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The importance the central leadership attaches to hukou reform is reflected in the Communist Party of China’s “No. 1 Central Committee Document”, issued at the end of January and presented to the just-concluded National People’s Congress. The document says efforts are being made to reform the hukou system in small and medium-sized cities (with population less than 500,000) only to allow migrant workers to settle down there and enjoy the same public facilities and services as people with permanent residence permits do.
But it is necessary to weigh the concrete action plans of the central and the local governments both to know whether the reform will work. And no significant progress can be made on this front unless three specific issues are addressed.
First, hukou reform cannot be successful if just relatively small cities are opened up to migrant workers or other rural migrants. A significant proportion of the country’s migrant workers are employed in large and mega-cities because they offer stable job opportunities in manufacturing and low-end service sectors. It’s those large and super-large cities that have proper public facilities and services. And it’s there that most of the younger generation migrants hope to spend their lives.
Hukou reform pilot programs were introduced in many small and medium-sized cities as early as the mid-1990s. But they met with limited success because such cities offered limited employment opportunities and poor public services. So if hukou reform is confined to relatively small cities, there is reason to be skeptical about its progress.
Second, hukou reform should not only target workers from rural areas of the same province, prefecture or county. China’s rural-urban migration involves large-scale movement of people from agriculture-based inland areas to the more industrialized and urbanized coastal region. Thus a significant percentage of workers from rural areas work outside their home provinces, prefectures or counties. So to be effective, hukou reform must help rural migrants from outside the home county, city or province.
In the past few years, a number of locally run hukou reform projects have been introduced in Chengdu (Sichuan province), Wuhan (Hubei province) and some cities of Zhejiang and Guangdong provinces. But they have met with limited success, because they usually target only rural migrants from within their jurisdiction. Thus it is still extremely difficult, if not impossible, for a worker who has migrated from the inland province of Hunan to, say, Guangzhou or Shenzhen in Guangdong province to get an urban hukou there.
Finally, and perhaps most importantly, effective hukou reform should cover the hukou-linked urban public services. Currently, the privileges include urban social assistance (known as Minimum Livelihood Guarantee Scheme), equal access to urban public schools for migrants’ children and locally funded public housing schemes.
It is a common misunderstanding that China’s urban hukou-linked benefits include social security schemes such as pension, medical insurance and unemployment insurance. The social security schemes are job-related rather than hukou-related insurance. Granting urban household permits to rural migrants, therefore, doesn’t imply that city governments would provide social insurance cover for them.
But to make the hukou reform really successful, city governments have to fund the social security schemes, and provide public housing to the migrants and schooling to their children. Unfortunately, local governments often have little incentive for doing this.
In 2004, the central government mandated that city governments with migrant populations provide equal access to schools to migrants’ children but didn’t provide additional financial resources for the purpose. Hence, migrants’ children still have limited access to schools in cities.
If the central government really wants to push hukou reform forward, it should either provide financial assistance to local governments or generate additional tax revenue at the local level to do so. One possibility is to introduce property tax in the local tax system while asking local governments to allocate at least some revenue to provide migrants’ children equal access to schools in cities.
Of the three urban hukou-linked services, providing public housing for migrants could be the most expensive. But if some coordinated reform in land development could be implemented to enable rural migrants’ collectives to develop land for housing rentals on the fringes of cities, the market rather than the government could provide affordable yet decent housing for the hundreds of millions of China’s internal migrants.
One needs only to look at the urban villages in Shenzhen and Guangzhou to understand such an arrangement. Unlike most other Chinese cities, the local governments there are more permissive to land development by rural migrants’ collectives in the suburbs. As a result, millions of migrants from other parts of the country find the massive apartment buildings in the urban villages of Shenzhen and Guangzhou to be the only affordable housing for them.
