China's sustained economic growth over the past few decades has been underpinned by urbanization.
The foundation for China's sustained economic growth over the next few decades is suburbanization.
Renowned scholar Qian Wenzhong once made a crucial point: the core group of backbone figures in China after its reform and opening-up were the educated youth who went to the mountains and countryside, including the first batch of entrepreneurs and even some of our current leaders, who originated from the educated youth. They gained an understanding of China's true national conditions and honed their comprehensive abilities through this experience, which became one of the major dividends driving China's rapid development after its reform and opening-up.
Today, a new wave of retirees returning to their hometowns will recreate China's development dividend in the new era.
All economics should be developmental economics; if not, it means that no direction for further development has been found. Developmental economics refers to the fact that the economic laws corresponding to each stage of development are different, and economic policies must be considered in accordance with the developmental laws of the current stage. If the current stage of development is violated or ignored, it will inevitably lead to serious problems. China has obviously entered the stage of "suburbanization" and "counter-urbanization", but both the academic and government circles have almost completely ignored this, and are instead distracted by other aspects, which is the root cause of being unable to find solutions.
The so-called "consumption deficiency" is an illusion, it's not that people don't have money to spend or lack the desire to consume, but rather that cities simply don't have the physical space for consumption. This is no longer an economic issue, but a geometric one.
Suburbanization and Counter-Urbanization Represent the Pinnacle of Industrial Civilization
In the past, urbanization was always seen as a symbol of entering modern civilization, and "leaving the countryside" to move to the city was the only way for rural people to improve their fate and living standards. It's possible that very few people considered that one day China would turn to the suburbanization process that had long been completed in developed countries. Although the concept of "suburbanization" was already known among Chinese scholars, it remained a distant academic concept in the minds of Chinese people, and even among scholars, very few thought it would become a reality in China so quickly.
20 years ago, I was the technical deputy general manager at ZTE's fourth marketing division. In 2004, I made my first business trip to Europe, and my colleagues at the local sales office introduced me to the daily life and habits of Europeans. They specifically mentioned to me that one way European elites show off to others is by saying "I live in the countryside". At the time, I could quickly understand this from the academic concept of "suburbanization", but I found it hard to directly appreciate the psychological state of living in the countryside as a way for elites to show off, because the living standards in rural China were vastly different from those in cities. However, after traveling to the US and Europe for business many times, especially driving through rural areas in Europe and the US, I indeed found it much more comfortable than in cities. The high-rise buildings in European and American cities, which we imagine to be the epitome of modern civilization, are actually where the poor people live. The truly wealthy and elite people all live in the suburbs.
At the time, I told my colleagues that maybe one day when I retire, I'll be able to brag about living in the countryside. I thought it was just a joke, and maybe we wouldn't see that day in our lifetime.
It turns out that China has already begun to enter such a state. As I write this article, I have been living in the countryside for almost half a year, which fully proves that living in the countryside is something to brag about, and that's why I'm writing this article now.
Each village committee surprisingly has its own fire truck, patrol car, and sanitation vehicle.
Every household in each village has a trash can at their doorstep, rather than the urban practice of having them concentrated in each neighborhood. Trash is collected every day.
Is this an isolated case or does it have broader implications?
First, let's take a macro view to see if China has already entered the suburbanization stage. Generally, developed countries also started with an urbanization stage, similar to China's past few decades, where economic development and rising urbanization rates led to a constant influx of rural people into cities. However, when the urbanization rate reaches a certain level, the suburbanization process begins. Looking at the specific practices of various developed countries, the urbanization rate at which they started suburbanization varies slightly, and is roughly at the following stages:
China's current urbanization rate is 67.89% as of the end of 2025, according to official data from the National Bureau of Statistics, up 0.89 percentage points from the end of 2024, when the rate was 67.00%. Official data for the first half of 2026 has not been released yet. Based on the trend of an annual increase of around 0.8-0.9 percentage points in recent years, it is estimated that the rate may have approached around 68.5% by the middle of 2026.
In other words, China has quietly reached the threshold where it should or must begin "suburbanization" and "counter-urbanization".
