China Center for Information Industry Development
College of Transportation Engineering, Tongji University
School of Economics and Management, Beijing Jiaotong University
School of Economics and Management, Beijing Forestry University
Wang Wei
Director General/Research Fellow, IME DRC
On June 8th, 2023
Index
Pages in italics refer to figures, pages in bold refer to tables, and pages followed
by “n” refer to notes.
acceleration stage 6, 10, 24, 29, 58–61, city clusters 15, 25, 27, 58, 62, 76–77, 81,
149, 153–154 119, 131, 133, 138, 140, 144–146, 146,
administrative intervention 68 148, 153, 156–158, 162n2, 163–164,
advanced robots 83 166–167, 175, 179–180, 187–191, 195,
advanced stage 6–8, 12, 15–16, 21, 25, 30, 199, 202–203, 211, 213
45, 62, 64, 66, 74, 165, 211 Clean Air Act 17
age of electricity 33, 36–37 climate change 84, 92
age of information 33, 37 cloud computing 83, 85–87, 107, 109,
age of steam 33, 37 127, 149, 163, 165, 172, 175, 200, 203
agglomeration effect 15, 28, 120, 187 collective breakthrough 87, 100
artificial intelligence 46, 83–85, 90–92, 95 competition mechanism 65
autonomous driving 84, 95–97, 99, 125, consumer market 9, 128n7, 169, 171, 185
188, 205 coordinated development 76, 131, 133,
144–145, 149, 159, 166–167, 180, 187,
basic research 69–71, 192–193, 212 207, 209
Belt and Road Initiative 140 corporate system 41
big data 81, 84–85, 87–88, 90, 103, 108, cutting-edge technology 97
109–110, 123, 127, 149, 159, 163–164, cyber-physical system 85, 107
168–169, 172–175, 189, 193, 197,
199–200, 203 deployment phase 33–34, 51, 53n1
blockchain 90, 168 Detroit 59, 75
British enclosure movement 39 de-urbanization 134
Brookings Institution 119, 122, 213 digital divide 112–113, 177–178, 204–205
business model 10, 35, 81, 84, 140, 154, digital economy 84, 86, 90, 103–104, 113,
160, 163–166, 168, 171–172, 192–194, 113n3, 114n8, 153–154, 158–159, 163,
197, 206 166, 168, 177, 194, 205
digitalization x, 85–86, 100, 169, 194
capital-intensive 16, 60–61, 139 digital technology 83, 85–88, 103–104,
carbon-free 92 109–112, 118, 122–123, 126–128,
catching-up economies 18 166, 176
catch-up urbanization 18 digital twin 86, 127
Chinese Academy of Social Sciences distributed energy 87, 92–93, 123
213, 215 driving force 13, 66, 76, 115, 118, 131
chip technology 86
Chris Freeman 36 East Asia 18, 116–117, 170, 176
city brain 105, 174–175 ecological protection 145, 148, 161, 199
Index 217
e-commerce 8, 35, 86, 103–104, 106, 109, hub-spoke effect 27, 138, 150–151
113, 122, 168–169, 170, 173, 173, 194 human capital 18, 20, 23, 29, 64, 154,
economic structure 1, 3, 7, 27, 45, 55, 57, 164, 184, 193
60–61, 64, 66, 68, 160, 167, 180 humboldt education system 69
education and research institution 61, 76 hybrid vehicle 97, 99
education system 1, 69–70 hydrogen fuel 92, 95
e-government 125–127, 174
emerging industries 1, 7, 8, 30, 69, 71, ICT industry 36
73–75, 77–78, 84, 103, 113, 115, 157, IMF 113
167, 185, 193 income gap 42–43, 53n11, 11, 113,
employment substitution 111, 113 175–177, 204
energy storage 83, 87, 92, 97 industrial chain 104
energy technology 33, 83–84, 92–93, 100, industrial city 9, 60, 65, 81, 103–104, 105,
110, 113, 171, 188 108, 113, 124, 157, 189, 192–193,
explosion phase 33–34, 46, 51 195, 197
industrialization 117
factor mobility 30–31, 65 industrialization-led urbanization 59, 68
factor of production 86, 103–104, 106, industrialization of agriculture 24
131, 159, 174 industrial research laboratories 34
fair competition 67, 159–160, 188, industrial revolution 3, 6, 8–10, 13, 16, 20,
202, 206 24, 26, 36, 38, 43–44, 46, 51, 56–58, 61,
financial crisis 84 64, 71–73, 83, 85–86, 101n1, 103, 109,
financial liberalization 63 112, 163, 166–167, 212
financing model 61, 133, 188 industrial upgrade 18
financial system 57, 60–61, 72 Industry 4.0 9, 85, 108, 114, 188
5G 86, 88, 124, 126, 163–164, 169, 193, industry Internet 108
199, 205 inequality of opportunity 8, 177, 178
five-year plan 95, 98, 138, 140, 146, 167, information economy 87
169, 180, 185, 214 information industry 13, 137, 213, 215
fourth industrial revolution 73, 85 infrastructure investment 74, 154, 198
initial stage 6–10, 18, 25, 30, 55–56,
general technology 34–36, 41, 51 66, 74, 133
globalization 7, 13, 21, 23, 40, 59, 65, innovation capability 64, 133, 140, 149,
74–75, 106, 113, 128n2, 138, 150, 166, 194–195, 197, 207
171, 207 innovation-driven growth 185
global market 39–40, 55 installation phase 33–34, 51, 53n1
governance capability 21, 49, 73–74, 76, institutional and policy adjustments 24,
78, 126–128, 148–149, 166, 180, 190 29, 31, 211
government-led growth strategy 18 institutional framework 37, 68
great depression 20 institutional innovation 41, 51, 174
green production 188 institutional reform 68, 191, 201–202, 211
ground-breaking scientific intellectual property system 41, 71
discoveries 36, 51 intermediate stage 7, 10, 12, 14, 21, 25,
growth momentum 66, 168 30, 58, 60, 66
international metropolises 65, 123, 189, 196
heavy and chemical industry 7, 10 internet of everything 86–88
high-caliber talent 64, 166 internet of things 83, 85–88, 90, 103, 107,
high-level opening-up 131 108, 149, 159, 168–169
high-quality labor force 64 internet plus government services 200
high-quality urbanization 6, 10, 15–17, intra-city spatial structure 47, 53
20–21, 27, 31, 131, 163, 179, 189, 191,
193, 195, 197, 199, 201, 203, 205, 207, knowledge-intensive cities 122
209, 211, 213–214 knowledge-intensive high-tech
high-speed railway 83, 110, 204 industries 12
218 Index
labor-intensive manufacturing 105 Ray. M. Northam 6

