A study on the mechanisms of building a new development pattern through new urbanization from the perspective of industrial capital circulation

Abstract

Purpose

This paper analyzes and discusses the fundamental role of new urbanization in the construction of a new development pattern based on the specific practice of China’s new urbanization construction, combining the classical Marxist ideas in urbanization and the theory of the industrial capital circulation, and proposes to remove blockages in the domestic and international circulations through developing new urbanization and construct a new development pattern with the domestic circulation as the mainstay and the domestic and international circulations promoting each other, thereby achieving high-quality national economic operation.

Design/methodology/approach

Based on the theory of industrial capital circulation, this paper elucidates the general process of domestic and international economic circulations, critically examines the bottlenecks and challenges in economic circulation, and emphasizes the mechanisms through which new urbanization contributes to the formation of a new development pattern.

Findings

The people-centered new urbanization can effectively release domestic demand, optimize investment supply, and stabilize market participants’ expectations, linking the national economic circulation from production to consumption and alleviating supply and demand mismatches, which has a fundamental role in building the new development pattern.

Originality/value

We should focus on creating a comprehensive domestic demand system based on counties while fostering a unified domestic market led by urban clusters and metropolitan areas to stabilize and enhance the expectations of both domestic and international market participants.

Citation

Jiao, F., Zhang, D. and Zheng, X. (2024), "A study on the mechanisms of building a new development pattern through new urbanization from the perspective of industrial capital circulation", China Political Economy, Vol. 7 No. 1, pp. 33-46. https://doi.org/10.1108/CPE-06-2024-039

The dual circulation strategy refers to adopting a new economic development pattern, taking the domestic market as the mainstay while allowing domestic and foreign markets to reinforce each other, which was initially proposed in the “Proposal of the Central Committee of the Communist Party of China on Drawing Up the 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2035”, approved by the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China in October 2020, stating that “[China should] accelerate the development of a new development pattern featuring domestic economic circulation as the mainstay while domestic and international circulations reinforce each other” (Renmin Ribao [People’s Daily], 2020). China’s proposal to build a new development pattern is a strategic adjustment to the external environment, characterized by trade protectionism, a sluggish world economy and a shrinking global market, as well as an effort to form a sound domestic economic circulation by expanding domestic demand and promoting production, distribution, exchange and consumption based on the domestic market. However, there are many challenges in building a new development pattern of domestic and international circulations. Although some scholars have proposed policy suggestions for addressing these issues, these suggestions are typically independent and scattered, lacking a common implementation body. Since building a new development pattern is a systemic issue, its underlying logic and implementation path must be systematic. Since the 18th CPC National Congress, China’s efforts to promote new urbanization have achieved significant progress, with the steadily increased rate of urbanization, the more rational urban structure and functions and the continuously optimized spatial layout. The theoretical framework of new urbanization has also been enriched. China has gradually established a new urbanization path with Chinese characteristics that are people-oriented, green, intensive, efficient, low-carbon, innovative and intelligent from the 18th to the 19th CPC National Congress (Xi, 2017) and a new urbanization strategy led by the urban clusters and metropolitan areas, with the coordinated development of large, medium and small-sized cities and towns and centered on people from the 19th to the 20th CPC National Congress (Xi, 2022). From the theoretical and practical meaning of new urbanization, it will inevitably have a systematic effect on forming the new development pattern. Based on this, this paper analyzes and discusses the fundamental role of new urbanization in the construction of a new development pattern based on the specific practice of China’s new urbanization construction, combining the classical Marxist ideas in urbanization and the theory of the industrial capital circulation, and proposes to remove blockages in the domestic and international circulations through developing new urbanization and construct a new development pattern with the domestic circulation as the mainstay and the domestic and international circulations promoting each other, thereby achieving high-quality national economic operation.

