China’s hukou reform a small step in the right direction

Author: Bingqin Li, ANU

The household registration (‘hukou’) system in China, originally adopted in 1958, was finally put on the national reform agenda in July 2014. But how significant are the reforms?

A Chinese parent takes her daughter home from a kindergarten set up for migrant workers, which is marked for demolition in Beijing on 26 April 2012. Under China's complex residency laws, most migrant workers remain registered in their native towns and villages and do not qualify for the all-important hukou in the city where they live. Without this document, their children do not qualify for places in public schools, making the unregistered fee-paying migrant schools their only option. (Photo: AAP).

The old registration system maintained a clear distinction between rural and urban residency, and it was very difficult for people labelled as rural residents to switch over to urban registration. This situation made it hard for rural-to-urban migrants to gain equal access to the urban welfare system as urban citizens. The new registration system abolishes this distinction, replacing it with residency registration in a particular locality. While this appears to eliminate the rural–urban divide, in practice it is only a fairly small step in this direction.

Early pilot experiments in unifying rural and urban hukou in some provinces, such as Shandong, began 10 years ago. Before 2014, 12 provinces and one autonomous region had already modified hukou registration to make it easier for migrant workers to settle down in cities within the same province. These provincial systems were very different from each other. The new national reform outlines an overarching structure with a set of entry criteria, such as job and residence stability, social insurance contribution and the length of time a person has been living in the city concerned. Local governments can exercise discretion to determine the specific requirements relating to these criteria.

The first principle of the reform is to eliminate the differential treatment of rural and urban populations. The hukou system was originally designed to support the centrally-planned economy, which prioritised industrial production. A person’s hukou status was primarily defined according to their place of origin and occupation. An urban hukou came with comprehensive welfare coverage by employers or the local government. With the help of the hukou system, domestic migration was tightly controlled.

Reforms of the Chinese economy resulted in the development of private markets, and very large scale rural-to-urban migration, but no change to the hukou system. Until 2003, migrants caught without permits could be evicted. In 2003 this practice was abolished and migrants could work and live in cities legally without the need for a special permit. But the link between hukou and access to social services and welfare was maintained.

The new policy introduced in July 2014 set up a single national resident registration (jumin hukou) system for both rural and urban populations.

The new reform maintains the principle of population control. It categorises cities by size and encourages rural migrants to settle down in smaller and medium-sized cities. As city size increases, local authorities can set stricter settlement criteria by specifying a narrower list of occupations, more years of residency, or higher levels of social insurance contributions. The Chinese government advises cities with more than five million people to be cautious about further expansion. It also requires the largest cities, such as Beijing, Shanghai, Guangzhou and Shenzhen to tightly control population inflow.

The reform severs the link between hukou and welfare entitlement. The idea is to provide long-term residents with equal access to social services and welfare. But, ultimately, access to urban social services depends on the resources and political will of local governments.

Cities that are either unwilling or unable to invest more in social services can use the flexible settlement criteria to set up alternative barriers for entry to replace the older hukou barrier. The largest cities, such as Shanghai and Beijing, have made it even more difficult for migrants to settle down permanently than before. A number of medium-sized cities have also introduced policies to favour highly-skilled migrants at the expense of low-skilled ones.

The largest cities find it difficult to cope with massive influxes of migrants. But the concentration of social and economic resources in a limited number of large cities is itself what attracts migrants from poorer areas. Until the issue of unequal provision of social services is addressed, setting higher entry barriers could potentially result in greater social exclusion of migrants who do not fit the local criteria.

The reform of the hukou system is a step in the right direction and will make it easier for migrants to settle in small and also, to some extent, in medium sized cities. But it is only a small step. China needs to continue to reform its social services policy to address deep inequalities both between cities and between urban and rural areas.

Bingqin Li is Associate Professor at the Crawford School of Public Policy, The Australian National University.