EO Editorial Board
Sept 30, 2013  
Economic Observer Online
Translated by Laura Lin
Original article: [Chinese]

Editor’s note: China’s hukou household registration system divides citizens as urban and rural. In cities, urban citizens have access to public services like education and social security, while those residents without a local hukou are left out.

In May, facing continuing rises in population, Beijing authorities made it even more difficult for university graduates who intend to settle in the capital to obtain their local household registration (hukou). The new regulations include an age threshold, stipulating that a university graduate cannot be older than 24, a master's graduate cannot be older than 27 and a new Ph.D, older than 35.

It has become a kernel of received wisdom that reforming China's hukou system is not easy. It is particularly difficult in the nation's largest cities. Recently Li Tie, a senior official of China's National Development and Reform Commission (NDRC), even stated plainly that "Megacities such as Beijing or Shanghai are finding it impossible to proceed with hukou reform."

In 2000, China relaxed the restrictions on college graduate household registration in townships below county-level. In 2011, they liberalized rural farmers moving into small cities and, further liberalized access to larger prefecture-level cities last year. However, the process for gaining local resident status in the biggest Chinese cities remains severely controlled.

Still, difficulty in reforming does not mean we should not make reforms. Establishing a better system to obtain household registration simply cannot be avoided in the nation's ongoing process of urbanization. And big city reform is the thorniest task of all.

A False Problem

What hinders the liberalization of the system is, above of all, fear. In 2008, Bai Jingfu, the then vice-minister of Public Security asked, "Beijing has nearly 20 million people now. How can it be possible to take in another 20 million?" What his words implied is that urban residency is a treasure, and were access relaxed, everybody would immediately flood the cities.

Bai's worries are not exactly unfounded. When completely liberalized, places such as Beijing and Shanghai are indeed likely to encounter serious population pressure in the short term. But over the long term, as the population increases, so will the difficulty of finding a job and coping with high living costs. People will choose to stay or leave, rationally. The so-called urban capacity is in effect a false proposition, and a residue of the thinking from Chinas' former command economy. Since ancient times, cities have always been formed spontaneously. How can a rigorous limit on residents restrict a mobile society?

Another obstacle comes from interests. As migration increases, a hukou is becoming more and more a bargaining chip for local governments. Urban development needs can be traded for hukous. Take Beijing as an example: In the 1990s when the capital was developing satellite towns, people who bought and invested in property in these pilot towns could obtain local household residency right away. Later on, when China was desperately in need of talented people, a lot of higher education graduates from foreign universities could get the urban status easily. But once foreign university graduates were no longer a rare species, the conditions were tightened up again.

These policies had indeed brought practical effects for local development, but using the resident registration as a bargaining chip is unfair. Free movement within one's own country should effectively be an equal right for every citizen.

The interests of existing local residents also stand in the way of reform. Big cities such as Beijing have gathered the best resources of the entire country, particularly in education. Residents of these cities are afraid that the influx of a population will snatch their cake.

However, introduction of labor to a city is beneficial to its development. Even demand for housing is advantageous to local residents, not to mention migration workers' contribution in output, employment, consumption and fiscal revenue.

Once these obstacles are removed, financial resources are not the central problem. Chen Jinyong, professor at Washington University and an expert of urbanization and migration at the United Nations, estimated that were China to bring forward the hukou reformation over the next 15 years, the annual cost would be one-fifth that of the Beijing Olympics. The Chinese government should be able to handle this kind of financial requirement.

Like Beijing, Shanghai is also a megacity with similar population pressure. But Shanghai has advanced at a much greater pace in reforming its hukou system. Since July, Shanghai has introduced the so-called “credit settling system” which gives migrant workers who meet at least two basic conditions — a “legitimate steady residence” and a “legitimate steady job” —the right to be given credits towards their application for a Shanghai hukou.

Though still far from comprehensive, this measure is nevertheless a transparent system upon which people can base their decisions. The Shanghai Municipal Human Resources and Social Security Bureau also offers an online simulation rating system for potential applicants, which is far more advanced than Beijing’s internal examination system.

Reforming the residency system that big cities use to manage their population and public services is indeed a major challenge. But Shanghai is an example of how to start. It showed that decades of a planned economy fortunately did not kill the deep-seated instincts in the people to help return to glory and build a new future, as both a megacity and historical treasure.

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