Hukou reform vital to nation's growth

PUBLISHED : Wednesday, 18 January, 2012, 12:00am
UPDATED : Wednesday, 18 January, 2012, 12:00am


The mainland expects to attain the milestone of having more than half of its population living in cities this year. With urbanisation acknowledged as a crucial driver of economic growth, that neatly fits the central government's plans. Migrants from rural areas provide labour for factories and also boost consumerism, seen as essential if the nation is to move away from a dependence on foreign investment and exports. It is a well-formulated strategy, but one that will falter unless authorities ensure that those moving from the countryside are made fully fledged urban residents.

That a recent Chinese Academy of Social Sciences report determined that more than 650 million citizens will be living in cities and towns is highly symbolic, as well as giving a huge confidence boost to economists and planners. When economic reforms were unveiled in 1978, just 18 per cent of the population was urban, and even a decade ago China was still perceived as an agricultural country. Sociologists predict that the urban population could reach 80 per cent by 2050, the same level as the United States now and a psychological landmark for leaders. Without reform of the hukou system of household registration, though, the associated benefits of economic development and stability are unlikely to follow.

The hukou is a relic of the Mao era, when the Communist Party segregated urban and rural dwellers to give them different places in society. Collective farms were created, giving villagers land to grow food but making it difficult for them to get access to urban schools, hospitals and subsidised housing. Despite the flood of farmers and their families to cities over the past three decades, only a small percentage have been made to feel at home. Just 35 per cent of people in urban areas are believed to be hukou holders.

About 350 million more people are expected to move to cities in the next two decades. But an unknown number, alienated and frustrated by the hukou system, will return to their villages. Some will feel that their families are being neglected. Others, as they reach their 30s and 40s, will no longer be able to do the fast-paced, nimble-fingered work required by factory production lines. Surveys of young people who have moved to urban areas show that most intend to go back to their rural roots when they get older.

Development plans will go awry if this happens. China wants and needs urbanisation; migrants boost consumption through renting flats, eating in restaurants and shopping in markets. They have been promised affordable housing and schools, but too few city and town governments have honoured such pledges. Unless more incentives are assured through urban hukou reform, economic growth will be affected and output may even start to shrink.