Chinese urbanization – BCA Research

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The over-capacity and over-investment problem in China is concentrated in low-end manufacturing businesses and sectors that experienced a massive boom during the last decade. Conversely, public infrastructure is grossly inadequate to accommodate further urbanization, according to BCA Research.

China is, at best, half-way through its urbanization process. About half of the Chinese population lives in rural areas with little or no prospect of improving their standard of living. To reach South Korea’s level of urbanization, China would need to move an additional 500 million people into urban areas. Even with today’s level of urbanization, public infrastructure is already strained, with road, rail and air transportation capacity often being grossly inadequate. Continued urbanization will require capital investment, and, according to our Global Investment Strategy service, China is far from at saturation point. Even per-capita fixed asset investment is way below the world average. Hence, capital investment, especially in public infrastructure, will continue to drive the economy.

This post was originally published by the BCA Research blog.