1. The operational mechanism of the new development pattern of “dual circulation” from industrial capital circulation

The key to realizing the new development pattern of the domestic and international economic circulations is to facilitate the match of supply and demand by building a complete system of domestic demand and strengthening the supply system, as well as to smooth the social reproduction process from production to consumption based on the potential of China’s domestic market. In his Introduction to a Critique of Political Economy, Marx discusses the general relations of production, distribution, exchange and consumption. In Das Kapital, he revealed the cyclical changes in the form of capital and the mechanism of social reproduction. Based on these theories, we believe that industrial capital circulation is closely related to the new development pattern of domestic and international circulations for the following reasons: the operating logic of industrial capital circulation is consistent with that of domestic and international economic circulation, and industrial capital is an important engine for both domestic and international economic circulations. Therefore, we explore the operational mechanism of domestic and international circulation and argue the critical role of new urbanization in establishing the new development pattern from Marxist theory on the circulation of industrial capital.

1.1 The operational mechanism of domestic economic circulation from industrial capital circulation

In Das Kapital, Marx states that the process of social reproduction is essentially a process of capital circulation. This process begins with monetary capital G, which, through the purchase of labor force A and means of production P_m, is transformed into productive capital P, which produces commodity capital W′ and then returns to money through exchange, i.e. G′ = G + g, realizing the value proliferation G–G′. At different stages of the total capital circulation, capital forms are transformed mutually, forming the unique function of industrial capital (Marx, 1975b, p. 63). From the perspective of capital circulation, the process of the general economic circulation of a country is illustrated in Figure 1.

Figure 1 elucidates the social reproduction process of a country as follows: beginning with monetary capital (G), purchasing means of production and hiring labor in the factor and labor markets, thereby forming physical productive capital (Marx, 1975b, p. 32); subsequently, labor (A) and means of production (P_m) are utilized to produce a new commodity W′, which enters into the circulation process (Marx, 1975b, p. 60). As an object of circulation in the second stage, W′ differs from W in physical quantity and value. The value of W′ is greater than that of all the factors of production, indicating that the productive capital generates a value that exceeds its value in the production process. Marx (1975a) believed that additional value created can be extracted and participate in social distribution to form factor income; the income generates consumer demand, which is satisfied in the commodity market, leading to the withdrawal of commodities from circulation, achieving the “ultimate goal” of the commodity (p. 171). The process above encompasses dual conditions vital for national economic growth: the production and realization of value (Pei and Li, 2020). The production of value provides product supply (S) through an exchange, while the realization of value generates demand (D) through the distribution and consumption of commodities. The matching of supply and demand affects the cyclicality and continuity of domestic economic circulation.

1.2 The operational mechanism of international economic circulation from industrial capital circulation

Marx (1975a) indicated that the circulation of commodities serves as the starting point of capital and the historical precondition for the generation of capital (p. 617). Production facilitates the circulation of commodities, and the emergence of commerce accelerates this process. The capital-centered mode of production continues to expand beyond geographical boundaries, creating a world market. According to Marx, the expansion of the division of labor causes large-scale domestic industries to increasingly rely on the global market, international trade and the international division of labor (Marx, 2009a, p. 627). With the rapid development of economic globalization in the 1990s, the integration of industrial chains, supply chains and transnational division of labor have become common patterns for various countries’ participation in international economic circulation. Value proliferation by industrial capital through the industrial and supply chains is an important driver of global economic circulation. The process is illustrated in Figure 2.

