Feb 11, 2011 | 13:12 GMT

6 mins read

Addressing China's Social Inequality Through Hukou Reform

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China's Chongqing municipality launched a program in August 2010 to reform hukou, the permanent residency identification system. The system divided rural and urban hukou holders, with the latter receiving greater social benefits, leading to a disparity in living standards and hurdles to economic reform. The hukou reform effort aims to reduce disparities while managing migration to urban centers. Some city governments have attempted to pay for the higher social spending by requiring rural hukou holders to forfeit their ownership interests in rural land in exchange for urban hukou status, but this has become problematic as land values rise.
Reform of hukou, China’s permanent residency identification system, in southwestern Chongqing municipality began last August and has attracted nationwide attention. On Jan. 31, state-owned Xinhua News Agency reported that more than 1.6 million farmers in the region who originally held agricultural hukou had been changed to non-agricultural status since the initiative was launched. The system, originally meant to manage population movement and industrial activities throughout China, is increasingly being blamed for restricting social benefits for the country’s large number of agricultural hukou holders. The result has been a growing disparity between rural and urban living standards and hurdles to economic reform. The reform initiative in Chongqing, which exemplifies similar efforts that have been undertaken in China since 2007, has also raised questions about land ownership, which is a major benefit for agricultural households.

Hukou Reform in Chongqing

Chongqing’s reform effort primarily targets agricultural hukou holders living within the jurisdiction of the municipality. Under the scheme, those who have worked more than five years in the municipality’s main district or three years in any of 31 suburbs and have met tax requirements can receive urban hukou status. With such status comes access to employment opportunities, social welfare, education, medical care and housing that rural residents traditionally did not have. The Chongqing municipal government wants to transform 3.38 million agricultural hukou holders to urban residency within two years and another 7 million rural residents to urban status between 2012 and 2020. This would bring the municipality’s percentage of urban hukou holders from 53 percent of the population to 60 percent and facilitate Chongqing’s urbanization. Chongqing’s reform effort may be one of the largest and most aggressive hukou initiatives to emerge in China since the Communist Party of China’s 17th National Congress first proposed hukou reform in 2007. Ultimately, hukou reform aims to reduce disparities in social benefits while continuing to manage population migration and settlement patterns. In the planned-economy era, rural populations were locked to the land and earned very little from agricultural work while urban residents enjoyed greater access to social benefits. Before the Chinese economy became more market-oriented in the early 1990s, there were simply too few jobs in the cities. When jobs opened up and surplus rural workers started migrating to the cities, they received no social benefits because of their rural hukou status. This underscored the dual nature of Chinese society, in which urban hukou holders had more privileges than rural hukou holders, which created the potential for social instability — Beijing’s worst fear. But making social benefits more equitable for rural residents migrating to the cities threatened to overburden public services in urban areas, and this made it necessary for the reforms to be gradual. So far, steps toward a more equitable hukou have occurred mainly in small- to medium-size cities, such as Shijiazhuang in Hebei province and Haining in Zhejiang province, and this has had little impact on the status quo. In some larger cities, initial steps toward hukou reform have often come with strict conditions, such as high educational requirements, home ownership in the city and years of residency. In these cases, hukou reform has been less about making benefits more equitable for former rural residents and more about screening and selecting highly qualified people to bring economic benefits to the cities. So the Chongqing initiative, designed to bring some 10 million rural residents — more than half of the existing agricultural hukou holders in the municipality — to urban and suburban areas over the next 10 years is an aggressive approach. It is also focusing mainly on agricultural residents living within the municipality, though more residents from other provinces could be targeted in the future. While the effort is truly trying to extend the same social benefits to rural residents as those enjoyed by their urban counterparts, Chongqing is a sprawling and rapidly developing urban area. Although it used to distribute large numbers of migrant workers to the coastal provinces, it now needs the labor force, which can be anchored by rural migrants holding urban hukou.

Land-seizure Controversy

How city governments can afford to increase social spending to accommodate hukou reform remains a lingering question, in Chongqing as elsewhere. In other provinces that have carried out reforms on a smaller scale, one of the critical steps in the process has been requiring rural residents who want urban hukou status to give up their ownership interests in rural land. This has become a controversial issue as some rural residents have watched their land values rise dramatically, far outpacing the value of the social services that they would receive in return. In China, rural land has always been considered the ultimate resource and the most important protection for the rural population. To a great extent, land ownership has helped stabilize rural society as well as sustain urban populations by providing food. Unlike urban land, which belongs to the state, rural land is owned by “collective” entities that subcontract parcels to households that then live on and cultivate the land. Each household also is allocated a certain portion of land for housing. After years of economic growth and urbanization in China, including a booming real estate sector, land has become more and more valuable. Following a massive wave of urban land development from 2008 to 2010, the focus has shifted deeper into the countryside. Recognizing the rising value of rural land, some rural residents have declined the offer to become urban residents — indeed, some urban hukou holders have even changed their status to rural hukou to gain a stake in valuable land. And rising land values have not been lost on local governments, which have realized that revenues generated by the sale of land relinquished by rural migrants could help pay for more social services brought about by changes in the hukou system. In the Chongqing initiative, the municipal government is allowing farmers to choose whether to keep their contracted land and continue receiving government subsidies for it or exchange their land for compensation after changing their status to urban hukou. The farmers can choose to regain their rural hukou after three years. Meanwhile, it is rumored that Beijing will halt any requirement in the hukou reform process that rural dwellers must relinquish land ownership before obtaining urban hukou. While the details remain unclear, such a provision could make it harder for local governments to implement hukou reforms, since land sales account for a large portion of local government revenues. As China accelerates its economic restructuring and urbanization while trying to alleviate social inequality, thorough reform of the hukou system is inevitable. But the gradual approach to reform also depends on socio-political and economic differences. And rural land, which is growing ever-more valuable, will still need to be carefully managed to avoid making matters worse.

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