China's Academic Research Status on This Issue
The concept of "counter-urbanization" was introduced in 1976 by American geographer Brian Berry, referring to the process in which, after Western urbanization reaches a certain stage, metropolitan growth begins to slow and large numbers of urban residents and resources flow toward rural areas and small towns. In 1979, American urban geographer Ray Northam, through empirical analysis of urbanization processes in Western countries, found that urbanization follows a slightly flattened "S"-shaped curve—now known as the Northam curve—further confirming that counter-urbanization is a distinct phase within the broader urbanization trajectory. Northam divided urbanization into three stages: the initial stage (urbanization rate below 30 percent), the acceleration stage (urbanization rate between 30 percent and 70 percent), and the stable development stage (urbanization rate above 70 percent). In the late stage of urbanization, growth decelerates or even stalls, giving rise to counter-urbanization. Since then, counter-urbanization has come to be regarded not only as an inevitable phase in urban development but also as a key theoretical framework widely used in urbanization research.
Excerpted from "Yamada Hiroshi, Li Gongchao: 'The New Crisis Threatening Urban Civilization - What Can Be Learned from European Experience?', International Economic Review, No. 12, 1983." Since then, China's academic community has continued to study this issue.
However, when I conducted a big data analysis of Chinese academic papers on CNKI using "suburbanization" and "counter-urbanization" as keywords, I found a very strange result:
The annual number of academic research papers in China with the theme of "suburbanization" showed a trend of big data analysis, peaking in 2007.
The annual number of academic research papers in China with the theme of "counter-urbanization" showed a trend of big data analysis, with the peak in 2016.
As can be seen from the above figure, from 2005 to 2015, China's urbanization rate increased by a total of 13.11 percentage points, with an average annual increase of approximately 1.31 percentage points, marking a period of rapid urbanization in China, without any clear signs of suburbanization. So, what about the "labor shortage" and "return to hometowns" back then? Looking back, it was actually a major industrial transfer within China.
In September 1999, the 4th Plenary Session of the 15th Central Committee of the Communist Party of China formally proposed the implementation of the Western Development Strategy.
In November 2002, the 16th Party Congress report proposed "supporting the acceleration of adjustment and transformation in old industrial bases such as the Northeast region". In October 2003, the Central Committee of the Communist Party of China and the State Council issued "Several Opinions on Implementing the Revitalization Strategy for Old Industrial Bases in Northeast China and Other Regions", marking the official and comprehensive implementation of the revitalization strategy for old industrial bases in Northeast China.
In March 2004, the government work report proposed "promoting the rise of the central region".
It was the Chinese government's proactive promotion of inter-regional industrial transfer within China that triggered the subsequent "migrant worker shortage" and "return to hometowns trend" in the eastern region.
As can be seen from the comparison between Guangdong Province and the national urbanization rate in the above graph, the current national urbanization rate is roughly the same as Guangdong's level in 2015. In 2013, Guangdong's urbanization rate had already reached 67.76, equivalent to the national urbanization rate level in 2025.
A comparison of the two graphs shows that the difference between Guangdong Province's urbanization rate and the national average is narrowing, from a 17.69 percentage point gap in 2005 to an 8.69 percentage point gap in 2025, a reduction of 9 percentage points.
The urbanization rate of 31 provinces, municipalities, and autonomous regions nationwide in 2025
From the above analysis, it can be seen that whether from a national perspective or from the most developed regions and municipalities with naturally high urbanization rates, China should have begun to enter a stage of suburbanization and counter-urbanization on a large scale. The eastern coastal regions have long been in the stage of suburbanization development, so why is there no significant suburbanization phenomenon? This is because the eastern regions have extremely scarce land resources, and the suburbs have directly become cities.
From a national perspective, it has undoubtedly already reached the stage of suburbanization.
But now, there is barely a voice to be heard from either the academic community or the government, so why is that?
Why China Fears 'Suburbanization' and 'Counter-Urbanization'
The following are statistics on the vacancy rate of homesteads in rural areas from different sources.