Assuming the global economy consists of three representative countries, in which Country I provides primary products (labor, raw materials, etc.), denoted as W₁′, through domestic circulation, which encompasses products involved in international circulation (W_1a′) and products involved in domestic circulation (W_1b′); Country II provides intermediate products W₂′ (including W_2a′ and W_2b′) and Country III provides final goods W₃′ (including W_3a′ and W_3b′). Each country produces its products through the domestic circulation process. Country I supplies primary product W_1a′ to Country II via the international factor market and realizes the proliferation of industrial capital from G1 to G1′ when primary product W_1a′ enters Country II. The primary product W_1a′ combines with labor A₂ and means of production P_m2 from Country II to produce intermediate product W₂′, in which W_2b′ enters the domestic circulation and W_2a′ is provided to Country III through the international factor market and participates in the production circulation of the final product W₃′. In economic circulation III, Country III produces the final product W₃′, in which W_3b′ enters the domestic circulation and W_3a′ enters the domestic circulation of the other two countries through the international consumer market and is consumed as a commodity to realize its value. At the same time, the industrial capital of Country III completes the proliferation of value from G3 to G3’. The smooth functioning of the domestic circulation in each country depends on the supply of factors from the countries at the front end of the industry, and the consumption of its goods depends on market demand from other countries. Throughout this process, “products undergo various stages of production, ultimately attaining their final form as a use value” (Marx, 2009b, p. 572). Commodities move from one production phase to another “in an ascending order sequentially” (Marx, 2009b, p. 571). The links are interrelated and iterative through the international factor market and consumer market, thereby establishing a comprehensive domestic and international circulation process, in which the industrial chain (P₁–P₂–P₃) advances toward high-end production, the supply chain (W₁′–W₂′–W₃′) undergoes continuous upgrades and the value chain (G₁′–G₂′–G₃′) progressively enhances the value.

2. Challenges in building a new development pattern from industrial capital circulation

From the perspective of capital circulation, the relationship between supply and demand in domestic and international circulations is formed by various countries in the global production network through the production and proliferation of value. The efficiency of industrial capital turnover plays a critical role in upgrading industrial supply and value chains. From the present development of domestic and international economic circulation, China mainly faces the following challenges in building a new development pattern.

2.1 Insufficient effective demand affects distribution and consumption

First, the increased income in the household sector leads to insufficient demand for goods and services. Firstly, affected by the external environment, the effective demand in the factor market has declined, and the wage income has decreased, leading to a contraction in consumer demand and thereby hindering the proliferation of value by industrial capital. Secondly, there is excess low-end production capacity and insufficient high-end supply. Domestic consumers have ever-increasing requirements for the quality of goods and services. However, constrained by factors such as technology, process and techniques, there is a relative surplus of low-end products and production capacity, and short-term technical problems cannot be solved currently, hindering the formation of an effective supply.

Second, the contraction of factor market demand in the production sector has led to poor circulation of monetary capital, G, to productive capital, P. Producers’ willingness to invest decreases, and the demand for factors of production decreases. From the producers’ perspective, the process of G–A and G–Pm is blocked, and the demand for consumption in the factor market is not satisfied. From the laborers’ perspective, they fail to sell their commodity A, i.e. labor power, and, thus, it fails to be converted into monetary income. The contraction of factor demand in the production sector and the poor circulation of monetary capital G to productive capital P affect labor employment and the level of residents’ income and consumer demand in the short term, hindering the transformation and upgrading of domestic industries in the long term. The dual challenges of income distribution and consumption hinder the effective utilization of the domestic mega-market’s potential.

2.2 Supply-side shocks affect the production and exchange process

First, production and exchange are not smooth and increasingly dependent on international markets. The contraction of demand has an impact on supply. On the one hand, insufficient effective demand for goods and services hinders the smooth circulation of commodities. Consequently, producers will maintain the current production level when the capital advanced by producers fails to increase the value, resulting in a relative surplus supply of low-end products. On the other hand, since the value of goods is difficult to realize, producers do not proactively expand production or invest due to a lack of incentives to innovate technologies and update the production process. Consequently, the supply of high-end products cannot be realized domestically, and consumer demand for high-end commodities can only be satisfied through the international market W_x (W_2a′, W_3a′). Then, production and exchange become increasingly dependent on the global market, which continues to impact the domestic supply.

