One of the current Chinese government's main economic and social initiatives aims to build a "harmonious society." This pleasant-sounding term is the end goal of a series of economic, social and political programs geared toward addressing the societal stresses that have emerged and expanded during China's economic reform and opening. One of the highest-profile issues these days is the wealth gap between urban and rural Chinese. Numerous proposals have been floated and tested in order to reduce the gap and the social frictions it sparks. At a national public security conference March 29, officials from the Ministry of Public Security proposed a way to deal with the inequalities across Chinese society and bridge the urban-rural divide. The proposed solution consists of eliminating the two-tiered household registration system, known as "hukou," and allowing freer migration between the cities and the countryside. Supporters of reform posit that doing so could alleviate the imbalance of labor availability and training, and reduce tensions between the coast and interior provinces. This is not the first time reforms of the hukou system have been raised, and it is unlikely to be the last. Though the system restricts China's effective use of its own potential labor force, it also prevents massive booms in the populations of cities already crowded and straining to maintain basic civic services like transportation, water and sewerage and education. A 1950s Relic
The hukou system is a remnant of Chinese economic and social policy from the 1950s. With the implementation of the first Five-Year Plan (1953-7) and the subsequent focus on heavy industry, China's predominately agricultural workforce began moving to the cities, where the central government was placing its economic emphasis. China's central leadership at the time saw mass internal migration and rising city populations as destabilizing factors undermining the ability to provide cheap agricultural goods for the cities. In response, the hukou system was implemented in 1958, registering individuals and households based on occupation and place of birth. Effectively, anyone who was a rural resident in 1958 would remain as such — as would all subsequent generations. Urban households remained urban in perpetuity as well.
Under the centralized economy, the hukou system also meant that urban registrants received additional government services, at the time primarily grain rations, but also education and medical care. Rural residents were expected to grow their own food, and thus did not receive urban grain rations. Nor did they have access to the education, medical or social security programs afforded the urban residents. But with Chinese agriculture still following relatively primitive methods of cultivation, the rural labor force had plenty of work available on the communal farms. With the economic reform and opening of Deng Xiaoping in 1978, internal migration surged again as the coastal cities began focusing on light industry for the export markets, and needed a mass of labor. Construction booms along the coast also absorbed the rural labor. But while tolerated, the movement remained illegal. Backlashes against internal migrant laborers — who became the scapegoats for any employment issues, congestion or crime — had begun by the early 1980s. Several cities undertook regular roundups of migrant laborers, packing them onto trains and shipping them back to their native provinces. As China began reforming agriculture practices, the faster pace of population growth in the countryside only added to the pressures spurring internal migration. The central government sought ways to deal with the rising numbers of internal migrants after a review of the 1982 census showed 1.14 percent of China's billion-plus population was not living where they were registered. Reforming Hukou
In 1983, the State Council passed a regulation allowing rural residents to work and live in the so-called market towns (though without changing their residence status). A year later, rural residents gained the right to work in cities legally, so long as they had their own source of funds, food and housing, and registered with the local security bureau. Stemming from this later reform, some of the larger cities began offering a "blue" permit to rural-registered Chinese who could provide capital or necessary technical skills for the cities' economic development. Though ostensibly open to anyone, the blue-permit system was available only to those with considerable cash — or to those who could buy such a permit from a corrupt politician. As the drive to reform the hukou system increased, opposition to the changes was strong. The cities did not want to pay for the social services for the migrants, but they wanted the migrant labor. A compromise solution thus emerged. China began issuing ID cards to citizens, allowing them to leave their registration books at home. The ID card could be used to get a job, and those employers who chose to ignore where the new worker was legally registered could simply do so. This allowed Beijing to keep an eye on the country's population and maintain some control over internal migration, and also allowed the cities to soak up surplus labor from the countryside and use it for urban growth. Rural labor moved into the factories, the construction industry and various service industries, including restaurants and small-scale entrepreneurs, food stalls and the like. But in the end, the government still maintained the authority to kick out migrants whenever it felt the need. In 1988, in order to better understand the nature of China's population, the state changed the definitions of rural and urban, basing them on occupation rather than place of birth and household registration. But this was used just for statistical purposes, and the hukou system remained in place. Four years later, a group of economists at the Institute of Rural Development of the Chinese Academy of Social Sciences called in 1992 for the abandonment of the hukou system, sparking another round of intense internal debate on the long-standing system. Statistics at the time showed that just 25 percent of gross national product in 1992 was from agriculture, but more than 80 percent of the population was registered as agricultural. The stresses on the system were becoming obvious. Fearing Rapid Change
But opponents of reform once again warned of the new costs to the cities, as well as the potential for a massive influx of rural residents into the major cities, taxing urban resources and creating massive slums. The underlying fear of many, however, was that the large-scale movement would leave Beijing unable to control the populations of the megacities that would spring up — and the memory of the 1989 Tiananmen Square incident was still strong in the minds of China's leaders. Once again, fear of rapid change prevented any significant alteration, and the problems lingered. The new push to eliminate the hukou system was cut short amid other economic initiatives. In the mid-1990s, Beijing began reforming the state-owned enterprises (SOEs), seeking to reduce the redundancies of enterprises built up over the previous two decades. The SOEs were unprofitable, becoming a drain on state coffers and on more solid economic growth. The dinosaurs of industry also were blocking innovation and development of China's own intellectual resources, since there was little or no pressure to be creative or even competitive. These reforms, implemented in fits and starts, led to a new wave of urban unemployment — and the first group to face blame for the unemployment were migrant laborers. Already treated as second-class citizens, social discrimination against them increased, and city governments once again began blocking the flow of migrants and shipping them back to their home provinces. Though some hukou reforms started as experiments in various cities and provinces, Beijing pressed for the development of rural cities to absorb the ever-increasing pool of surplus rural labor — but with only minimal success. Beijing also sought to direct migrants to the inland cities, like Chongqing, that were more accommodating to migrants. Efforts also were made to urbanize select rural areas, creating cities by massing the rural population together in an effort to keep rural forces in the interior rather than heading to the coast. But none of these fully addressed the rising numbers of surplus rural labor. The allure of the cities was too strong. By the turn of the century, the construction booms in the coastal cities and the continued rise of exports drew in the rural laborers. The expansion of service industry in the cities to satiate the expanding middle class also created a vacuum the rural laborers could fill.