In terms of land area, the idle and vacant rate of rural homesteads nationwide is roughly between 10% and 18%; in terms of the number of houses, the rate is even higher, with some studies reaching 25% to 30%.
The idle rate of rural homesteads varies by region
Typical Case Studies
As can be seen from the above analysis, the vacancy rate of homesteads in rural areas varies greatly, ranging from relatively few vacancies to complete abandonment.
The following are vacant rate data for China's commercial residential properties provided by various institutions.
The following are the vacancy rates for commercial residential housing in different regions of China
China's housing vacancy rate in international comparison
Different vacancy rates in the housing market have distinct implications. A low vacancy rate, typically below 5%, indicates a tight housing market where demand exceeds supply, often leading to rising rents and housing prices. This scenario can be beneficial for landlords and property investors but may pose challenges for renters and potential homebuyers. On the other hand, a high vacancy rate, usually above 8%, suggests a surplus of housing supply over demand. This can lead to downward pressure on rents and housing prices, making housing more affordable for renters and buyers. However, it can also result in reduced income for property owners and potentially slower economic growth in the housing sector. A moderate vacancy rate, around 5-8%, is often considered healthy, as it balances the needs of both landlords and tenants, allowing for stable rents and prices while still offering options for those seeking housing. The ideal vacancy rate can vary by location, depending on local economic conditions, population growth, and other factors.
China is faced with a dilemma due to the simultaneous rise in vacant housing rates in both rural and urban areas, with the latter reaching a dangerous level. If the country were to initiate counter-urbanization at this time, wouldn't the vacant housing rate in urban areas increase even further?
However, this is not simply a matter of vacancy rates, but a structural issue. As the vacancy rate of urban housing continues to rise, the living conditions of people in cities, especially young people, have continued to deteriorate due to the significant increase in rent and sale prices in the past. It is common for a single-room apartment to cost 2,000 to 3,000 yuan in rent. This raises a question that many people are asking: why are young people in cities now unwilling to have children? The "unwillingness" is also an illusion - if they do have children, where would they raise them? Of course, this issue involves more complex factors, which we will discuss later. This article will only discuss the issue of China's economic development stage.
Promoting Counter-Urbanization to Unlock Consumption Potential: Geometric Spatial Analysis
Let's take a look at my consumption situation after I moved to the countryside.
After scattering the grass seeds I bought, I was excited to water them every night at first, but in the end, a bunch of wildflowers and weeds also joined in and grew together, and even pumpkin vines grew, all thriving happily. The germination rate wasn't 95%, but possibly as high as 195%. The area where I scattered the grass seeds sprouted, and the area where I didn't scatter seeds sprouted even more.
The landlord was also shocked, and after staring for a long time, she blurted out, "I've spent my whole life pulling out weeds as soon as I see them." Initially, she pulled out all the grass I had planted, and I told her not to, explaining that I had intentionally planted it. When she saw me watering the grass seeds, she was disdainful, repeatedly saying, "You don't need to water them." However, the initially weak and small grass shoots eventually grew rapidly to the point of bursting. At least for this year, I've really enjoyed this free-growing grass.
Having so much grass in the yard, will there be more insects?
In fact, people often overlook the living environment in the city, and the greenery in residential areas needs to be regularly sprayed with pesticides and weeded, otherwise it will be overgrown with weeds and infested with insects.
However, the pleasant surprise was eating several dozen pumpkins and stir-fried pumpkin tips.
So, China's economists are all talking nonsense with their eyes closed. China's current economic problems are not about tax rates, interest rates, reserve requirements, exchange rates, or the Medium-term Lending Facility (MLF), nor are they about investment rates. It's purely a geometric problem: the amount of living space in square meters determines the maximum possible consumption space. Why is consumption sluggish? Because there's no room to put the things you buy, so you just don't buy them. It's that simple. I have personal experience with this - I receive deliveries almost every day, and I have plenty of space to put my purchases.
