But experts have warned that many problems, in developing small towns, have yet to be tackled properly.

Currently only 30 percent of Chinese people live in cities, much lower than the world average of 42 percent. And the slow urbanization process is a burden on the economy. The country is striving to develop small towns to encourage rural dwellers to come to urban areas and thus boost economic development.

In June, the government issued a document on the healthy development of small towns. And in its draft 10th Five-Year Plan (2001-05) published in October, while it mentioned the coordinated development of small towns, medium-sized cities and large cities in its urbanization strategy, it stressed again the development of small towns.

Under such circumstances, experts worry that local leaders will rush to establish small towns, regardless of local conditions and the relevant laws.

"I am afraid that too many small towns may spring up too quickly in the coming years," said Hu Xuwei, a researcher from the Institute of Geophysics under the Chinese Academy of Sciences at a recent forum held by the Beijing-based Unirule Institute of Economics.

A prerequisite for the creation of a town or city is the convergence of a certain amount of resources, such as people and capital, urbanologists said.

"If too many small towns spring up in a short period, the resources allocated to them will be insufficient for their growth and they may die young," Hu said.

Furthermore a rapid increase in small towns puts pressure on land resources.

Statistics show the per capita use of land in small towns is about 149 square meters, 27.6 percent and 40.9 percent more than that in medium-size and big cities respectively.

"The government should pay special attention to this problem and curb the blind establishment of small towns," urged Liu Fuyuan, an urbanologist from the Macro-economic Institute under the State Development Planning Commission.

"Otherwise, the huge amounts of capital put into the development of small towns would only be a waste of resources," he said.

Their worry is not unfounded. China has witnessed a rapid increase in small towns in recent years.

In 1992 alone, 2,253 towns were established, 226 more than the total established in the preceding five years. From 1993 to 1998, 4,925 more towns sprang up.

"Many of the towns only have a population of 2,000 to 3,000, which can not enable them to sustain their growth," Liu said.

Generally, a population of 30,000 is the bottom line for a town to sustain development and prosper, experts agree.

For this reason, the development of small towns should be a selective process. County seats, which have plentiful resources and a good economic situation, should be selected for the urban development strategy, Hu said.

Many local governments have drawn up policies to restrict the movement of farmers from rural to urban areas, experts said.

"Since China carried out its reform and opening up policy, its domicile system has been relaxed somewhat. But the process is still going too slow and domicile is still a barrier to the growth of small towns," said Fang Jun, a researcher from the Central Working Committee of Finance of the Communist Party of China.

"In some small towns, new-comers are required to build a new house before they can move in," said Yao Yang from the Economic Research Center of Peking University.

This involves an exceptionally large investment from farmers. To boost the growth of towns, standards should be lowered. As long as they have a house to live in and can find a job, newcomers should be allowed to move into towns, Yao suggested.

With more people arriving, more resources will be introduced and towns will gradually grow. A number of local governments have realized this mistake and are redressing the situation.

In Yongchuan, in Southwest China's Chongqing city, people once had to pay up to 100,000 yuan (US$12,000) to get a residence permit. Now four yuan (US$0.5) will buy you your permit providing you have a home, a source of income or a college diploma.

It seems that loosening domicile restrictions should be easy for local authorities. But that is not always the case. A weak fiscal environment is a constant headache for local officials trying to expand their economy.

"Under the current fiscal situation, a large part of revenue in some towns has to be handed over to the county governments," said Zhang Xuedan, a researcher from the Institute of Financial Sciences under the Ministry of Finance.

This has resulted in financial straits for some towns, he said. To solve the problem, more authority over fiscal matters should be granted to towns to aid their further development. And the proportion of income handed over to the upper fiscal department should not be set too high, he added.

More attention should be paid to the development of local rural enterprises, which contribute hugely to the development of towns in terms of cash turnover.

"Local governments should help enterprises reform their property rights system and introduce a share-holding system to boost their growth," Zhang said.

In the past, many rural enterprises were collectively owned. However, after more than a decade of rapid development, the unclear ownership situation has become a barrier to future growth.

To channel in more money for public finance, local governments should choose high-quality assets, such as the infrastructure and well-managed enterprises, as a basis from which to issue asset-backed securities to pool money, Fang Jun said.

By so doing, they can attract more private investors to raise money for the construction of small towns, he added.

(China Daily 11/27/2000)