As China enters the urban age, a critical part of the Chinese dream is the ‘urban dream’: the promotion of urbanisation to generate household consumption to put the economy on a sustainable footing. This would steer China away from its current export- and investment-driven growth model, which has long been considered, even by the government, as ‘unbalanced’ and ‘unsustainable’.
Premier-designate Li Keqiang has championed urbanisation for years. Some media pundits are excited by his talk of a new type of urbanisation, though details are scant. Can he do it right and help China reach its urban dream?
Some say China is already on the way to fulfilling this dream, only having counted the number of people relocated to cities and the tens of thousands of new buildings erected and roads built in recent years. But others have countered that it’s not real urbanisation, only an incomplete version of it, based on the fact that a third of the 700 million Chinese urban dwellers today are not truly ‘urbanised’. They do not have an urban hukou, or household registration, a little red booklet that entitles the bearer to live like an urbanite. Without a local hukou, they cannot receive urban social security entitlements and access to public housing, and their children have to pay extra fees to attend public school in the city. Many jobs also call for a local hukou. Today, about 230 million migrants work and live in these ‘cities with invisible walls’.
This gargantuan Chinese labour force without urban residency rights has supplied the global economy with the largest ever army of exploitable labour; it has also driven the country’s boom over the past 30 years. Without the hukou system, there would be no China as we know it today. Some have said that it is China’s most potent dirty, secret weapon. While the arrangement has enabled China to seize the world’s low-end manufacturing market and become a global power, it has also locked a large segment of Chinese citizens into permanent impoverishment by turning them into an underclass. And since the hukou status is hereditary by law, this status gets passed on to the next generation.
This caste-like system has made China’s urban story more complex. And this important dimension is missing in many narratives and forecasts of consumption trends. For example, a popular argument, put forward by financial gurus such as Stephen Roach, contends that China’s large number of rural–urban migrants will soak up the housing supply, and turn China’s ghost towns full of empty apartments into ‘thriving metropolitan areas’. This cannot possibly happen. Study after study has shown that very few rural migrant workers can afford to buy an urban flat; most can’t even afford to rent a decent place.
Neither will China add 400-500 million people to its middle class between 2011 and 2021, as the rosy forecast by the Brookings Institution’s Homi Kharas has it. Considering the continuing super-low urban fertility rate, that figure sounds like an urban legend in the making. Hence, the familiar narrative of rural migrants going to the city, getting a higher-paid job and eventually joining the middle class — the magic of urbanisation leading to prosperity — cannot be readily applied to China under its present hukou system.
The new generation of migrants is more educated than their parents and more aware of their rights. Some are demanding greater equality, and this is contributing to widespread social unrest, which cannot be ignored. To fulfil its urban dream, China will need to fully undo its discriminatory hukou system, beyond recent reforms. Of course, the system cannot be dismantled overnight. It should be phased out over 15 years or so, steadily transforming a sizeable group of migrants every year into China’s next wave of urban citizens and consumers, boosting domestic consumption and alleviating social instability.
Such a plan would mean converting about 15 million migrants to urban hukou residents every year. Some groups should be prioritised: college graduates first; then skilled migrant labourers with regular employment; and, finally, unskilled workers. Offering migrant workers local residency will help them settle in the city and become more productive. The equal opportunity bestowed by residency rights will also enable them to move up socially and economically.
Beijing must take the lead on this issue. Serious hukou reform will inevitably involve inter-regional fiscal, population and administrative issues that require its commitment and coordination. Local governments cannot be left to try piecemeal and, at times, distorted hukou reform in their own jurisdictions.
China’s economic growth in the past three decades has been achieved through a skewed and short-sighted model that has also brought serious social and economic problems. Moving forward now requires an overhaul of the hukou system to allow migrants to become full urban citizens and to participate in China’s growing prosperity. That’s what is urgently required to unleash that magical power of urbanisation, and it has to be done right.
China’s cities with invisible walls need to — and can be — turned into cities of dreams.
Kam Wing Chan is Professor of Geography at the University of Washington.
An earlier version of this article appeared here in The South China Morning Post.