China plans investment and reform to ease urbanisation drive

SHANGHAI (Reuters) - China is planning a major expansion of its transport networks and urban infrastructure as it seeks to increase migration from rural to urban areas, lifting incomes and demand to drive continued economic growth.

The 2014-20 urbanisation plan released on Sunday aims to boost domestic consumption by increasing the proportion of urban residents among China's population of almost 1.4 billion to 60 percent by 2020, up from 53.7 percent now.

Among the biggest obstacles to the planned relocation of several hundred million rural residents is the huge infrastructure development needed to accommodate the new wave of city dwellers as well as reform of the country's "hukou" registration system.

This complex system of residency registration is a major sticking point because it controls the benefits that residents can enjoy. The system denies basic services to those who relocate without permission, fanning social unrest.

China's leaders, however, will make it easier for rural migrants to obtain residency status in smaller cities, with the intention of helping to unlock the nation's huge potential domestic demand. Urban salaries are higher than rural incomes, meaning that a larger city-based population should have greater spending power.

"Domestic demand is the fundamental impetus for China's development, and the greatest potential for expanding domestic demand lies in urbanisation," state news agency Xinhua reported, citing the plan from China's State Council, which added detail to previous announcements about the urbanisation drive.

RAIL LINKS

The plan will create "huge" demand for investment in public infrastructure, with authorities seeking a substantial increase in social housing as well as the development of expanded urban underground transport networks by 2020.

Every city with more than 200,000 residents will be covered by standard railways by 2020, the plan said, with high-speed services connecting cities with more than 500,000 residents. The civil aviation network, meanwhile, will cover about 90 percent of the population.

Authorities are also targeting environmentally friendly growth, a serious issue for a nation that has been bogged down in pollution issues including toxic levels of smog, polluted waterways and so-called "cancer villages".

These villages, hit by high levels of water, air and soil pollution, are a symptom of China's many years of rampant economic growth, when environmental issues took a back seat to financial rewards.

The 2014-20 urbanisation plan said it will improve water safety and air quality.

"Green production and green consumption will become the mainstream of city economic life. The amount of power and water-saving products, recycled goods and green construction will be raised substantially," the report said.

China will also increase the number of small and mid-sized cities, boosting less-developed regions in the west of the country and improving services to meet demand from the influx of rural residents, the plan said.

(Reporting by Adam Jourdan; Editing by David Goodman)