2018 marked a crucial turning point, after which the annual increase in household deposits jumped from the 5 trillion yuan level to the 10 trillion yuan level, and even exceeded 17-18 trillion yuan in 2022-2023. By the end of 2025, the balance of household deposits was approximately 16.589 trillion yuan, with an increase of 1.464 trillion yuan.
China's high savings rate, which is 12 times that of the US, cannot be simply attributed to the notion that "Chinese people love to save, while Americans do not." The strong consumption in the US can be partly explained by the high cost of medical care, but it is also because the living space in the US is virtually unrestricted, with consumption limited only by income, and not by other factors.
Currently, rural areas in China have insufficient consumer resources, due to cognitive gaps, and lack the numerous consumption concepts that urban residents have. Even with some money, they don't entirely know what to buy. In contrast, city dwellers have abundant consumer resources and more advanced consumption concepts, but lack the physical space to consume, with their valuable consumer resources being largely tied up in real estate.
What if they can't consume it in the end? The rich will have to transfer their money to countries like the US, Australia, and New Zealand, where there is enough space to spend it.
China's economy has now developed to a stage where it must be driven by consumption, which is to say it has developed to a stage where it must rely on suburbanization and counter-urbanization - opening up the geometric space of consumption, without needing to consider any economic spatial issues.
Cautious Progress on the Path of Counter-Urbanization
The 2024 Central Document No. 1 proposed: prudently advancing the reform of the homestead system.
The 20th Third Plenary Session's "Decision" allows rural households' legal residences to be activated through methods such as renting, equity participation, and cooperation.
China's economic and social development has currently entered a crucial turning point:
Government revenue, which originally relied on land sales income, will inevitably continue to decline, posing significant challenges to the government's fiscal situation.
On the revenue side of taxation, new economic factors such as high-tech are gradually scaling up, but at the same time, traditional industries are gradually shrinking. High-tech requires national support, and traditional industries also need assistance. Therefore, the growth of revenue obtained through taxation will face significant pressure.
In 2021, China's land transfer revenue reached a peak of 870 billion yuan, but has since declined, dropping to 415 billion yuan by 2025, returning to the levels of 2016 and 2017, a decrease of 455 billion yuan from the peak in 2021, and is likely to continue to decline in the future. According to incomplete statistics, during the three years of the pandemic from 2020 to 2023, the government increased spending by 2.3 to 3.5 trillion yuan for epidemic prevention, while revenue decreased by approximately 4 to 6.5 trillion yuan due to work stoppages and production halts. The total loss to the national treasury is estimated to be 6 to 10 trillion yuan, which will take many years to absorb. China's general public budget revenue exceeded 2 trillion yuan for the first time in 2021, but only increased to 2.16 trillion yuan by 2025, a mere 135 billion yuan increase over four years. In contrast, from 2015 to 2019, China's general public budget revenue increased by 381 billion yuan over four years. Therefore, the notion that "the Chinese government has a lot of money" needs
On the expenditure side, in the face of unified problems and the huge challenges of a turbulent international situation, defense spending is unwavering and must be continuously increased, even to prepare for potential large-scale wars.
Further efforts are needed in energy and environmental governance.
Economic transformation and high-tech competition require increased expenditures.
On one hand, a large portion of revenue from land sales can only be continuously compressed, as the principle of "housing for living, not for speculation" must be upheld in the long term, and tax growth is subject to numerous constraints. On the other hand, expenditures continue to increase. If this situation is not handled properly, it may lead to fiscal exhaustion. Looking back at history, such a development trajectory is fraught with danger.
For example:
With tears in his eyes, he proposed greatly increasing farmers' pensions, which would only cost a few hundred billion, an amount the country can afford.
It seems that they are calling for the country to allocate 1% or even 2% of its GDP to subsidize childbirth, which would be around 1 to 2 trillion yuan, an amount that the country can afford.
In one place, there are hundreds of billions, in another, 100 billion, and when calculated separately, they are manageable, but when combined, it's a different story.
"The country ran out of that much money long ago. The government doesn't need you lecturing it on how to spend — anyone can spend more."
How can farmers' incomes be increased while also boosting government fiscal revenue?
How can we reduce government fiscal expenditures while better addressing issues?
