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Impact of
Urbanization on
Regional Economic
Development
Hunan Provincial Bureau of Statistics
September 2013
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Introduction
This article analyzes the impact of urbanization on regional
economic development by referring to the typical examples of
regional economic development in Pearl River Delta, Wuhan city
circle and Chang-Zhu-Tan urban cluster.
With sample data on
urbanization rate of the above three regions as well as indicators
relating to economy, society and people’s livelihood, comparative
analysis is performed using modeling (such as linear, composite,
growth models, etc.) via SPSS application and analytic hierarchy
method. Regional conglomeration, innovation capacity, radiation
capacity and demonstration capacity have become stronger and
stronger following the increase of urbanization rate. Likewise, the
scale of industries becomes bigger and bigger, and advantages
more and more obvious.
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■ Contents
1. Theoretical study on the impact of urbanization on
regional economic development
2. Some basics of the typical regional economic
development
3. Correlation analysis between urbanization and regional
economy
4. Conclusions and suggestions
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 1. Theoretical study on the impact of urbanization
on regional economic development
(A) Aggregation Theory
(B) Advantage Theory
(C)Radiation Theory
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Overseas urbanization studies
Judging from the progress of urbanization of each
country in the globe, urbanization development presents a
S-shape growth curve. The S-shape growth curve has three
basic stages. The initial stage is where the urbanization rate
is below 30%, with lower level of economic development
and slow progress of urbanization; the middle stage is
where the urbanization rate is between 30% and 70%, with
stronger economic foundation and faster speed of
urbanization; the last stage is where urbanization rate is
above 70%, with higher level of economic development and
stable development of urbanization. Experiences from
different countries and different types of urbanization
patterns are worthy of our study.
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(A) Aggregation Theory
Urbanization will cause the prompt aggregation
of industries.
Urbanization facilitates regional
economic development through promotion of industrial
development and thereby encouraging industries to
aggregate.
Industrial agglomeration refers to the
process of the same industry getting highly
concentrated in a designated geographical location,
with continuous clustering of capital and factor inputs
therein. Industrial agglomeration also refers to the
clustering of companies and various types of
interrelated organizations in a designated field and
relatively concentrated in a geographical location.
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(B) Advantage Theory
Regional advantage refers to the integrated
resource advantage of a region; that is, the existing
favourable conditions or advantageous position of a
certain region during economic development. Its
component factors mainly include: natural resources,
geographical location, as well as various aspects of
society, economy, technology, management, politics,
culture, education, tourism, etc.
The regional
advantage is mainly determined by natural resources,
labour, industrial agglomeration, geographical
location, transportation, etc. Regional advantage is
also a concept of development which varies with the
changes in the relevant conditions.
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(C) Radiation Theory
Radiation capacity of urbanization refers to the spread of positive
effect of urban development to the peripheral regions, thereby
promoting the economic development of the peripheral regions.
Radiation is divided into intangible spread and tangible spread.
Intangible spread includes information technology, education and
culture, etc.; tangible spread includes talent flow, capital and resource
flow, etc. Regional radiation capacity mainly refers to the movements
of capital, talent, technology, market information, etc. as well as the
exchange of concepts and ideas, mode of thinking, living habits, etc.
between regions of relatively higher level of economic development
and urbanization and those of relatively lower level of economic
development and urbanization. The range of radiation depends upon
levels of urbanization and economic development of a region. The
higher the levels of such, the stronger the technology, capital, talents
and other related aspects, and hence the wider the range of radiation
for promoting the economic development and process of
modernization of the whole region.
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 2. Some basics of the typical regional
economic development
(1) The general situation of Pearl River Delta
(2) The general situation of Wuhan city circle
(3) The general situation of Chang-Zhu-Tan
urban cluster
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(1) The general situation of Pearl River
Delta
Pearl River Delta adjoins Hong Kong and Macau, with Pearl
River passing through the whole region.
Water and land
transportation is very well-developed, with advantageous
geographical location. Pearl River Delta covers such locations as
Guangzhou, two sub-provincial cities in Shenzhen, five prefecturelevel cities of Zhuhai, Foshan, Jiangmen, Dongguan and
Zhongshan as well as some county-level cities like Zhaoqing,
Huizhou, etc. Pearl River Delta has a land area of 54 700 square
kilometers, i.e. 0.57% of the total land area of our country. At end
of 2011, the resident population is 56 465 000, or 4.19% of the
total population, with urbanization rate at 83%; the regional GDP is
4.372086 trillion dollars, or 9.26% of the total GDP of the whole
country; the regional GDP per capita is RMB 77, 637, 2.21 times of
the national average level.
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(2) The general situation of Wuhan city
circle
Wuhan city circle is located at the south-eastern part of Hubei
province, with Wuhan city as the center. Wuhan and the eight
cities of Huangshi, Ezhou, Huanggang, Xiaogan, Xianning, Xiantao,
Tianmen and Qianjiang within a periphery of 100 kilometers have
formed a regional economic entity, which is situated at the “crossshaped” junction of first-rate development of the two east-west and
north-south axes —— Changjiang economic belt and Jing-Guang
Railway; and Jing-Zhu High Speed Rail. Wuhan city circle is the
core region of development within Hubei province where industries
and factors of production are the most intensive and vigorous. The
region has a total area of 58 100 square kilometers, or 31.2% of
the province’s total area. In 2012, the population of the region was
more than 30 000 000, which was more than half of the province’s
population. The urbanization rate is 58.3%; regional GDP is
1.387137 trillion dollars; and regional GDP per capita is RMB
45, 378, exceeding the province’s average level by 17.6%.
