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Financing Challenges for New Models of Urbanization
By Lei Wei and Zhu Hongming, the Research Institute of Finance, the DRC
Research Report No 115, 2013
Abstract:
China is advancing its urbanization at a fast speed. It is estimated that by 2020, the urbanization rate will reach over 60 percent from 52.6 percent in 2012, triggering off a huge financing demand. The future internal and external environment and conditions for financing are not encouraging.
First, against the backdrop of an economic growth slowdown and a lowering resilience in government income, reduced growth in government incomes will become normal. Second, due to the dropping savings rate, growing inflation pressure and capital shortage in banks, the monetary and financial environment will not likely be as loose as in the past. Third, latent financial risks are rising; risk reduction is more urgent and there is narrowing space for new urbanization to find financing. Fourth, the current financing mechanisms for urbanization are unsustainable. Under such circumstances, China can't wait any longer to implement reforms and innovation in the financing system for new urbanization.
