Urbanization is one of the most important economic and social policies of the new government. The key point of the policy is the urbanization of middle and small sized towns. In China there are thousands of towns with developed industry, however in terms of social governance quality, these towns lag far behind.

I) Lots of people are stuck between rural and urban areas and therefore are unable to accomplish their “urbanization”. Hundreds of millions of migrants are employed by modern industries in towns. These people will not migrate back to rural areas. However, without a “hukou” they can not enjoy equal rights like urban residents in education, housing, etc.

II ) In spite of their developed industrial sector, these towns still fall far behind in terms ofsocial governance. In the Chinese administrative system, local governments are divided into different levels, and different administrative levels mean different access to resources, like administrative power, budget, staff, etc. A town's government, at bottom level (lower than county) in the Chinese administrative system, is unable to get adequate resources for providing necessary infrastructure and public services to its big population. Instead, it has to hiretemporary staff and informal power (sometimes illegal power) to govern the society.

III ) China's urbanization is disordered as mega cities' expansion is pushed forward by administrative power, while those self-evoluted towns are not “allowed” to be promoted to “city status”.

IV ) “Half-urbanization” blocks industrial upgrade and damages sustainable growth in those developed industrial townThe key to industrial upgrade is upgrade of personnel. For sustainable development, enterprises must be able to attract and retain highly qualified staff and investors, who require high quality living, which is not provided in “towns”. Meanwhile, “half-urbanization” also dramatically restricts the development of service industries, especially high-level service industries. The restriction of those developed industrial towns, which account for a significant part in China's economy, restricts the upgrade of China's economic structure.

The purpose of Unirule Institute of Economics planning to launch a research on China's endogenous urbanization is improving social governance in developed industrial towns, in particular, promoting urbanization of millions of rural migrant workers, advancing the route of urbanization and finally achieving a democratic and autonomous governance.