EDITOR'S note: In his latest World Competitiveness Yearbook, IMD professor Stephane Garelli ranked China 21st among the 60 nations surveyed, up from 23rd last year. In an exclusive interview with Shanghai Daily reporter Wang Yong this week, he explains how China can benefit from well-planned urbanization. The following is an edited version of the interview.

The new Chinese leadership says that urbanization will be a key to China's economic growth. Do you agree?

Yes. I fully agree with this.

One of the biggest challenges for the future of China is going to be the migration of people from the countryside to the cities. We see that in most advanced economies, at least two-thirds of the population now live in cities.

The real question is how this is manageable. How can it be done in such a way that it does not jeopardize the city nor the countryside.

There is no doubt that mega cities in China are one of the big challenges. We know relatively well how to manage companies, we teach a little bit how to manage countries. A key issue for the future will be how to manage cities.

Mega cities are rising everywhere in the world, contributing a lot to GDP. What are their challenges, though?

We have a concentration of world economies around mega regions.

In China, it's also because you have a policy of special economic zones, which have naturally developed themselves into mega cities. The consequence is that urbanization is not always under control.

This is one of the biggest challenges for the future: how can we better manage the urbanization process, and make sure it is under control and that we have people - mayors and etc - who have the skills of urban management.

Do you think urban management skills are lacking in Chinese cities?

Oh, you are not the only one, we lack them in Switzerland, we lack them everywhere.

The problem is: the job of the mayor is the job where there's no training. You can become a mayor tomorrow and then start to do everything you want. You may win or lose your job, but in between, you may have done a lot of damages.

It seems to be prestigious to build buildings everywhere. I've met a lot of mayors in China and the first thing they show you are buildings. If you ask: how many people work and live inside? No one gives you an answer.

There is a tendency to believe: If you create buildings, you will attract companies and people. And if you sell a building, you finance the next, you go up the property ladder, until you have a bubble.

Managing a city requires certain skills, not only financially, but also in terms of planning, like traffic flow, water supply, sewage, security, and pollution. All these are new issues within the context of city environment. This is new.

Most of the time, the only way a mayor learns how to manage a city is to go and visit another city. But there's no real process in which a mayor can learn how to plan urbanization, how to plan investment, how much debt you could accept, etc. It's a problem not only in China, but in so-called advanced economies as well.

Detroit, for example, is confronted with US$17 billion in unfunded liability.

One of the issues today is the cascading of debt. When you go one level down (from the central government), the region and cities have a lot of debt. In China, this is often linked to the development of shadow banking. A lot of debt was incurred more by shadow banking than by official lending.

This is an additional dimension of unregulated debt, which is disquieting.

You are familiar with Shanghai and many other Chinese cities. How can they improve the urbanization process?

The problem in Shanghai is that its mobility is very difficult. If you have a mega city like Shanghai and you cannot move, or you lose a lot of time in moving, you are somehow back into inefficiency.

Water treatment, electricity grid, sewage, and access to health facilities next to the people are all very important.

When you speak of urbanization, you don't speak only about buildings, you think of everything that goes around the buildings. It's not only about buildings, but about shopping malls, green areas etc. Otherwise, you only have big buildings where people work, but at night there is nobody. Everybody leaves.

The high concentration of business is very important. But on the other hand, if it is not well managed, it will become not an opportunity, but a liability. Sao Paulo is the most prosperous city in Brazil, but now people try to escape. There they cannot move, and pollution is high.

The economic advantage of having a lot of people in one place is that you can sell. But it will become a disadvantage if you mismanage.

Shanghai used to have many trees ...

Yes! I went to Shanghai in 1981, I was at the Peace Hotel on the Bund. It was very nice. It was a city with no skyscrapers, nothing. Nanjing Road was a small road. Then suddenly, everything started to be built quickly, so quickly, that you felt there was not anymore one Shanghai. You have many Shanghais. Sometimes, if you go around the railway stations in Shanghai, you are completely lost.

Should China slow down its rate of urbanization a little bit?

The big challenge is that there's big pressure now on the cities because of the migration from the countryside.

Once upon a time, the countryside actually had higher revenues than the cities in China, but this is reversed. Almost everybody now wants to send younger generations to the city.

What is important is to improve urban planning. Every city should be able to provide a blueprint. Where shall we be in 10 years from now? This is what we do in Switzerland. If there's something wrong with your blueprint, the government will say, listen, it's not feasible, and people will have to do it again.

What about China's bid to develop its western region and smaller cities?

Very good idea. Mega cities are going to be more and more unmanageable. To develop the western part of China will ease pressure on the eastern part. Developing Chengdu, Wuhan, Xining, all these regions, may help. There's no doubt.

Smaller cities, yes, but how do you make sure they remain small cities? A small Chinese city can be very big for us.

Then there is another aspect which is interesting. We see a real trend in Germany, Switzerland and England that there are lots of enterprises being built in the countryside, because the city is too expense. Of course, they do not destroy arable land. We've frozen arable land, so people cannot go there for any other purpose. One of the parts of urbanization which is nice is to define the use of land.

If you take Shanghai and Suzhou, for example, one of the problems is that a lot companies went there - actually I was there in the early 1980s - and quickly destroyed the environment. People started to build almost everywhere. There was no balance between the factory and the environment.

What can China learn from Europe?

The allocation of land for different purposes. You never have a neighborhood which is only offices and empty at night. Balance working with living, with green areas. Also very important is access to health and education infrastructure.

In a lot of places in the world, for example lately in Brazil, people are saying: we spend money on buildings, etc, but what I want is a better hospital, a better school, and better public transport. This is daily life of the people. If you don't provide that, sooner or later you get some social tensions, because people are unhappy.

You ranked China 21st this year in the world competitiveness report. What are the major factors that make China more competitive?

China is still growing faster than the rest of the world, despite the fact that there are a lot of discussions about China slowing down. China was growing 7.8 percent last year. This year, even if it grows around 7 percent, it is still very good growth for the second largest economy in the world. If you are looking at the business and economic potential in China, it is still huge.

Moreover, the government now focuses more on domestic consumption than just exports. That's important. Household demand in China is smaller than many other countries. In most countries, personal consumption is about 60 percent of GDP, In China it's about 42 percent.

Another thing is that more and more Chinese companies are becoming global. China is not just exporting from foreign companies in China, but exporting back home. China's global companies are not just about construction, you see companies like Haier. This is a positive change for the competitiveness of China.

What do you think of China's dream to become more beautiful as it is still trying to industrialize itself?

It's very deep inside Chinese culture and expectations to have a peaceful relationship with the environment. I have a feeling that rediscovering the beauty of China is going to be very important, so that people will believe that, when China becomes more prosperous, it means a better quality of life for the people.

When I go to Hangzhou, they always tell me: you have paradise in heaven and Hangzhou on earth. We have to be careful not to spoil the environment.

When does it take more than getting rich to be glorious in China?

Lee Kuan Yew from Singapore always says: if people do not see the tangible consequence of their work, then they will bring social tension. They want to have a greener environment, no pollution, etc, it is where China is now.

Yes, we are growing fast, but at the end of the day, what does it mean for me?

If China needs a new slogan to replace "working hard to get rich," what would you suggest?

Working hard for a better life.