Urbanisation, Consumption, Harmony

Speech Transcripts and Background Reading

Worried about strains in society, the PRC government now has a range of policies under the name ‘Harmonious Society’. With them, China is simultaneously moving hundreds of millions of people from country to town and creating the world’s largest welfare state. Healthcare, insurance and social security arrangements are to be developed for a billion people. Hundreds of new cities need culture industries. The experience of mature countries and companies is needed. What opportunities exist for partnership? How can you take part in these extraordinary endeavors?

Map of the Parliamentary Estate

Map of Portcullis House

Speakers Biographies for the Hearings on the 25th of April

Peter Luff

Xin Chunying

Lu Mai

Theodore Zeldin

Philip Dodd

Jeanne-Marie Gescher

Mike Gregory

Alan Knight

David Willetts

Francesco Garzarelli

Alderman Sir David Brewer

Kerry Brown

Stuart E. Smalley

Robert Court

Dr Ran Tao


‘The China Impact’ Workshop: The Ascent of China’s DCM

Full text: ChinaWestminsterApr07_Francesco_Garzelli.ppt

China’s Social Reform and Rebuilding the Welfare System

Full text: China_ssocialreform.doc



by Stuart Smalley

Full text: ParliamentaryCommittee250407.ppt

Background Reading

This meeting entitled ‘Urbanisation, consumption, harmony‘ is the third in a series of five ‘China Hearings’ held in the British Parliament in London.

Its aim is to explore issues concerning the social nature of China’s extraordinary rapid economic growth – and to consider the implications for UK businesses and for UK government policy.

Annual growth rates in excess of 10% in a country whose population represents a quarter of mankind, constitute a significant world event. Growth has been concentrated in China’s Eastern and South Eastern seaboard, and this has precipitated the migration in recent years of over 200 million persons. This is the largest peacetime migration in human history. What’s more, this is not only from the poor West to the rich East, it is also a migration from the largely rural to the largely urban.

Such an event cannot by its very nature be without its problems. Clearly, such vast migrations put a strain on the social welfare resources in Eastern urban conurbations, especially where tax incomes in these urban areas do not respond proportionately, and in circumstances where rapid institutional & structural economic changes are also underway. The Chinese Government has expressed its willingness to accelerate its problem-solving with respect to the fallout from these major changes sweeping the nation.

This provides opportunities for British expertise in supporting the Chinese government’s aims, but also creates a number of concerns for the UK government, both in the risks that Chinese economic growth (which the UK is rapidly adapting to), might be interrupted, and in the general geopolitical impact of China and Chinese society on the UK – a global trading nation.

An understanding of the nature of growth-led social changes in China is therefore important for UK business and government alike.

Who has driven this mass migration, for example – Chinese state or private corporations, provincial governments or central government ? Given that the socialist domicile control system for individuals is still largely in place, how much control over the migration has the government had ? Is the reported ‘temporary’ status of Chinese migrant workers in Western urban areas, and consequent real-world inequalities in rights, a way of ‘denying’ the problem or service provision ?

The marketisation of state and provincial enterprises has at the same time reduced welfare services to employees, as company-based social services such as health, education and retirement income is halted or service provision purchased by officials and others. Insurance-based schemes however have been slow to respond – especially for those on low incomes and/or working without permanent status.

The slow response of market-based social support alternatives is rooted in structural economic developments. Chinese workers famously have high savings rates, but due to mixed state/private ownership in the new industrial sectors, equity markets are underdeveloped, as are the plethora of financial intermediary services like pension funds familiar to those in the OECD. The result is that savers have limited places to invest, and can be left with no choice other than to place deposits with low interest majority-state-owned banks – who in turn see low returns on their investments and who suffer from high incidences of non-performing loans.

An understanding of the dynamics of social change and the problems facing the Chinese leadership cannot be complete without an understanding of the rural background from whence the migration originates.

Contrary to experience in the rest of the developing world, taxes in rural areas, for example on farming, are higher than on equivalent economic activities in urban areas, and in recent years they have been rising. Rural land grabs by Chinese entrepreneurs and provincial officials have received widespread international publicity. However, a more difficult phenomenon has been the decline of rural faming institutions and the relative absence of modern replacements for the old range of collective bodies. It has been widely reported that the migration to urban areas is not just a result of the attractiveness of urban jobs, it is also the decline in the attractiveness of many rural areas as a place to live and work in security.

These deep-rooted issues result from rapid growth and structural change, and UK companies and experts have much to contribute in addressing these important challenges. This ‘China Hearing’ will shed light on these developments and also help UK policymakers better understand risks and potential UK responses. It will be an invaluable opportunity.

How financial-system reform could benefit China

The ongoing development of China’s financial system will play a critical role in the country’s effort to narrow social disparities and pursue balanced growth.

Full text pdf: McKowfinancialsystemreformcouldbenefitchina.pdf

Reproduced courtesy of McKinsey & Company.

Checking China’s vital signs: The social challenge

China is undergoing a remarkable socioeconomic transformation from agriculture to industry and from a predominantly rural society to an increasingly urbanized one.

Full text pdf: McKcheckingchina_svitalsigns2006.pdf

Reproduced courtesy of McKinsey & Company.

Helping China’s companies master

Chinese companies are making acquisitions abroad to win access to technology, raw materials, brands, and new markets.

Full text pdf: McKhelpingchina_scompaniesmasterm_a.pdf

Reproduced courtesy of McKinsey & Company.


Politics and the quest for profit – VIEWPOINT: Foreign investors must grasp the Communist party’s key role in state-owned enterprises, write Gordon Orr and Richard Huang of McKinsey & Company.

Full text pdf: McKINVESTINGINCHINA-governanceFTarticlesept06.doc

Reproduced courtesy of McKinsey & Company.


The government is determined to close the gap between the city and the country, mainly through urbanisation. Cities provide opportunities that the country areas cannot. But urbanisation has to be managed carefully if the risks are not to outweigh the rewards.

Chapter 36& Chapter 40: BRIEFINGSbyHB030407.doc
Taken with permission from the introduction to China: Friend or Foe? By Hugo de Burgh, published in the UK in 2006 by Icon Books Ltd, Cambridge, UK, email: info@iconbooks.co.uk, http://www.iconbooks.co.uk/