Xi Jinping

Beijing lays out first steps in push to urbanise, including 'hukou' changes

Restrictions under household registration system to be removed or eased to make gaining full urban status easier for migrant workers

PUBLISHED : Sunday, 15 December, 2013, 5:25am
UPDATED : Sunday, 15 December, 2013, 5:25am

The central government yesterday rolled out long-awaited plans to push forward urbanisation.

The plans are considered a centrepiece of the leadership's effort to unleash domestic demand and reduce urban-rural disparities.

As a first step, restrictions under the household registration system, or hukou, will be removed in small cities and townships and gradually eased in medium-sized cities to make it easier for migrant workers to win full urban resident status.

The measure was one of six contained in a plan released following the highest-level meeting yet convened on the issue. President Xi Jinping delivered the keynote speech at the Central Economic Work Conference in Beijing. Premier Li Keqiang, widely seen as the main initiator of the drive, also gave a speech, and the other five members of the Politburo Standing Committee were present.

Urbanisation was "the path China must take in its modernisation drive", said a statement released afterwards that described the plan. The policy would provide "an important means" of addressing rural issues, and carried "practical significance" in the nation's pursuit of modernity, Xinhua quoted the statement as saying.

The statement marks an official reaffirmation that the controversial urbanisation drive will be a top policy priority for at least the next decade.

The leadership has viewed urbanisation as a key plank in its effort to move the economy away from reliance on credit and export-driven growth to one based on consumption.

The overall guidelines for the massive project, which would see the urban population boosted by 400 million over the next decade, were "steady", "active" and "human-focused", the statement said.

By partially relaxing the hukou, the leadership hopes to set reasonable conditions for settling in big cities while strictly controlling the population in mega cities.

The hukou has long been considered as a cause of inequality and to have suppressed consumption, as it stops migrant workers accessing the same social services as those with urban hukou even after they move to the cities.

The other measures include more efficient use of urban construction land, greater low-carbon urban development and better cultivation of urban management officials and experts.

Analysts say the plan lacked details of how the leadership would solve a main sticking point of the urbanisation drive - funding. The conference had been postponed for the past eight months as authorities tried in vain to devise viable ways to finance spending on roads, housing and the social safety net.

Analysts say local governments will have to issue long-term bonds, but that requires a fiscal overhaul as they don't have steady stream of tax revenues to back the debt issuance.

The central government gets most tax revenue while local governments do the spending, forcing them to rely on land sales for survival. To support urbanisation an overhaul of land and tax codes is needed, analysts have said.

But yesterday's statement only said steps should be taken to "improve local taxation mechanisms", "set up a system for managing local bond issuance" and "encourage private capital to invest in public infrastructure and facilities", without giving details.

Additional reporting by Reuters