China’s Greatest Development Challenge?

That China has experienced off-the-charts development in the last thirty years has become apparent for most, both for citizens experiencing higher standards of living, and foreign observers witnessing the miracle. China has indeed achieved the remarkable, with year-over-year GDP growth rates the rest of the world could only dream about. For the observer, it is tempting to stop here, to accept the miracle and shout ‘Ganbei!’ (‘cheers’ in Mandarin). During the past year, President Xi Jinping has pushed the thought of the Chinese Dream, which could be interpreted as a further ideological shift from egalitarianism and collectivism towards more focus on the individual’s right to the pursuit of prosperity. However, the impressive achievement of the last thirty years must be understood through some further reflection.  The fact is that perhaps the greatest determinant of whether you as a Chinese citizen will be able to realise your ‘Chinese Dream’ can be summed up in three words: place of birth.

Image courtesy of Oliver Ren, © 2010, some rights reserved

Image courtesy of Oliver Ren, © 2010, some rights reserved

Since the late fifties, the Chinese household registration system, hukou, has served as a central institution in PRC’s control over the country’s internal migration flows. The hukou system entitles Chinese citizens to public benefits as well as rights concerning jobs and housing, however effectively only at your location of birth. The urbanisation that spurred China’s development in the first place, was made possible by masses of rural citizens who were willing to seek opportunity in the countries’ urban centres. The catch: no access to public services, no job security, and low wages. Being a city resident without a hukou also means greater difficulties in getting a driver’s license, buying a car or a house. Your hukou status is also transferred to your children, giving them as little opportunity to above-poverty line salaries, career advancement and access to education and other public services as their parents

The hukou system has its roots in the sharp separation of rural and urban societies, which was installed during the Mao era. One could argue that the feudalism of the old China that Mao wished to destroy through his implementation of full egalitarianism and control only served to create another type of feudalism. This feudalism was, however, not based on class, but on birthplace. Since the beginning of the reform era, the PRC has been struggling to craft a modern state system in combination with the complex institutions of the Mao era, such as the hukou system.

Clearly, the rural-urban divide creates civil rights issues. Citizens born in the countryside simply do not have the same opportunity to the Chinese Dream as those born in the cities. Although the unfairness aspect may be reason enough for serious hukou reform, there are other perspectives also speaking for reform. A hukou overhaul could result in considerable economic benefits. The current hukou system can be seen as holding economic development back through keeping 230 million people in poverty. More free movement of people would result in a more natural allocation of labour according to demand, seeing the large potential waste in the present system’s inelasticity to labour demand. Giving migrant workers a stronger status and more rights within the cities they live would also result in higher incomes and, consequently, increased consumption.[1] This would pave the way for enlarging the country’s middle class, a goal that is central to the Xi Jinping administration.

So, what stands in the way of migrant and permanent worker equality in today’s China? The short answer would be: a whole lot. First of all we must understand that the hukou system cannot be separated from the wider system of rural-urban division that the whole Chinese society is based on. Much of which is still in place across the Chinese countryside is a system of collective land ownership. This means that, although land is used and farmed individually, it is owned collectively. When a rural farmer decides to seek opportunity in a city, he would first of all not be able to sell the land he has been using to acquire some startup capital for his new life. The collective land system also makes things more difficult if a migrant worker would, down the road, decide to return to village life. The issue of collective land ownership, which in itself is under considerable debate, highly affects the rigidity and permanence of China’s internal migration. If a sustainable solution to the hukou problem is to be found, this cannot be done absent of significant land ownership reform.

Although macro reform of this scale may not be possible at present, current pilots projects of hukou reform display issues based on the problem of the rural system of collective land ownership. Chongqing, also known as the largest city no one has heard of, with its 32 million inhabitants is a perfect example. As a city of enormous expansion and development, as well as a large migrant population, Chongqing would be believed to be the ultimate test ground for hukou reform. Surprisingly, however, many migrant workers turned down the prospect of permanent urban residency when given the choice.[2] The reason being that the workers offered Chongqing hukou were migrants from the rural areas immediately surrounding the city. Accepting a city hukou would mean turning down their village residency as well as their part in land ownership. This would result in, among other things, the loss of potential revenue from renting out collective land to businesses. In rural areas close to major cities around the country this kind of land lease can be a surprisingly large income source for villagers. The most important problem of the Chongqing case, however, is that the migrant workers from afar, struggling with a disadvantageous opportunity-structure, are not the ones who become subject to hukou reform pilots. In cities all over China, the fact remains: the group of migrant workers that are in the greatest need are those with the least chance of reaping the benefits of getting their hands on a hukou.

It is strikingly apparent that there exist considerable obstacles to achieving meaningful reform of the unsustainable hukou system. However, it is not a far stretch to argue that this issue may become one of the largest challenges to continued Chinese development. There are significant indicators showing that attention is increasingly given to this civil rights issue. Chinese authorities, academics, migrants, and activists, all acknowledge one thing. In order for the Chinese Dream to be truly achieved, the hukou system needs some serious fixing.

[1]       Northwest Asian Weekly, 2013-10-13.

[2]       Global Times, 2010-09-29.