Second, global industrial and supply chains are blocked, and production and exchange suffer from bottleneck problems. The industrial chain, supply chain and value chain shaped by the industrial capital circulation interrelate and affect each other globally (Lu and Wang, 2021). Each country’s domestic economic circulation depends on the successful completion of economic circulations in other countries in the value chain. In this regard, Marx (2009b, p. 572) pointed out, “The reproduction of a product at a higher stage is always due to the fact that its production at a previous stage has already taken place and has been completed. The reproduction would be interrupted if the previous production had not been completed.” Trade protectionism in today’s world has impeded production and exchange in international economic circulation, and the global industrial chain and supply chains suffer from the risk of a break. On the one hand, the increase in such risk hinders the smooth completion of international commodity exchange, impeding the proliferation of monetary capital G advanced in the domestic economic circulation into G′. Consequently, disruptions in international supply chains adversely affect production and exchange within the domestic economic circulation. On the other hand, countries have long participated in the global specialized division of labor and cooperation based on their resource endowments. In the deeply collaborative global division of labor system, the productive capital circulating within each country is highly specialized (Xie and Huang, 2015), and the supply of products and technologies depends on other countries in the global industrial chain. Once there is a break in the international industrial chain and supply chain, the domestic production and exchange chain will face the bottleneck phenomenon caused by the shortage in foreign core technologies and products, thus hindering the upgrading of the domestic industrial chain and supply chain and causing a sustained impact on the supply side.

2.3 Low expectations affect consumer and investment demand

Widespread low expectations lead to challenges on both the demand and supply sides. Economic expectations directly affect the behavioral decisions of market participants. For example, residents and manufacturers usually make purchasing behavior and production decisions based on their analysis of experience and future market situations (Xu, 1990), namely, consumer and investment expectations. In general, consumer expectations in the household sector shape consumer demand, while producers’ investment expectations influence supply. The matching of supply and demand affects the generation and realization of value, thereby determining whether production, distribution, exchange and consumption can proceed smoothly. Currently, consumer expectations are generally low due to the impact of commodity prices and quality on the supply side. In addition, with changes in the domestic and foreign environments, consumer expectations within the household sector have gradually converged, giving rise to irrational consumer expectations characterized by the coexistence of revenge and contractionary spending. Under the influence of these unreasonable expectations, the consumption pattern in the household sector exhibits herd behavior, manifesting as minimal spending during specific periods and frantic purchasing during others. This phenomenon generates immediate shocks to economic circulation with an immediate impact on economic circulation – once a node in the circulation is blocked, the impact will be transmitted to the following link, resulting in policy ineffectiveness and economic volatility.

While the productive investment sector has low expectations, corporate investment may still lead to excessive total investment due to the inconsistency between individual and collective rationality, thereby causing overaccumulation in the direct production sector (Xie et al., 2019) and excess capacity. At the same time, in the context of global upheaval, the risk in cross-border activities significantly increases, and the national low expectations greatly reduce the enterprises’ enthusiasm for participating in economic and trade activities, such as international cooperation and division of labor, leading to a reduction or cease in outward investment, which causes the global industrial chain and supply chain to contract or break, seriously affecting the sustainable and stable development of industrial capital in the international economic circulation.

3. Mechanisms of developing a new development pattern through new urbanization

The new urbanization path with Chinese characteristics, established since the CPC’s 18th National Congress in 2012, represents a comprehensive transformation of social development. It systematically addresses supply and demand challenges and expectations while fostering a new development pattern characterized by dual circulation. This mechanism is rooted in the essence of urbanization – a process of material transformation centered on human beings. In Marx’s view, individuals’ appropriation of the means of production and transformation of nature are aimed at “achieving their private ends” (Marx, 1972, p. 87). The transformation process has led to the division of labor and further large-scale social production, driving the process of industrialization and urbanization and promoting the establishment and development of modern cities. According to Marx’s theory of urbanization, for one thing, urbanization and industrialization facilitate the exchange and circulation of commodities. The emergence and development of the commodity economy refine the division of labor, driving industrial transformation and upgrading. In the context of the coordinated development of industry and urbanization, the market continuously expands, fostering conditions conducive to both domestic and international trade; for another, cities and towns enable more efficient allocation of production factors and better address consumer needs. Marx and Engels (1995) noted that a city has exemplified the concentration of population, means of production, capital, consumption and demand (p. 104). The resources concentrated in urban areas can be utilized more efficiently, as laborers can better realize labor reproduction by consuming goods and services offered by urban sectors. Consequently, the advancement of urbanization can promote the economic circulation of production, distribution, exchange, consumption and reproduction. Given this, this paper will focus on how the development of new urbanization facilitates the formation of a domestic mega-market, releases the potential of domestic demand to optimize investment and promotes high-quality supply with effective demand to realize a synchronized upgrading of both supply and demand sides, empowering the development of a new development pattern characterized by mutual promotion between domestic and international economic circulation.

