Urbanization of China's population has become one of the most important elements in the mainland's shift toward domestic consumption and away from investment-led growth, said Sri Mulyani Indrawati, chief operating officer at the World Bank.
"Chinese leaders recognize the inefficiency and (are aiming for) less reliance on investment," she told CNBC from Beijing at the launch of a World Bank report on urbanization. "Urbanization has become one of the most important parts of shifting the growth model," she said.
She expects the shift will require a lot of policy adjustment, with reforms needed on land policy, including imposing a property tax to substitute revenue for local governments to provide services for their cities' populations. Local governments have been relying on revenue from selling land to convert it into urban space, she noted.
"To maintain [economic] growth at 7.5 percent, [with] better quality and more inclusive, the change is really needed," she said. "They have to change the ecosystem. That is not only going to require the fiscal space, or the ability to finance it, but also the ability to provide those services to many of the migrants moving from the rural to the city area."