China’s growth being held back by restrictive resident registration system, urbanisation expert says

A hukou controls access to public services and is often based on the birthplace of the holder, therefore preventing the movement of labour to the most productive areas

Weak economic growth in both Beijing and Shanghai in the first half of 2019 should act as a warning, according to professor Lu Ming

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In Beijing and Shanghai, about 40 per cent of regular residents do not possess a hukou, which are closely related to the ability to access social benefits and local schools. Photo: Reuters

Published: 7:15pm, 25 Jul 2019Updated: 2:49am, 26 Jul 2019

Shanghai’s disappointing economic growth at the start of 2019 is a warning to other large Chinese cities that they need to rethink their population control mechanisms and speed up the liberalisation of labour movement, said Lu Ming, a prominent Chinese professor of urbanisation.

The growth rate for the financial hub slowed to 5.9 per cent in the first half of the year– a slight increase from 5.7 per cent in the first quarter – but still below the national average of 6.3 per cent, indicating that Shanghai is holding back instead of driving the world’s second largest economy.

According to data published by the municipal government this week, the slowdown was mainly due to falling industrial production and a small drop in trade. Total industrial output from large firms fell 3.9 per cent year-on-year, while the total value of trade fell 1.8 per cent as exposure to the US-China trade war cut the city’s exports to the United States by 10.4 per cent to 129.7 billion yuan (US$18.9 billion) in the first six months of the year.

China recently eliminated household registration policies, known as hukou, for cities with populations of 1-3 million residents and eased restrictions for those with regular residents of 3-5 million. But the government is still reluctant to make similar changes for big cities like Beijing and Shanghai, which have said they will cap regular residents at 23 million and 25 million, respectively, by 2020.

The hukou policy, introduced in the 1950s, has restricted free movement of labour not only between rural and urban areas but also between different cities. The rigid system essentially created a dual society where those without residency status in a particular city would have only limited access to welfare entitlements and public services.

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