labor market 9, 15, 27, 111–112, 114n12, regional disparity 165, 179
120, 165–166 regional market 39, 55, 202
labor mobility 52, 58, 62 ruhr region 77
leading technology 34–35, 37, 51, 157
legal system 41, 62, 71 sanitary act 17
level of marketization 67 satellite city 48
lifestyle x, 3, 5, 46, 63, 103, 109, 113, 123, satellite internet 88, 90
125, 128, 185 second industrial revolution 10, 20,
light industry 6, 7, 10, 16, 23 44, 61, 72
low carbon development 92, 100, self-driving vehicles 83, 188
128, 171 service industry 6, 7, 9, 11, 13, 14, 16, 17,
22, 27, 30, 31n4, 58–59, 61–62, 64, 66,
Maglev 94–95 66–68, 115, 139, 142, 154, 156, 166,
manufacturing industry 12, 27, 29, 59, 169, 180, 182, 185, 187, 191, 194, 197,
71, 74, 86–87, 144, 156, 166, 169, 176, 203, 212
191, 193 shared mobility 86, 94, 98, 100, 110,
market boundaries 65 114n11, 166
market economy 3, 4, 10, 65, 67–68, 78, shareholding system 72
133, 136, 212 smart cities 123–124, 129n9–129n12,
market mechanism 18, 65–66, 158 166, 200
mega cities 121, 149, 151 smart factories 87, 107
metropolitanization 5 smart grid 84, 93–94
middle-income trap 13, 28 social security 17–18, 29, 56, 59, 62, 161,
minimum wage 62 190, 198, 200, 202, 204, 208, 210
mobility as service 99 spatial reconstruction 104
mobility of factors 30 spatial structure of cities 46, 57, 125, 128
modern education system 69–70 spillover effect 92, 154, 191
multinational corporations 13 suburbanization 7, 12, 25, 26–27,
47, 53n15
natural resource endowment 9 supply chain 104, 113, 167, 189, 191
new infrastructure 154–155, 199
new urbanization with Chinese Taobao town 140
characteristics 140, 142 Taobao village 140
next-generation genetics 83 technological diffusion 40
technological invention 34, 36–39, 42
OECD x, 66, 120, 213, 215 technological know-how 71
online consumption 110 technological paradigm 41
open market 30–31, 198 technological singularity 35, 53n6
opportunity gap 112–113 technological unemployment 111–112
technology cluster 37, 41, 104
patent system 41–42, 71–72 technology-knowledge-intensive
pedestrian cities 25, 47 industries 63
people-centered urbanization 142 3D printing 85, 169
physical-virtual integration 125 townization 5
platform economy 109–110, 114n7, 157, transportation hub 20, 25, 44–45, 125
172, 193, 206 transportation network 39, 166, 168
points of inflection 6, 10–11, 84 transportation technology 25, 33, 37, 83,
political and social stability 73–74, 200 94, 100, 101n1–101n2, 110, 123,
poly-center pattern 44 128, 187
population distribution 152, 152, 187
property rights of data 155 ubiquitous network 109
public governance 23, 126 ultra-high-speed 94, 100
public private partnership (PPP) 154 unbalanced urbanization 20
Index 219
unicorn 166, 173, 173 urban renewal 62

