China's urbanisation challenge

Hu Shuli urges bolder reform of the household registration system and the inequitable access to social services between town and village

PUBLISHED : Thursday, 20 September, 2012, 12:00am
UPDATED : Thursday, 20 September, 2012, 2:28am

This year marks a watershed in Chinese urbanisation: for the first time in China's history, over half of its people now live in the city. With an average of over one percentage point added to the rate of urbanisation every year for the past 33 years, it's an achievement to be proud of. But, as Premier Wen Jiabao conceded last week at the World Economic Forum in Tianjin , China's urbanisation is falling short of what it should be. The country has gained some experience but learned some lessons too, he said.

We couldn't agree more.

Urbanisation is a force in China's modernisation. Only when production capacity is concentrated in the city can economies of scale be achieved. In today's China, urbanisation can also help rev up domestic demand, mop up excess production capacity, and spur growth. Urbanisation - along with industrialisation, the information technology revolution and globalisation - will drive social and economic growth in the years to come.

The danger now is that China's "incomplete urbanisation" will not only impede its growth, but may also become a source of social tension, leading to instability.

The problem, Wen said, is that Chinese villagers are not treated the same as urban residents. In other words, farmers are not successfully becoming city residents.

On paper, the rate of urbanisation leapt from 18per cent in 1978 to 51.3per cent at the end of last year, during which the urban population grew from 238million to 680million. Officially, this figure includes everyone who has lived in cities and towns for at least six months. In reality, however, at least 250million migrants working in the city are not entitled to the social benefits given to urban residents, and have little or no access to a secure job, welfare benefits, or education and medical benefits for their children. This imbalance is especially striking in the big cities where migrants congregate.

Some analysts estimate that if this group of people were taken out of official counts, it would shave at least 10 to 12percentage points off the urbanisation rate.

There's no doubt the government should aim to "complete" the urban transformation. To this end, the premier has stressed the importance of continuing "structural reforms".

Many local governments have in recent years taken measures to improve social security benefits for migrant workers. The central government has not been idle, either. In February, the State Council released a document on the gradual implementation of reforming the household registration system. More recently, on August 30, it released a set of guidelines from the Ministry of Education and other relevant authorities on giving migrant workers' children better access to education.

While important, however, these policy tweaks face significant challenges in implementation and will in fact be limited in impact.

Correcting the flaws of Chinese urbanisation is a work in progress, to be sure. But more fundamentally, the government - both the outgoing and incoming leadership - ought to focus on tackling the root of the problem: the household registration system.

The social welfare gap between a rural migrant and an urban resident today is wide, and it's particularly glaring in the municipalities, provincial and sub-provincial cities that attract the highest number of migrants. How should the government begin overhauling the hukou system?

The biggest obstacle is financial. First, the government must delink access to public services and a person's hukou. Then, it must redefine the financial roles of the central and local governments, and design and build a nationwide, equitable and sustainable social security system that allows people to migrate freely within the country without losing their access to services.

Not all migrants will want to settle down in the city, and it's their choice to make.

Here, Thailand's experience is instructive. Bangkok is home to some three million migrant workers. Those who want to return home eventually are required to pay the labour department their contribution for work injury insurance; those who intend to stay must start to make social security payments, and they will be granted residency after eight years.

Chinese migrants should be allowed to make those choices, too, and they can do so sensibly if social welfare is more equitably provided in both village and city.

It is only right that people choose where they want to live. Unfortunately in China today, the "urbanisation of place" is racing ahead of the "urbanisation of people", while economic principles are often ignored in officials' zeal to urbanise.

Too often, farmers' land is seized against their wishes. Local governments have been known to try all kinds of ways to convert farmland into development projects, illegally and violently evicting farmers from their homes, turning them into flat dwellers and unwilling urbanites. This is a major cause of the mass outrage and radical protests in recent years.

With between 500million and 600million villagers expected to move into cities in the next 10 to 25 years, the scale and complexity of Chinese urbanisation is unprecedented. It's all the more necessary that the government ensures this process is sustainable and people-centred.