Should the China hukou system be abolished?

China is an amazing country and its development is unusual. At the end of 2012, China’s total population is 1.48 billion, with 824 million and 624 million residing in the rural and urban areas respectively. With around 1 million housing established per year, the average living space of per square of a citizen has increased by 25% compared to five years ago. Despite the amazing figures, inequalities, slums and poverty have started to raise in Chinese cities partly because of China’s unique hukou system of home registration, which restricts permanent migration to cities and only allow temporary migration.

Source: China Daily

This phenomenon is caused by the uneven distribution of development in China. Because of China’s open-door policy along the coastal areas as the first stage of development, it results in booming opportunities and improvement in the life of the residents in those area. It draws more and more people towards those areas and thus causing the problem of migrant workers. With the cities’ infrastructure and wealth-fare system not designed to cater the needs of both migrant and urban residents, the Chinese government, in 1958, imposed the hukou system. The main idea of hukou system is to control population mobility. The regulation decreed that all internal migration be subject to approval by the relevant local government. From that point, Chinese citizens lost the freedom of residence and migration within their own country. Each person has a hukou, classified as “rural” or “urban,” in a specific administrative unit. The hukou mechanism, as a central instrument of the command system established for the big-push industrialization, was intended to prevent what were held to be “undesirable” rural-to-urban migratory flows.

As a result, during the economic development of China in the past decades, two class of people are created: the urban working class whom members worked in priority and rights are protected and had access to social welfare and full citizenship; and on the other hand the peasants, who were tied to the land to produce agricultural products for industrialization became the bottom of the food chain.

Rural-urban migration and the hukou system

The idea of inequality among the hukou system is from the different rights entitled by different hukou holders. We can simply evaluate this issue using the housing problem in China.

China’s very fast urbanization has induced a massive rural-urban migration since the late 1970s. Despite institutional arrangements on migration control, rural migrants still encounter great difficulties in acquiring urban registration (urban hukou) and permanent residence status in urban areas. Due to the incompleteness of the urban social service system reform, nearly all of those migrants are considered as being temporary in urban areas and thus do not have access to many urban amenities.

Firstly, the restructuring of the urban housing market since the reform is orientated to privatization and commercialization of housing. Therefore, newly emerged units of commercial housing, built essentially for making profit by real estate developers, are generally expensive and thus not affordable to migrants who are employed in low-paid jobs. This causes the failure of the filtering model.

Secondly, more affordable units provided by the secondary housing market where transactions of older housing units occur, or by subsidized public housing programs for the low-income families (known as the anju project) require a local urban hukou and are thus not available to rural migrants.

Excluded from the urban housing system, many of the rural migrants reside in the urban villages where native farmers construct and rent out inexpensive housing units. Through these villages, indigenous farmers are becoming well-off landlords by building extra rooms and rural migrants are thus able to find shelter. Nonetheless, villages within cities are generally perceived as undesirable and consequently dispelled by urban authorities because of the villages’ association with unplanned land uses, decayed housing condition, worsened public safety, and deteriorated social order. Urban policies have been therefore adopted to demolish villages within cities and to redevelop them into commercialized housing districts. Neglecting millions of rural migrants residing urban villages, the debate on the adequate policies that should be adopted to redevelop the villages has been kept between urban authorities and the indigenous peasants who build the villages. This also creates discontinuity. People tend to have special feelings towards the places where there may lay memories. However, due to the demolition, everything is wiped out for the future development.

The Chinese Hukou Reform and outcome

China’s reformed hukou system was characterized by a highly independent system with the central government approved all hukou registration and transfer. Any officially permanent migration required approval from the state to convert hukou status from agricultural to non-agricultural and to change the place of hukou registration (from a village to a particular town or city). That is, any rural-to-urban migration involving permanent hukou change required both a conversion in entitlement status – the nongzhuanfei process – and a geographical change in residential place.

This gives nongzhuanfei a superior power to control the rural-to-urban hukou transfer and since there is no clear indications of the criteria, there are a lot of grey areas for the officials to gain personal benefits. The law provides also provides exemption to people whom have proper employment, education or entitled a house to be excluded from the system by allowing them to register a temporary urban hukou called collective hukou status. Due to the need of time to process the documents, this creates a great deal of problems due to its timeliness. Problems include people having two hukou(s).

