The report of the 18th National Congress pointed out that the series of problems China faces can be summarized as the "three imbalances": unbalanced, uncoordinated, and unsustainable. Urbanization is a very important means and pathway to solve all problems in China's economy and society in the near and medium-to-long term. In the future, China's urbanization rate will reach 70%, and rural areas will basically become manorialized. In the process of realizing this vision, we must achieve more intensive, faster, higher-quality, and more sustainable development.

　　Why is urbanization so hot?

　　Over the past 30-plus years of reform and opening up, we have made great achievements but also face a series of problems. Urbanization is a very important means and pathway to solve all problems in China's economy and society in the near and medium-to-long term.

　　The big backdrop for urbanization being so hot now is that over the past 30-plus years of reform and opening up, we have made great achievements while also facing a series of problems. The situation is severe, and China's development has reached a critical juncture of transformation.

　　According to the report of the 18th National Congress, the series of problems China faces can be summarized as the "three imbalances": unbalanced, uncoordinated, and unsustainable. Their specific manifestations, in the short term, are economic slowdown, huge inflationary pressure, overcapacity, etc. The medium-to-long-term problems are resource and environmental issues, most typically smog. Air pollution has never been mentioned like this before—more than 2 million square kilometers are controlled by one type of atmospheric pollution.

　　In the world, there are only two ecological and environmental pollution and destruction incidents comparable to smog. One is the "Dust Bowl event" during the development of the American West in the 1930s. At that time, the United States was also developing rapidly. East of the Mississippi River were vast plains with fertile soil, but it still wanted to expand. West of the Mississippi River was grassland. The United States destroyed all the grassland. The first year of planting crops was good, the second year grain yields fell, and the third year it all became desert. In the fourth and fifth years, dust storms occurred. When the wind blew, the entire western United States was shrouded in desert dust. The Dust Bowl lasted 10 years before being resolved. After that, farmland was returned to forest, and desert development was no longer pursued.

　　The second ecological disaster that affected the world was the "Black Storm event" that occurred during the former Soviet Union's development of Siberia. In the 1950s, the former Soviet Union's economic industrialization developed rapidly but lacked food. Siberia was a grassland region, so they developed the grassland. The first year's harvest was good, the second year production declined, the third year it became sandy land, and in the fourth and fifth years the black storm event occurred.

　　These three events are all lessons learned. Our ecological environment is already unsustainable.

　　Facing these problems, the new leadership collective has proposed a new governance philosophy that is very far-sighted: we must, within a limited time, realize the Chinese Dream of the great rejuvenation of the Chinese nation. This is the goal proposed by Xi Jinping. Li Keqiang proposed "we must create an upgraded version of the Chinese economy," which is the fundamental solution to the problems. Aiming at China's future, the Chinese Dream of the rejuvenation of the Chinese nation, and creating an upgraded version of the Chinese economy—this is our new governance philosophy.

　　This philosophy is not empty. Specifically, it has three core contents: expanding domestic demand and improving people's lives; on the supply side, innovation, eliminating backward production capacity, raising product quality, and bringing the manufacturing level up a notch; on the institutional side, reform.

　　It can be seen that our future governance philosophy, the Chinese Dream, and industrial upgrading are real and concrete. We have the greatest growth potential, which is urbanization; we have the greatest driving force, scientific and technological innovation; we have the greatest dividend, reform and opening up.

　　Urbanization is a very important means and pathway to solve all problems in China's economy and society in the near and medium-to-long term.

　　Why develop small and medium-sized cities?

　　Now, large cities have developed to a certain stage and face many problems themselves. Per capita annual income has reached five or six thousand US dollars. At this time, proposing small and medium-sized towns or urban-rural integration is timely.

　　Nobel laureate Stiglitz once said that the world economy in the 21st century depends on two things: first, American high technology; second, China's urbanization. One is from the demand perspective, and the other from the supply perspective. Over the past decade or so, China's urbanization has indeed not only been one of the important driving forces supporting China's economic development but also one of the driving forces promoting world economic growth.

　　Now, there are differences in understanding urbanization, and many statements are not necessarily accurate. How should the concept of urbanization be understood? What exactly should China's urbanization look like—should it focus on small towns, or on large cities? Should it focus on urban agglomerations, or on the development of individual cities? Should it focus on suburbanization, or on the transformation of urban cores? Western countries suburbanized long ago, and the centers of large cities have become hollowed out. The most typical example is Detroit. Such a great city actually collapsed. On the surface it collapsed, but in reality its city center became hollowed out.

　　How should we view this issue? Their development process is different from ours, so we cannot use their phenomena to discuss our problems. Now, we focus on small and medium-sized enterprises and small and medium-sized towns.

　　In fact, China also started this way. Thirty years ago, when reform and opening up began, urban construction was closely related to economic construction. The slogan for urban construction at that time was "control large cities, develop small and medium-sized cities." The result was that large cities all developed, while small cities did not. What was the reason? It was related to the stage of development. At that time, people had to be concentrated to generate services and transactions and reduce transaction costs. At that time, our monthly income was only 50 yuan. I entered university in 1979, among the earliest university students, and graduated in 1983 with a salary of just over 50 yuan. At that time, developing small and medium-sized towns did not conform to national conditions and could not develop.

　　In fact, the development of these 30 years relied on large cities. But now per capita annual income has reached five or six thousand US dollars, making us a middle-income country. At this time, developing small and medium-sized cities is timely. Moreover, large cities have now developed to a certain stage and face many problems themselves. At this time, proposing small and medium-sized towns or urban-rural integration is timely.