3.1 The development of new urbanization expands total demand

In 2022, the per capita disposable income of urban residents in China was 2.4 times that of rural residents, and the per capita consumption expenditure of urban residents was about twice that of residents in rural areas. Population aggregation and structural adjustment from rural to urban areas hold enormous consumption potential for the following reasons. First, continued population concentration promotes income growth. There is a significant difference in earnings between urban and rural areas due to differences in factor productivity. Since people seek more remuneration, the earnings gap will continuously attract population transfers to towns and cities. Higher earnings not only encourage consumption but also help build wealth, which in turn boosts residents’ assets and generates additional income from property. This leads to greater income expectations among residents and further increases their spending. Second, demographic restructuring produces a behavioral modeling effect, wherein the lifestyle and behavioral habits of the original residents serve as a reference for the newly relocated residents. Urbanization is fundamentally about bringing urban ways of production and lifestyle, along with material and spiritual civilization, to rural areas (Jian and Huang, 2010). In this process, the urban area has a modeling effect on rural consumption behaviors (Cui and Fan, 2011), changing residents’ consumption habits and encouraging new household spending. Third, population aggregation helps optimize income distribution. Generally, the factors of production in urban areas contribute to the initial distribution of income based on their respective contributions, with land, labor and capital receiving appropriate rewards. However, this initial distribution sometimes proves disadvantageous for equitable distribution among these factors (Lu and Chen, 2004). Consequently, secondary and tertiary distributions of income are essential to promote fairness. A well-structured distribution can effectively reduce gaps between income groups and improve the overall social income structure. Generally speaking, low-income groups tend to exhibit a higher propensity to consume; thus, when their incomes rise, they are more inclined to spend to meet their needs, thereby enhancing overall social consumption.

3.2 The development of new urbanization adjusts the total supply

The ongoing development of new urbanization continues to attract populations, stimulate increased urban investment and enhance the availability of high-quality goods and services. A primary driver of investment increase is income growth. Saving behavior, driven by precautionary and speculative motives, is prevalent among households, businesses and governmental entities. Income emerges as the most significant determinant of saving patterns. The process of urbanization elevates income levels for both residents and enterprises, thereby stimulating consumption while concurrently increasing savings. Therefore, the financial system established in urban areas facilitates a more efficient flow of saved funds into the real economy. Another significant driver is the development of urban infrastructure. Population concentration and urban expansion generate two distinct types of investment demand. First, investments necessitated by the need for housing, schools, hospitals, roads and bridges are essential not only for the formation of urban assets but also as a catalyst for further agglomeration of resources within cities. Second, goods and services arise from production and investment aimed at meeting residents’ needs. The process of urbanization requires not only an increase in the quantity of goods and services but also enhancements in their quality and diversity. This upgrading of consumer demand can stimulate industrial innovation and drive further investment.

