Company News

  • Aug 27, 2014
  • Household registration reform
  • State Council Unveils Details of Household Registration System Reform, Expected to Unlock Potential of China’s New-type Urbanization

    The State Council of China recently published the Opinions on Further Pushing Forward Household Registration System Reform (the “Opinions”), setting out details over household migration policy, population management and ensuring the rights for the transient rural population. In terms of household settlement policies, the strategy of allowing cities to implement the reform in light of the practical circumstances was outlined, including the full liberation of household settlement at towns and small-sized cities, the orderly relaxation of household settlement at medium-sized cities, the criteria formulation of household settlement at large-sized cities and strict control over house settlement at super-sized cities. Together with reform initiatives in building a unified household registration system across urban and rural population, expanding the scope of fully-subsidized education as well as social housing, these measures are expected to have significant impact on China’s urbanization process. The lives of many will fundamentally change in this imminent major wave of migration. There are enormous business opportunities along the development value chain of China’s new-type urbanization. In fact, some experts predict that in the coming decade the household registration system reform will be the core driver for the sustainable growth and healthy development of China’s real estate sector.

    Listed companies in the field will benefit from China’s new-type urbanization process underpinned by the deepening reform in household registration system

    In comparison with developed economies such as U.S. and Europe, there is substantial headroom for China’s urbanization rate. As clearly outlined by the State Council, the core of China’s new-type urbanization lies on the coordinated development between cities along the entire size spectrum and smaller towns, optimization of urban spatial structure and management, as well as upgrading the integrated accommodating capacity of cities. The household registration system reform will result in the establishment of a unified household registration system which tailor makes to the size of cities. This encourages strategic rationing of household settlement in the country, clearing a major obstacle in new-type urbanization. It is expected this will stimulate nationwide investments in new town development and create exciting opportunities for the industry.

    China New Town Development Co. Ltd. (stock code: 1278.HK; Singapore Exchange stock code: D4N.SI) will benefit significantly from this process in being the pioneer in urban planning and development. The company is the core listed platform of China Development Bank Capital Corporation (“CDB Capital”) focusing on new town development and planning in China. Through its unique business model, the Company forms joint ventures with local governments to develop new town projects, and participate in the full range of activities including master planning, resident relocation and resettlement, land clearing and preparation, construction of infrastructure and quality ancillary facilities. It also introduces quality brands and leading real estate developers into the new towns it operates to enhance the long term value of the town and its land resources. Starting from 2002, the Company has been engaged in the development of Shanghai Luodian New Town, Wuxi Hongshan New Town and Shenyang Lixiang New Town. Among them, the Luodian New Town has entered maturity phase and received international and domestic recognition for its innovative new town design and execution. The Luodian New Town was granted the prestigious status of “United Nations Development Program Pilot Town” by the United Nations Development Program and “National Development and Reform Pilot Small Town” by the National Development and Reform Commission. With the profound resources and the long-term experience on new town development of its controlling shareholders China Development Bank and CDB Capital, China New Town is expected to tightly adhere to national strategic policies in its strategic deployment and development plan, to fully capture the growth opportunities arising from China’s urbanization.

    Large and medium-sized cities to take the lead under practical approach to urbanization

    The household registration system reform advances the hinging of household settlement policy to population size instead of the city’s administrative hierarchy. This is a more practical approach suiting the current situation. With gradual relaxation of medium-sized city settlement restrictions, households can generally settle down at will - on an orderly queuing basis - so long they meet the basic requirements of legal and stable employment and residence (including leasing). China's urbanization rates on a regular residence basis and registered household basis are expected to increase from 52.6% and 35.3% respectively in 2012 to around 60% and 45% respectively by 2020. As mentioned in the Opinions, efforts will be put to achieve the migration of 100 million rural population to regularly residing urban population by 2020. The sustainable migration of rural population to cities could accelerate the real estate de-inventorying not only at the top tiered cities but also at the smaller cities.

    The strategic location of Nanjing Two Bridges Project recently announced by China New Town Development is highly consistent with this trend. Nanjing, the provincial capital of Jiangsu Province and the second largest city in Yangtze River Delta and Eastern China, is currently in a soaring wave of urbanization development growth. The project is located at the important redevelopment region of the Yuhuatai District, at the heart of China's largest communications software industrial base - the Nanjing Software Valley. With the mission to enhance integrated accommodating capacity and attract talent to settle in the region, this project is indeed closely adheres to the national policies and the direction of future reform.

    Committed to role model setting for China’s new towns, China New Town Development Co. Ltd. sees tremendous upside potential

    With the unification of registration systems for urban and rural households, residence permit holders and citizens with domestic household registers (as known as “hukou” in China) will enjoy equal welfare in terms of education, healthcare and retirement benefits. Therefore, there is an expected surge in demand for township master planning and auxiliary facilities. In China’s New Urbanization Plan (2014-2020) published earlier, the State Council clearly emphasized the construction of intellectual cities, coordination of industry resources, enhancement and digitalization of city planning and management, optimizing deployment of infrastructure and public services as well as industrial modernization. While this plan lays down the skeletal strategies, professional new town developers capable of lining up various strategic partners and executing these strategies are much needed.

    China New Town Development Co. Ltd is well positioned for this favorable macro environment. This is evident from its existing Luodian project (located in Shanghai) and the more recent Two Bridges project in Nanjing. China New Town Development has established experience and track record in township development. Recently, CDB Capital opened up to China New Town its unique industry resources, the China Urbanization Strategic Alliance, which is a collection of world-class business partners in each field closely related to urbanization. This further imbues the company with unique competitive advantages in playing a pioneering role in China’s urbanization.