United Nations 3–6, 21, 31n2, 117 urban–rural continuum 47
universal bank 61 urban-rural integration 51
urban diseases 189 urban-rural migration 165
urban governance 12, 17, 19, 21, 23, 30, urban-rural relation 49
48–49, 53, 58, 115, 126–127, 148–149, urban spatial patterns 24–25, 25
160, 162, 173–174, 179, 190–191,
200–201, 211 value chain 81, 104, 106–107, 121–123,
urban infrastructure 7–8, 10–12, 18, 29, 128, 150, 156, 168, 191, 194, 207
49, 74, 120, 123, 128, 167, 169–171, venture capital 42, 42, 72
184, 199, 214
urbanization curve 6, 31n2 World Bank x, 14, 19, 22, 67, 104, 112,
urban management 48–49, 159, 161, 174, 114n10, 114n14, 182, 204, 212
189, 200 World War II 18–20, 40, 45, 47
urban planning 28, 29, 48, 57, 60, 126,
128, 161, 173, 188, 195, 198–200 Zipf’s law 121, 128n5

China's Urbanization in The New Round of Technological Revolution, 2020-2050

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China's Urbanization in The New Round of Technological Revolution, 2020-2050

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China’s Urbanization in the New Round of

Technological Revolution, 2020–2050

Based on a major research project undertaken by a team at the Institute of

Founding Series Editors

The aim of this series is to publish original, high-quality, research-level work

71. Wind Power in China

72. Multinationals, Global Value Chains and Governance

73. China in the Asian Financial Crisis

74. China’s Commercial Health Insurance

75. Finance and the Real Economy

76. How China Escaped Shock Therapy

77. Medicines in China’s National Health Insurance System

78. China’s Urbanization in the New Round of Technological Revolution,

Wang Wei, Deng Yusong, Niu Sanyuan,

List of figures vii

1 Process, typical models, and inspirations of global

2 Impact of technological revolutions on urbanization 33

3 The role of institutional policies in urbanization

4 Background, traits, and trends of the new technological

5 Impact of the new technological revolution on economic

6 Global urbanization trends under the new technological

7 Process, achievements, and issues of China’s urbanization 133

8 Impact of the new round of technological revolution

9 China’s urbanization (2020–2050) in the new round of

10 Strategic path and policies for China’s high-quality

1.1 Criteria for Defining a City 4

6.5 Proportion of the 300 Metropolitan Areas in Global Growth

1.1 Three Stages of Urbanization and Corresponding Problems 7

With technological revolution came urbanization. Successive technological

significance for long-term economic and social development. By constantly pro-

Prof. Long Guoqiang

Figure 1.1 Criteria for Defining a City.