3.3 The development of new urbanization affects market participants’ expectations

The preceding analysis suggests that when expectations are weak or low, market participants tend to make pessimistic decisions and exhibit irrational behaviors, which can result in policy failures and hinder economic circulation, thereby impeding the establishment of a new development pattern. Thus, stabilizing expectations is crucial for fostering the active engagement of residents and enterprises in economic activities. New urbanization can bolster market participants’ expectations in the following ways. (1) Improving the living standards for people. Urban development stimulates an increase in residents’ wealth, boosts disposable income and enhances overall quality of life, ultimately elevating residents’ life satisfaction and happiness. Second, reducing the cost of living. (2) Reducing the cost of living. Urban environments benefit from economies of scale resulting from agglomeration, manifested in public transportation systems, information networks, urban safety measures, social security frameworks, etc., and these public goods significantly reduce people’s costs associated with urban living, facilitating the efficient operation of both production and daily activities. (3) Enhancing human capital satisfaction. Cities provide residents with opportunities for training and education and access to cultural and entertainment offerings, promoting a harmonious cultural environment. (4) Providing comprehensive social security. Cities can offer public goods like healthcare, pension schemes and unemployment insurance. Social security is crucial for newly relocated urban residents in stabilizing their expectations and enhancing their willingness to participate in economic activities. (5) Improving life experience. Urban development can increase living convenience and improve environmental sustainability, fostering a harmonious and comfortable living environment. (6) Reducing business costs. The business environment constitutes a unique public good with institutional characteristics collectively provided by the government, market and society for market participants within a region (Lou and Zhang, 2018). The new urbanization process facilitates the marketization, legalization and internationalization of cities, enhancing comprehensive urban management standards and significantly reducing business costs. Thus, it is clear that new urbanization can optimize urban functions and improve domestic and international environments in various ways. This process substantially improves residents’ living and working conditions, promotes overall social progress and enhances the rationality and adaptability of enterprises and individuals in economic activities through overall management.

3.4 The development of new urbanization positively affects international circulation

From the perspective of industrial capital circulation, a nation functions as an economic entity embedded within the global production network, acting as a node in the global value and supply chains. The goods market and factor market of other countries constitute the primary external environment for China’s engagement in international circulation. A key to establishing the “dual circulation” development pattern is enhancing China’s position in international economic circulation while fostering a virtuous interaction between domestic and international circulation by facilitating the transformation of industrial chains towards high-end segments, upgrading supply chains and proliferating value through value chains in the global production network. The development of new urbanization continuously improves domestic industrial and supply chains by enhancing the links of production, distribution, exchange and consumption. In addition, it reshapes international economic circulation by facilitating smooth domestic circulation (Jiao and Zhang, 2021). The specific mechanisms are manifested in two aspects:

First, the advancement of new urbanization facilitates the upgrade of industrial and supply chains by systematically improving the production and exchange processes within the domestic commodity market, thereby progressively addressing consumer demand in the international market. From the perspective of commodity consumption, urbanization represents a process through which social production aligns with consumer demand. As China’s new urbanization initiative is comprehensively advanced, domestic consumer demand undergoes continuous upgrading, prompting structural adjustments in the production and exchange process and thereby facilitating the gradual penetration of high-quality domestic goods and services into the international economic circulation. Furthermore, as China’s technological innovation continues to advance and products undergo constant updates and iterations, the transition from initial products W1′ and W2′ to mid- to high-end products W3′ has been achieved, resulting in an upgraded supply chain that provides mid- to high-end offerings in the international market. Simultaneously, domestic production processes have progressed from P₁ and P₂–P₃, thereby completing a comprehensive upgrade of the industrial chain. This process continuously strengthens the dominant role of domestic circulation as the mainstay of the national economy through the development of new urbanization to enhance the penetration of Chinese goods and services in international circulation.

Second, the development of new urbanization enhances the circulation and allocation of domestic factor markets, thereby attracting high-quality international resources and facilitating value chain expansion. From a factor allocation perspective, urbanization represents a process through which factors engage in distribution and value realization. As China’s new urbanization advances, the efficiency of circulation and allocation in the domestic factor market improves, which is reflected in a more rational and effective mechanism for factor participation in value distribution. The development of new urbanization continuously reshapes the spatial structure of factors, further attracting high-quality international resources. This sustained accumulation of factors is poised to transform China’s endowment profile gradually. In the context of global economic circulation, countries leverage their comparative advantages based on factor endowments to participate in international production and division of labor. The availability of high-quality resources has become essential for the expansion of China’s value chains and effective engagement in global competition, thereby offering substantial support for China’s development in international circulation.

