Since the country's majority rural population is facing many difficulties to improve their income given the limited per capita natural resources, the rural market is yet to be tapped.

The gap between consumption by the rural and urban population has widened in recent years. The growth of consumption in rural area was 0.7 percentage points lower than that in cities and towns in 1998, the difference was 3.8 and 3.2 percentage points in 2001 and 2002 respectively while it expanded to 4.1 percentage points in February this year.

These numbers indicate that the consumption demand in rural areas remains in need of further stimulation, otherwise, domestic demand will not be increased.

Accelerating the urbanization process is ultimately the best way to increase consumption in rural areas. Moving redundant laborers from rural areas into cities and towns also helps meet the goals of industrialization and modernization.

Turning rural areas into cities and towns would offer a win-win solution to both rural and urban regions.

On the one hand, as fewer people work in agriculture, the per capita area of farmland will be raised to allow for a wider application of agricultural machinery. As a result, the efficiency of agriculture and the farmers' income would both be improved.

On the other hand, investment, consumption and employment in urban areas would be increased during this process. According to studies, with every 1 percent of rural laborers taking jobs in non-farm sectors, the country's GDP will be raised by 0.5 to 0.85 percent.

From the experiences of urbanization in other countries, when a country's urban population reached 25 to 59 percent of the total population, its urbanization process gears up.

With an urban population accounting for 39 percent of the total, China is right at this stage. It is time to adopt active measures to support the growing momentum of urbanization.

The fundamental principle of urbanization should be to maintain a balanced development among large, middle and small cities and towns. With their own special characteristics, cities and towns of different sizes play different economic roles.

Being the backbones of propelling urbanization in this country, large cities have their unique advantages.

With highly intensive population and industries, large cities offer a platform for cooperation of different industries, which could also serve as a base for consolidating land, human and information resources and public service facilities. Meanwhile, large cities could produce large amounts of diverse job opportunities. As a result, they could accommodate all kinds of laborers and increase their population.

Since the rural economy is not closely associated with that of cities, small cities and towns could be links relaying modernization and industrialization from large cities to rural areas.

When large cities upgrade their economic structure, many of them switch from manufacturing to high-tech industries. Manufacturing facilities could be transferred into small cities and towns where cost of land and labor are both lower.

In the economic restructure of rural areas, small cities and towns should serve as centers for technology, information and capital.

However, small cities and towns in this country could not fulfill these tasks now because of many problems, like poor economic efficiency, scarce job opportunities and backward infrastructure facilities.

To tackle these problems and make small cities and towns fitting for their role, efforts must be made to build them into modern cities where people could get rid of their old way of living and enjoy urban lifestyle.

Reform of current administrative policies is needed to support urbanization.

First, the rigid system of residence registration should be altered to allow the reasonable migration of rural population.

The current registration system should be reformed step by step until it is only a reference for examining the size and distribution of population, monitoring their migration and keeping an overall control.

Second, a unified labor market of urban and rural areas should be established to eliminate the obstacles for farmers seeking jobs in cities.

Limits upon positions, industries and types of work for rural laborers in cities should be written off to allow rural laborers to compete for job opportunities with their urban counterparts on a fair base. Only in this way can human resources be effectively allocated and flow reasonably.

Third, a nationwide social security system should be set up to cover each worker regardless of his identity.

The author is a researcher with the Department of Economic Forecast under the State Information Center.

(China Daily May 14, 2003)