The impact of the reform and its social development

The ultimate reason of the inequality is that hukou indicates more than mere place of residence, but also the basic rights, privileges, healthcare, property and education of the citizens. Only the citizens with that hukou of the local city can entitled the rights of within the city. Since the condition of urban and rural or inland cities and coastal cities differs drastically, the difference in the rights entitled are so great that it starts to affect the living of the country.

Education

Chan Kam Wing, a professor at the University of Washington conducts a study about the probability of a student entering a public school in China, where the cost of education is supported by the national government and with the best teachers. He concluded that a student with a kid with a Beijing hukou have the highest chance to get into a public. This situation was worsen when it comes to university.

Workplace

workplace

From Exhibit 10, you may notice the widening of the income differences between rural and urban populations. With inflation of the prices of daily necessities, it becomes the only way for the people with rural hukou to work in the urban areas. Exhibit 11 further supports the argument by presenting that migrant workers can achieve a higher wages in urban areas than as farmers. The intention of the hukou system was for better urban planning. However, this actually creates a huge drive of migrant workers to work in urban areas and create overcrowding in the cities.

Marriage

Marriage was considered one of the best ways to migrate from a rural hukou to an urban hukou. Therefore, cases of fake marriages have occurred. The land compensation also creates the problem of “new rich”. As rural hukou holders were entitled compensations by their share of land, therefore a lot of people tried to obtain a rural hukou by purchasing houses in rural areas, marrying people with rural hukou. In addition, inheritance also becomes a problem. There was a famous case in China that the father-in-law married the daughter-in-law eyeing for house relocation compensation which was hukou based.

The value of “marriage” was distorted by the hukou system as people find a lot of ways to gain benefits by acting around the system.

So far the discussion is around the bad impacts of the hukou system to the Chinese society and it should definitely be scrapped. However, if the hukou system is abolished without having an alternative plan in place it would create new, more complicated problems, trussing up the rational movement of rural migrants in cities.

It is not an easy task to grant 1.3 billion people equal access to urban facilities and welfare. According to a rough estimate by the National Statistics Department of China, the government would need to spend an additional 1.65 trillion every year to ensure all citizens enjoy standard social security. Take education as an example. There is a wide gap in education resources between urban and rural areas. The government has to increase its expenditure on education by a huge margin to meet the needs of rural immigrants’ children. Vocational training is basically free for urban residents now. But the government has to spend another 700 billion to train new rural immigrants.

Does the central government have enough money for the additional expenses? The answer is a definite no. The government’s overall revenue in 2012 was 6.8 trillion, with the national social security revenue being less than 1.6 trillion.The government is reluctant to the abolishment because it takes a long time to establish a set of practicable funding schemes to build a new, comprehensive, sustainable social security system. If the government abolish the system now, hundreds of migrants will move to the cities for a better life. From exhibit 26, you may find out that government have been running trial runs to test the effectiveness of the policies.

Hukou reform

In the past few years, a number of locally run hukou reform projects have been introduced in Chengdu (Sichuan province), Chongqing (Hubei province), Shanxi and Guangdong provinces. But they have met with limited success, because they usually target only rural migrants from within their jurisdiction. Thus it is still extremely difficult, if not impossible, for a worker who has migrated from the inland province of Hunan to, say, Guangzhou or Shenzhen in Guangdong province to get an urban hukou there.

The main problem of the current pilot programs were that the focus was on small and medium-sized cities. The reason why it was a limited success is that such cities offered limited opportunities and poor public services. A significant proportion of the country’s migrant workers are employed in large and mega-cities because they offer stable job opportunities in manufacturing and low-end service sectors. It’s those large and super-large cities that have proper public facilities and services. And it’s there that most of the younger generation migrants hope to spend their lives. Therefore, if hukou reform is confined to relatively small cities, there is reason to be skeptical about its progress.

Secondly, hukou reform should not only target workers from rural areas of the same province, prefecture or county. China’s rural-urban migration involves large-scale movement of people from agriculture-based inland areas to the more industrialized and urbanized coastal region. Thus a significant percentage of workers from rural areas work outside their home provinces. Therefore, in order to benefit the many, hukou reform must help rural migrants from outside the home county, city or province.

The central government should provide financial assistance to local governments or generate additional tax revenue at the local level to support the increased expenses due to hukou reform. One possibility is to introduce property tax in the local tax system while asking local governments to allocate at least some revenue to provide migrants’ equal access to schools in the cities.

Read entire paper.

Francis Yeung is a student from Hong Kong Polytechnic University, China taking Accountancy, minor in China Studies.

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