4. Specific approaches to develop a new development pattern through new urbanization

Based on the theory of industrial capital circulation, this paper elucidates the general process of domestic and international economic circulations, critically examines the bottlenecks and challenges in economic circulation and emphasizes the mechanisms through which new urbanization contributes to the formation of a new development pattern. The findings reveal that, first, Marx’s theory of capital circulation identifies two essential conditions for economic growth, i.e. value production and realization. The process of value production is characterized by producers delivering goods via the circulation process, while value realization manifests as consumers generating demand through distribution and consumption. The alignment between supply and demand directly influences the continuity of domestic economic circulation. From an economic globalization perspective, the integration of industrial chains and supply chains – coupled with transnational collaboration and division of labor – has emerged as a prevalent mode of engagement in global economic integration. Industrial capital leverages the industrial and supply chains to facilitate value proliferation, thereby fostering global economic circulation. Second, from industrial capital circulation, the obstacles to developing a new development pattern are evident in three dimensions: insufficient effective demand impedes distribution and consumption, supply-side shocks disrupt production processes and exchanges and residents, enterprises and governments exhibit low expectations. To address these challenges effectively, advancing new urbanization can catalyze the establishment of a super-large domestic market that unleashes consumer potential to stimulate investment expansion and optimization while promoting high-quality supply aligned with effective demand, thereby achieving synchronous upgrades on both supply and demand sides and further facilitating smooth domestic circulation that empowers a new development framework where domestic and international circulations mutually reinforce. Accordingly, this paper proposes several strategic approaches as follows:

Firstly, advancing new urbanization by leveraging counties as significant platforms for building a comprehensive domestic demand system. In 2022, there were 1,812 counties and county-level cities in China, which accounted for 63.7% of the nation’s county-level administrative divisions and were 1.8 times the number of urban districts in prefecture-level cities and above. The population residing in urban areas within counties constituted nearly 30% of the nation’s total urban permanent residents. Counties hold a critical position within China’s urban development landscape. Expediting the relocation of farmers with counties as carriers and enhancing living and production conditions in surrounding rural areas is significant for enabling factors in rural sectors to participate in distribution and consumption, thereby expanding domestic demand and further establishing an integrated domestic demand system. Therefore, such measures should be implemented. (1) Deepening reforms to the household registration system. The 14th Five-Year Plan (2021–2025) and Long-Range Objectives through 2035 have initiated tiered reforms aimed at optimizing permanent residency policies in cities based on different population sizes: below 3 million, 3–5 million and over 5 million. The reform of the hukou system has made it easier for agricultural migrants to settle in cities. There is a need to optimize population management methods continually, lower the barriers to obtaining urban household registration and leverage the transitional role of counties between urban and rural areas to smoothly and effectively integrate rural migrants into the urban environment. (2) Innovating the land system. The “14th Five-Year Plan for New Urbanization” issued by the National Development and Reform Commission (2022) explicitly advocates for reforming the use of rural land, including agricultural lands and construction lands. In promoting new urbanization, particularly regarding county development, it is essential to enhance both land use and output efficiency. Relevant methods include clarifying property rights held by farmers and improving the overall land property rights system.