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(3) The general situation of Chang-Zhu-Tan
urban cluster
Chang-Zhu-Tan urban cluster is situated at the north-eastern
part of Hunan province. The three cities are distributed in a
triangular shape along Xiang Jiang. The cities are within a distance
of less than 40 kilometers from each other. They belong to the
typical “economic growth triangle”, and are the cradle of Hu-Xiang
culture. Within the region, the rail lines of Jing-Guang, Zhe-Gan,
Xiang-Qian, Xiang-Gui, etc. intersect; Jing-Zhu, Shang-Rui highways
and the four national highways 106, 107, 319 and 320 run through
the region. Water transportation internally links up places like Xiang,
Zi, Yuan and Li, and reaches out to Chang Jiang. The administrative
area under the jurisdiction of Changsha, Zhuzhou and Xiangtan is
28 000 square kilometers, taking up 13.3% of the province’s total
area. At end of 2012, the total population was 13 834 200, or 20.8%
of the province’s total population. The urbanization rate is 63.4%.
Regional GDP is 944.4 billion dollars, or 42.6% of the province’s
GDP. Regional GDP per capita is RMB 68,506, 2.05 times of the
province’s average level.
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 3. Correlation analysis between urbanization and
regional economy
(1) Urbanization speeds up regional economic
development
(2) Negative effects brought about by overly rapid
pace of urbanization on regional economic
development
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(1)Urbanization speeds up regional
economic development
Strengthen regional
agglomerating capacity
Strengthen regional
technological innovation
Increase regional
radiation capacity
Set a regional example
Urbanization
Expand large scale
industries in the
region
Increase geographical
advantage of the region
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Typical Analysis: Regional Radiation Capacity
Regional radiation capacity mainly refers to the integrated
influence and power of the core city within an urban cluster towards
promoting the development of peripheral cities and regions. During
the process of continuous urbanization and rapid development of
individual urban clusters, it is a strategic choice to make full use of the
radiation capacity of each city to sustain economic development. Thus,
it is important to study the radiation capacity of each core city for the
strategic implementation of urbanization. In this article, analytic
hierarchy method is adopted to perform systematic analysis and
research of six cities within the three regions. We have classified
urban economic radiation effect into five indicators, i.e. integrated
economic strength, industrial development, infrastructure, science
education and level of opening up. Weightings are allocated to the
various indicators (see table 9). Radiation scores and rankings of
each city are then computed (see table 10).
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Table 9: Economic radiation and indicators system of 6 cities
First Level Indicator
Integrated economics strength
radiation (0.35)
Second Level Indicator
Economic aggregate radiation (0.7)
Economic level per capita radiation
(0.3)
Industry development radiation
(0.15)
Industry structure radiation (0.5)
Enterprise radiation (0.5)
Basic infrastructure radiation
(0.2)
Transportation radiation (0.25)
Urban construction radiation (0.25)
Resources radiation (0.25)
Communication facilities radiation
(0.25)
Science education and medical
care radiation (0.2)
Technology input radiation (0.3)
Labour quality radiation (0.4)
Medical care radiation (0.3)
Opening up radiation (0.1)
Utilization of foreign capital radiation
Third Level Indicator
Regional production output (0.3)
Regional population (0.25)
Fixed asset investment (0.15)
Total amount of retail sales of consumer goods (0.1)
Fiscal revenue (0.2)
GDP per capita (0.35)
Fixed asset investment per capita (0.2)
Fiscal revenue per capita (0.25)
Disposable income per capita in a city (0.1)
Consumer spending per capita in a city (0.1)
Share of secondary industry in GDP (0.3)
Share of tertiary industry in GDP (0.2)
Ratio of secondary to tertiary industries (0.5)
Number of enterprises above the designated size (0.35)
Gross output of industries above the designated size (0.65)
Passenger capacity (0.6)
Freight volume (0.4)
Urban built-up area (0.5)
Urban green area (0.2)
Urban road area per capita (0.3)
Total water supply (0.5)
Society-wide electricity consumption (0.5)
Fixed line telephone subscribers (0.2)
Year-end number of mobile telephone subscribers (0.4)
Subscribers for broadband internet access (0.4)
Expenditure on science and technology (0.6)
Percentage of expenditure on science and technology to
total expenditure (0.4)
Number of students in tertiary schools (0.6)
Number of tertiary schools (0.4)
Number of hospitals and health centers (0.4)
Number of doctors (0.6)
Actual amount of utilization of foreign capital in the year
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Table 10: Scores and rankings of economic radiation of the six cities
City
Integrated
economics
strength
Industry
development
Basic
infrastructure
Guangzhou
Shenzhen
Wuhan
Changsha
Zhuzhou
Xiangtan
0.534
0.549
0.409
0.354
0.140
0.114
0.181
0.227
0.131
0.133
0.118
0.111
0.364
0.376
0.218
0.133
0.066
0.042
Science
education
and medical
care
0.300
0.172
0.279
0.212
0.178
0.060
Opening
up
Total
Rank
0.158
0.170
0.139
0.096
0.018
0.018
1.536
1.494
1.177
0.928
0.521
0.344
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3
4
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Note: Data sourced from “China City Statistical Yearbook 2012”
According to the results shown in Table 10, Guangzhou obtained the
highest comprehensive radiation score of 1.536; Shenzhen rank the
second with a score of 1.494; Wuhan 1.177; Changsha 0.928; Zhuzhou
0.521; and Xiangtan the lowest 0.344. It can be seen that for cities like
Guangzhou and Shenzhen having higher urbanization rates, its
radiation capacities are stronger. For cities such as Zhuzhou and
Xiangtan having lower urbanization rates, its radiation capacities were
weaker. This shows that the higher the urbanization rate of a city, the
stronger is its radiation capacity; the lower the urbanization rate of a city,
the weaker is its radiation capacity. To a certain extent, the radiation
capacity of a city depends upon its urbanization rate.
