Just realized this thread got stickied. Cool!
The push toward urbanization is and will be one of the biggest economic factors in China. I am especially encouraged to read that the Chinese gov't is moving people out of dangerous mountain areas and replanting forests. Human inhabitation is very aptly described as a cancer upon the natural environment of China. Villagers who live in those mountains are forced to deforest the hills in order to subsist. This in turn triggers deadly landslides and increases the silt content of the arterial waterways, further exacerbating the water shortage.
People in North America have it easy. Get out of the cities and you can find miles and miles of wild lands with not a soul in sight, except the cars on the highways.
In China, it's completely different. I once took a train from Shanghai to Xinjiang. I passed by a plethora of bewilderingly different landscapes, all of which had one thing in common: people. Signs of human inhabitation was everywhere, from the rice fields of Jiangsu to the caves and mud huts in Sha'anxi. The only exception was at the end of the trip, when we entered the Gobi desert. That was the only place in China where I did not see signs of human inhabitation everywhere.
It is a fact that urban living, given a similar quality of life, is far more efficient than rural living. In China's case, population consolidation makes a lot of sense. It will improve the quality of life of tens of millions of people as well as decrease the burden on the natural environment.
Coupled with advancements in green technology, China's future mega-cities might well be its solution to environmental and economic sustainability.