Box 1.1 A List of Features of Cities

Archaeologist Vere Gordon Childe makes a list of features that are

1. The size of population. The number of residents is larger than that

It should be noted that the term “townization” is mostly used to express

Urbanization rate (%)

Figure 1.2 City Population and Urbanization Rate of all Continents (2018).

Figure 1.3 The Northam Curve.

Stages Level and Speed of Drivers of Industrial Structure Problems/Trends

Initial Stage 10%–30% Light industry Agriculture is the Poor infrastructure

Process, typical models, and inspirations of global urbanization 7

1.2.1 The initial stage of urbanization

In the millennia of agricultural society, the vast majority of the population

manual labor, doubling productivity. In 1764, the British engineer Hargreaves

1.2.2 The intermediate stage of urbanization

Cities enter the intermediate stage of urbanization characterized by fastest

1.2.2.1 The accelerated period dominated by heavy and chemical industry

propelled the rapid development of electrical industries. Electricity has since

1.2.2.2 A period dominated by the service industry (urbanization rate between

minimum legislative standards in architectural structure, amenities, and liva-

1.2.3 The advanced stage of urbanization

Table 1.2 Comparison of Industrial Composition of Large Cities: (Unit: %)

City Year Added value of the Proportion of

New York 2005 88.4 90.4

1980–1990 1990–2000 2000–2007

The United States 79.3 81.6 83.1

Box 1.2 How and Why Large Cities Are Advantageous?

Large cities have outstanding advantages in all three micro mechanisms

number of workers increases output by a greater proportion, which is not

Another prominent feature of the advanced stage is the formation and

1.3 Comparison and lessons of urbanization paths of typical countries

achieved high-quality urbanization in about 30 years. Although Latin American

78. China’s Urbanization in the New Round of Technological Revolution,

Figure 1.1 Criteria for Defining a City.

Box 1.1 A List of Features of Cities

Figure 1.2 City Population and Urbanization Rate of all Continents (2018).

Figure 1.3 The Northam Curve.

1.2.1 The initial stage of urbanization

1.2.2 The intermediate stage of urbanization

1.2.2.1 The accelerated period dominated by heavy and chemical industry

1.2.2.2 A period dominated by the service industry (urbanization rate between

1.2.3 The advanced stage of urbanization

Table 1.2 Comparison of Industrial Composition of Large Cities: (Unit: %)

Box 1.2 How and Why Large Cities Are Advantageous?

1.3 Comparison and lessons of urbanization paths of typical countries

1.3.1 Urbanization in European and American countries through gradual

1.3.2 The catch-up urbanization driven by industrial policies in countries like

1.3.3 Unbalanced urbanization due to insufficient industrial support in Latin

Figure 1.5 Urbanization Rate in Latin America (1950–2050).

1.3.4 Lessons and inspirations

Figure 1.7 Share of Employment in the Informal Sector in Argentina, Brazil and

Table 1.5 A Comparison of Three Typical Urbanization Models

1.4 Prerequisites for a smooth urbanization

1.4.1 An industrial structure that keeps upgrading and optimizing

Table 1.6 Technological Revolution and Urbanization

Box 1.3 Technological Revolution and Urban Spatial Patterns

Figure 1.8 Industrial Structure of Typical Countries with an Urbanization Rate of 50%.

1.4.3 Timely and effective institutional and policy adjustments

1.4.4 Factor mobility and an open market

2.1 Three stages of technological revolutions

2.1.1 The installation phase of technological revolutions

2.1.2 The deployment phase of technological revolutions

2.1.3 The explosion phase of technological revolutions

Box 2.1 The Six Phases of Technological Revolutions

2.2 Four patterns of technological revolutions

2.2.1 Ground-breaking scientific discoveries laid the foundation for

2.2.2 Increased market demand as an important driver of technological revolutions

2.2.3 Breakthroughs in general technologies as the key to technological revolution

2.2.4 Institutional innovations as a solid assurance for technological revolutions

Table 2.2 U.S. Venture Capital Investment in Internet-Related Industries