China’s economy seems so vibrant and entrepreneurial, it can be easy to forget that central planners determined nearly every aspect of personal life just 40 years ago. But that fact is painfully obvious for anyone considering the hukou system, a household registration system that continues to play a huge role in how Chinese live their lives.
The system records every Chinese citizen as a permanent resident of a particular city or county, which acts as the gravitational center for the bulk of paperwork that accompanies Chinese life. Relocating to another part of the country requires a difficult and time-consuming process – especially for those seeking to acquire a coveted urban hukou.
But a dramatic new reform could make this process easier. A State Council circular emerged in February directing small and medium cities to grant hukous to migrants who maintain legal jobs and pay in to social insurance for three years – thereby standardizing a system of rules that formerly varied from city to city. (China’s provincial-level cities – Beijing, Shanghai, Tianjin and Chongqing – are excluded, as are provincial capitals such as Wuhan and Shenyang). Premier Wen Jiabao reiterated the reforms at the National People’s Congress, a gathering of officials in March.
The measure could have huge implications for the way China develops. It could deliver social services to millions of underserved people and boost urbanization, consumption and GDP growth in the process. But that day is unlikely to arrive soon.
The hukou system was originally intended to register people and deliver the appropriate social services. But it has also barred rural residents from the economic development that has taken place in China’s cities, exacerbating the gap between rich and poor. Wages in Chinese cities are now about 60% higher than those in the countryside.
Proponents say the restrictions have prevented the rush of rural labor to the cities that created the slums of Rio de Janeiro or Mumbai. But the regulations have not stemmed the tide entirely. Kam Wing Chan, a professor of geography at the University of Washington in Seattle, estimates that roughly 200 million migrants now live in Chinese cities without a hukou, meaning they lack access to social services such as education and pensions.
Perhaps the most severe consequence of this faulty system is the damage to rural children. Since rural hukou holders cannot enroll their kids in urban schools, children are often left behind in villages with the elderly. Various cities have introduced programs to integrate migrant kids, but the measures are new and insufficient. Meanwhile, the quality of rural education is lapsing as more teachers move to large cities to pursue higher salaries. Yao Yang, director of the Centre for Economic Reform at Peking University, argues that access to education is becoming more divided socially and geographically just as the return on education is increasing.
By providing underserved migrants with basic welfare services, the new policy represents a big leap for social justice. It will also offer huge benefits to the Chinese economy: Gathering workers, resources and expertise in cities leads to big gains in productivity and GDP.
Chinese people realize these benefits, but they also recognize the obstacles to implementing the system. “Some say this policy is wonderful,” wrote one Weibo user from Hubei province. “Others say, ‘I wish it could be true, but there’s no way.’”
Opening the door
Beijing’s timeline for implementing these reforms is vague. The measures technically went into effect when the State Council circular was issued, but governments on all levels seem to realize there will be lags in implementation. Wen Jiabao has called on officials to “prudently” carry forward the reforms.
Many Chinese are losing patience with this gradual approach. However, Du Zhixiong, a professor at the Rural Development Institute of the Chinese Academy of Social Sciences, said that implementation cannot be one-size-fits-all. Since most of the funding will come from local governments, implementation will need to take various forms, according to the local government’s financial ability.
Unfortunately, the exact nature of local government finances remains difficult to determine. Many local governments claim they lack the necessary funding to provide social services to millions of migrants. Yet local governments are also notorious for underreporting revenues: In some cases, thorough audits have found local officials to be pocketing one-third of the city’s income. “I believe the majority of local governments do have the financial ability to offer migrants these services. It’s not that they are unable to, it’s that they’re unwilling,” Du said.
As with a range of issues, from the environment to affordable housing, local governments have little motivation to meet central targets on hukou reform, besides currying favor. Migrants’ social care is now an externality; local governments happily record the additional GDP growth without paying for social services. Until China establishes a more transparent system for government finances, Beijing’s ability to cajole or demand local government reforms will remain limited.
One effective solution could be establishing a system of rigorous, independent audits of local government finances. This would be difficult to implement, but if local governments continue to drag their feet on hukou reforms, it is worth a try. Securing a boost to the economy and delivering social services to hundreds of millions of rightful recipients certainly merits the effort.