The acceleration of urbanization 2.0 in the next phase will help China overcome external risks and the drag of an aging population to become a high-income country by 2025, according to a recent report by Morgan Stanley. Xing Ziqiang, chief economist of Morgan Stanley China, said that the key areas of urbanization 2.0 in the wake of the epidemic, including connectivity, the digital economy and reforms related to city clusters, are developing against the trend and have a clearer path. The meeting of the Standing Committee of the Political Bureau of the CPC Central Committee on March 4 proposed to accelerate the construction of new infrastructure, including 5G base stations, industrial Internet, artificial intelligence and data centers, ultra-high voltage, intercity high-speed railways and rail transit, and charging piles for electric vehicles. Morgan Stanley believes that in the view of the digital economy, digital infrastructure is conducive to improving the agglomeration effect of cities, while accommodating more population and resources, it can alleviate some common big city diseases such as traffic congestion and pollution. Morgan Stanley predicts that investment in new infrastructure will reach an average of US$180 billion a year between 2020 and 2030, almost double the average level of the past three years. In terms of connectivity, the newly launched railway plan outlines a plan to double the length of high-speed rail to 70,000 km by 2035, creating a two-hour commuting circle between major cities within the urban clusters. Morgan Stanley believes that the development of China's city clusters cannot be achieved without the world's longest and fastest high-speed rail system. For the development of urban clusters, Morgan Stanley emphasizes that the agglomeration effects of cities come from better job market matching, knowledge spillovers, specialization of supply chains and synergies between industries. Therefore, Morgan Stanley believes that it is necessary to implement further structural reforms, including household registration reform and opening up the current fragmented social security system, in order to promote the concentration of productive factors, especially human resources, in large urban clusters.