To achieve a simultaneous increase in revenue for Chinese enterprises, employee income, and government income, several strategies can be implemented. Firstly, enterprises can focus on innovation and research and development to create high-value products and services, thereby increasing their revenue. This can also lead to higher salaries for employees as companies become more profitable. Additionally, the government can implement policies that encourage entrepreneurship, support small and medium-sized enterprises, and provide incentives for businesses to invest in research and development. This can lead to job creation and increased economic activity, resulting in higher tax revenue for the government. Furthermore, the government can also implement tax reforms that reduce the tax burden on enterprises and individuals, allowing them to retain more of their income. This can lead to increased investment, consumption, and economic growth, ultimately resulting in higher government revenue through increased tax bases. Investing in education and training programs can also enhance the skills and productivity of the workforce, leading to higher salaries and increased economic competitiveness. This, in turn, can attract foreign investment, create new job opportunities, and increase government revenue through taxes on increased economic activity. Ultimately, a combination of these strategies can help achieve a simultaneous increase in revenue for Chinese enterprises, employee income, and government income, promoting sustainable economic growth and development.
If you are a scholar, if you truly care about the country and its people, and if you have the ability to do so, then the above is the way to solve problems.
Young people may have to live in the city for work, but retirees don't need to live in the city, so why not move to the suburbs to enjoy life?
Suburbanization should not repeat the old path of commodifying housing and creating an intermediate "developer". Currently, the suburbs already have homes built by farmers themselves, which are starting to meet the basic conditions that city dwellers can accept. The state has invested many years in implementing various "village access" projects, and rural living conditions have improved significantly.
I have investigated many rural households and found that the toilet conditions in their hometowns have become almost identical to those in cities. These seemingly minor changes in living conditions, however, reflect the massive transformation taking place in Chinese society. Although the living conditions in rural China still cannot be compared to those in the US, at the very least, city dwellers who move to the countryside will no longer feel that their living standards have decreased, but instead will experience an improvement in their quality of life due to the vast expansion of their living space.
When discussing the gap between China and the US, many people only talk about technology and military, and at most, add discourse power. However, these are not the real issues. I have spent my entire career in high-tech and have personally witnessed how China's high-tech industry has caught up with and surpassed the US, step by step, from a huge gap. There's no mystery to it, just a thin layer of window paper. The real gap between China and the US that is hardest to bridge is the living conditions in rural areas, as well as the living conditions of city dwellers.
Due to the enormous amount of vacant housing in rural China, even if a large number of retirees move to rural areas, it will not lead to the occupation of existing arable land. Especially if the developer model is fundamentally changed, it will not be necessary to add new land to achieve this. Additionally, the cultivation of desert resources in regions such as Xinjiang and Inner Mongolia has also effectively improved China's extremely tight arable land resources situation.
China's population has entered a downward channel, and the rapid growth trend of food imports has also been alleviated and turned into a downward channel.
By vacating houses in the city on a larger scale, young people's living spaces can also be greatly improved, and various big city diseases can be solved at the same time.
Cities like Beijing and Shanghai no longer need to restrict car purchases, and the space for large-scale consumption has also been opened up. On one hand, people are saying that consumption is insufficient, but on the other hand, due to spatial constraints, purchasing behavior is being strictly restricted - isn't this logic self-evident?
If urban residents directly pay rent to farmers, wouldn't that be more effective than increasing pensions? This not only greatly improves the living standards of retired urban residents, allowing them to spend their money, but also directly channels urban residents' money to farmers on a large scale, increasing farmers' consumption capacity and consumption concepts. Increasing overall social consumption benefits not just some farmers, but the entire society. This is the path to making farmers generally wealthy without the country having to spend more money.
Farmers' income increases, companies' income increases, and the government can increase tax revenue without increasing expenditures...
Develop the lush mountains and lucid waters in rural areas, and let city dwellers move in. Such lush mountains and lucid waters will be China's future gold and silver mountains.
This is the inevitable path to driving the economy through consumption, and it is also the inevitable path for China's social and economic development to truly surpass the United States in the future.