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(2)Negative effects brought about by
overly rapid pace of urbanization on
regional economic development
Negative Effects
Bottle-neck
Effect
Matthew
Effect
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Ty p i c a l A n a l y s i s : M a t t h e w E f f e c t
Matthew effect refers to the situation where the strong becomes
stronger and the weak becomes weaker. This is widely applied to
various fields like social psychology, education, finance and science,
etc. When considering simultaneously such factors as system, human
resources, income, etc., there always appears another outcome, i.e. a
Matthew effect of “development divergence” between the
developments of affluent regions and less affluent ones. The people,
capital and goods would flow from the regions lagging behind to
affluent regions, as the systems of the former are often less developed
than those in the affluent regions. And the vicious cycle goes on,
rendering regional divergence larger and larger.
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Table 11: Disposable and fiscal income/revenue per capita of each
core city in 2005 and 2011
Indicator
Guangzhou
Shenzhen
Wuhan
Changsha
Zhuzhou
Xiangtan
2005 Disposable income per capita
18287
21494
10850
12434
11230
9685
2011 Disposable income per capita
34438
36505
23738
26451
22633
20614
2005 Fiscal revenue per capita
3913
4987
1618
1740
660
528
2011 Fiscal revenue per capita
12024
50003
8139
7992
2790
2228
As shown in Table 11, from 2005 to 2011, the “Matthew Effect” of each
core city in the three regions further manifested itself. For disposable
income per capita in a city, the difference between the highest of
Shenzhen and the lowest of Xiangtan increased from RMB11,809 in 2005
to RMB 15,891 in 2011, showing that high income earners earned more
and more. For general budgetary revenue per capita of regional finance,
the ratio of the highest of Shenzhen to the lowest of Xiangtan rose from
9.4 times in 2005 to 22.4 times in 2011, showing a trend of increasing
difference. Social inequality arising from income differential is a crucial
factor affecting social stability in each region. Therefore, with the
increasing urbanization and expanding income differential each year, the
widening income differences among the regions have given rise to the
“Matthew Effect”, bringing about certain negative impacts on the socioeconomic stability of the regions.
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 4. Conclusion and suggestions
1) Conclusions of Analysis
2) Direction of regional economic development
during urbanization
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(1) Conclusions of Analysis
With sample data relating to the urbanization rates of the above three regions as
well as indicators of economy, society and people’s livelihood, analyses of
modelling (such as linear, composite, growth models, etc.) via SPSS application
and analytic hierarchy method are performed on the data.
Regional
conglomeration, innovation capacity, radiation capacity and demonstration capacity
have become stronger and stronger, along with the increase in urbanization rate.
The size of the large scale industries becomes bigger and bigger, and advantages
more and more obvious. At the same time, the rising urbanization rate also
pushes up the housing price, creating the need for more capital during
urbanization and rising the threshold for farmer to change to urban dweller during
urbanization. Following the increased urbanization rate, the income differentials
among the city dwellers have become larger and larger. The large income
differences have brought about negative impacts on the socio-economic stability of
the regions. Thus, each region needs to play a leading role during urbanization to
facilitate sound and fast regional economic development. In the meantime, it is
also necessary to properly adjust the policies regarding housing price and income
distribution so as to constrain housing price and income differences within a
reasonable range.
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Direction of regional economic
development during urbanization
Direction of development
Reform and
innovate to
optimize
regional
structure
Act according
to local
circumstances
so as to build
livable cities
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(2) Direction of regional economic
development during urbanization
In conclusion, the core of modern urbanization is the
urbanization for “people”. Upgrading the living qualities of
“people” is the key to actualize the urbanization for
“people” with the objective of making contributions to the
general public. Urbanization of regional economy must
be intensive, energy-saving and eco-friendly, allowing
modern urbanization to complement industrialization,
modernization of agriculture, and information technology.
This is to prevent building artificial city with overintervention.
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