Secondly, harnessing the significant role of urban clusters and metropolitan areas in promoting the formation of a unified domestic market. Taking urban clusters and metropolitan areas as spatial entities, the large-scale aggregation of population and capital, along with the intensive utilization of technology and land, are important directions for the advancement of new urbanization in China. Urban clusters and metro areas hold a central position in China’s economic development. In 2022, China’s gross domestic product (GDP) reached 119.7 trillion yuan, accounting for 18.5% of the world’s economy. Among this, the combined GDP of 42 major cities reached 55.1 trillion yuan, representing 46% of the national total, with the number of cities boasting a GDP of over one trillion yuan, increasing from 6 in 2012 to 24 in 2022 [1]. By 2035, the numbers of megacities, medium-sized cities, small cities and towns in China will be further optimized, resulting in a spatial layout that promotes coordinated development among these various types of urban areas. This layout will play a crucial role in streamlining production and exchange processes, thereby fostering the formation of a unified domestic market. First, it is important to leverage information technology and the digital economy to empower traditional and leading industries within urban sectors, guiding industrial upgrading through innovation and creativity. Specific measures include (1) enhancing traditional industries and emerging businesses in urban sectors through data, Internet technologies and the digital economy, steering these industries towards higher-end development, which requires innovative breakthroughs. Population, factors of production and industries concentrate in urban sectors and, driven by demand and innovation, continually promote the upgrading of consumption and industrial structures, ensuring a match between supply and demand and facilitating a virtuous cycle of productive materials in cities. Institutional innovation must be accelerated to swiftly dismantle barriers between urban and rural areas as well as administrative regions, thereby promoting the formation of a unified national market. (2) Utilizing urban clusters and metropolitan areas as strategic pivot points to restructure the international division of labor, further expanding China’s competitive advantages in opening up. Since the functions and levels of metropolitan areas and urban clusters determine how a country participates in the global economy, it is essential to enhance the attractiveness of urban clusters and metropolitan areas to global high-quality resources to create hubs of technology, industry and talent, changing the regional factor endowments and thereby transforming the nature of the country’s participation in the international division of labor. It drives the formation of high-end industrial clusters and new business models, positioning the nation at the upper echelons of global value and supply chains. China has established 21 free trade zones across 17 provinces, regions and four municipalities directly under the central government. Urban clusters and metropolitan areas can leverage the policy advantages of these free trade zones to deepen reforms. By anchoring efforts in the Regional Comprehensive Economic Partnership (RCEP), these zones can strengthen cooperation with the Association of Southeast Asian Nations (ASEAN) and the Asia–Pacific region to create a conducive business environment and explore ways to build a higher level of open economy, striving to become new hubs for China’s further opening to the world.

Thirdly, guiding high-quality urban development through new urbanization construction to stabilize and enhance market participants’ expectations. From the history of the world’s development, urban clusters and metropolitan areas represent the most efficient, dynamic and open spatial organizational forms in human society. For example, the Northeastern Megalopolis in the United States of America, the largest urban cluster in the world, occupies 1.5% of the country’s land area yet is home to about 20% of the USA population, with an urbanization rate as high as 90%. It is the most densely populated region in the USA with the strongest economic drive. Similarly, the Tokyo Metro Area in Japan, one of the most efficient and competitive metropolitan areas in the world, occupies 9.8% of the country’s land and is home to one-third of Japan’s population, 70% of large enterprises and 90% of foreign company headquarters. This region accounts for 67% of the national economy and contributes to 75% of the national industrial output, with an urbanization level exceeding 90% (He, 2022). China, with its sizable population and vast development potential, implements the strategy of balanced regional development through the construction of metropolitan areas and urban clusters to optimize the layout of productive forces. This is a crucial approach for building the new development pattern. Therefore, it is essential to positively advance the development of urban clusters, fostering the development of modern metropolitan areas and improving urban spatial carrying capacity while enhancing population and economic carrying capacities. Establishing an urban layout featuring “two horizontals and three verticals” and a spatial dynamic system for high-quality economic development, China implements the new urbanization strategy to lead high-quality urban development, stabilizing and enhancing market participants’ expectations. Specific measures include (1) improving the efficiency of factor allocation in urban clusters and metropolitan areas by promoting the intensive utilization of water and land resources, and different regions should advance urbanization and ensure localized approaches based on their respective ecological and economic conditions and natural laws, reducing the scale of habitation and development in ecologically fragile areas. Improving people’s life experience, as well as urban, comprehensive governance capabilities, and advancing all aspects of social undertakings through new urbanization will benefit more people and thus stabilize and improve the expectations of enterprises and citizens. (2) Leveraging urban clusters and metropolitan areas as pivot points to position China at the forefront of global science and technology and make it the origin of major international scientific and technological inventions, establishing key hubs in the global innovation network. Enhancing other countries’ positive expectations regarding China's stable and high-quality growth by fostering a high-quality urban system.

Figures

Figure 1

General process of national economic circulation from industrial capital

Figure 2

General process of international economic circulation from industrial capital circulation

Note

1. The 42 major cities mainly include cities with a GDP of over one trillion yuan, sub-provincial cities, and provincial capitals.

This is a translation of an article original post at: https://doi.org/10.15894/j.cnki.cn11-3040/a.2023.01.003