Urbanization will be a main engine for sustainable economic development in China, and urbanization will also promote the restructuring of China's economy, as it boosts consumption, investment and development of the service sector.

The apparent gap between China's current urbanization rate of slightly above 50 percent and nearly 80 percent rate of developed countries means China still has great potential for growth in investment and consumption as more rural residents become urban residents in the next 10 to 20 years.

However, the system for distributing fiscal resources from the central to local governments is too rigid to help promote the country's urbanization. The governance capability in cities also lags behind the current urbanization trend, with city governments usually attaching more importance to infrastructure construction than to integrating new residents.