After more than 50 frosty years, there are welcome signs that China’s rural-urban apartheid is beginning to thaw. Policymakers announced plans in December to improve social welfare for migrant workers by relaxing hukou restrictions in second- and third-tier cities.
Chinese governments have used some form of household registration for the past 1,000 years. The current hukou residence permit system combines elements of the traditional registration process with a Soviet-style internal passport designed to restrict citizen mobility. The country’s 150 million-strong floating population shows that the system has long ceased to function as a deterrent to mobility. But it remains an effective class barrier, firmly dividing the rural have-nots from the urban haves.
Every citizen in China is issued with a residence permit that identifies the carrier as "rural" or "non-rural." Urban citizens ("non-rural") are registered as residents of a particular urban authority, which entitles them to the social services provided by that authority only. This means that rural migrants who move away from their official place of residence have to pay extra to use local services, which are far more expensive than equivalent services (where they exist at all) in the countryside.
Urban hukou reforms began in 1998, but progress has been glacial. Cash-strapped local governments, which effectively control population management within their jurisdictions, are reluctant to open schools and hospitals to hordes of impoverished migrants. The upshot is a two-tier level of urban citizenship that has been likened to a system of apartheid. Migrant workers aren’t banned from the superior social welfare facilities found in cities, but the high cost of seeking medical treatment or paying school fees effectively keeps them out.
The catalyst for the State Council’s latest call for reform appears to be economic rather than social: central government economists reckon that giving migrant workers access to social services in cities will boost consumer spending. Currently, most of China’s floating population send their remittances home and families hoard money to pay for future health care and other unforeseeable costs. From an economic point of view, this cash is not being put to work.
Encouraging migrants to set down roots in cities and giving them access to basic social insurance should, in principle, boost consumer spending. If millions of migrant families can afford to move to the cities, that will also drive demand for the infrastructure associated with urbanization.
Until now, local governments have mostly granted hukou to individuals with a pile of cash to spend, or to university-educated workers with white-collar jobs. Unfortunately, the first response to Beijing’s call to loosen restrictions came from Guangdong, which unveiled a points-based system designed to allow the province’s estimated 26 million migrants to "earn" residency. It looks like more of the same. Under the current rules, a migrant worker would need to gain a bachelor’s degree or buy the equivalent of eight apartments to earn the 80 points needed to get his child into a local school!
The fact that the State Council has explicitly called for hukou reform is a strong sign that there has been a genuine policy shift. Whether local governments respond to this call is another matter.