Footing the Bill
But the influx of laborers also brought new problems to the city administrators. In order to ease the growing social unrest triggered by economic inequalities, Beijing ordered the cities to provide basic services to migrant laborers, including education and medical care, though compared to many benefits enjoyed by nonmigrant urban citizens, these services were substandard. But the cities did not want to foot the bill, and the treatment of migrant labor became one of a growing number of contentious issues between the wealthy coastal cities and the central government. This problem continues today, though Beijing is starting to gain the upper hand in the struggle for recentralization of control — as seen in the sacking of officials in Shanghai. Nearly every year, there is a new call for the dissolution of the hukou system, and rumors circulate that the government finally will take the necessary steps to do so. But the uncertainty of control over the estimated 100 million to 200 million surplus migrant laborers, not to mention their families, continues to weigh heavy in the decision-making process. The inadequate infrastructure of the cities also affects the decision. Currently, China's rural migrants favor coastal cities, where economic growth has been concentrated. According to a recent report, of the top 10 choices of destinations for migrant labor, all but two are on the coast. These cities, including Beijing, Shanghai and Guangzhou, are straining to keep social services for their existing populations. But pressure to eliminate the hukou system is also strong. Rural pressures are building up, and Chinese officials have seen throughout history that revolution comes not from the cities, but from the countryside. Further, as Beijing seeks to shape China's economic development — moving growth centers from the southeastern coastal cities to the northeast, including the Bo Hai area — the restrictions on migrant labor hinder the best use of China's massive manpower resources. Migrant labor concentrates in the southeastern cities — regardless of whether there are jobs — since these are seen as places where it is possible to "get rich quick." Modifying the restrictions on labor and finding ways to better manage population flow could allow China to channel labor to where it is most needed, rather than to areas most popular among the labor pool, while still imposing some of the social controls of the hukou. Matching Workers to Work
Though China's massive potential workforce offers great advantages, Beijing has been less than successful in matching the population to the work — at least since agriculture was the dominant element of the economy. In the United States, the internal flow of labor, the absorption of immigrant labor and highly efficient flows of information in the labor market have allowed workers to congregate where the work is. If one geographical area slackens off in economic productivity, the labor moves to another area where growth has created a demand for workers. In China, this has not occurred except in select cases because of restrictions on movement still in place with the hukou system and the lack of a national labor information system. And once again, Beijing is taking a shot at reforming or removing the household registration system. Monitoring the population is possible through the personal ID cards, lessening the need for the hukou system. However, even with just ID cards, some elements of the household registrations restrictions could remain. The rate of increase of rural surplus labor exceeds that of the rate of surplus urban labor, and the "official" rural population continues to grow faster than the urban population, even as agricultural reforms make agriculture less manpower-intensive and environmental issues reduce the amount of arable land. Finally, labor is not flowing necessarily to the places where Beijing, in its more centralized economic planning, needs the workers. The recent Ministry of Public Security conference once again addressed these issues. And while there was a general agreement that something has to change, the hesitancy born of fears that overly hasty change could lead to chaos remains. The ministry has been tasked to work on the issue jointly with other ministries. It will step up its investigations into potential solutions, funded in part by a $3 million project sponsored by the International Organization for Migration, which recently opened a new liaison office in Beijing. The central government is also using the All-China Federation of Trade Unions to seek out and unionize migrant labor in order to get more control over the migrant population and begin using the migrant laborers as leverage in dealing with recalcitrant local and regional coastal governments — along with foreign companies. Though the abandonment of the nearly half-century-old hukou system might not come about this year, Chinese President Hu Jintao's proclivity to use the rural population as a base of support makes the changes increasingly likely before Hu's term expires in 2012. Both Hu and Premier Wen Jiabao have worked to rebuild rural grassroots support for the Communist Party — and their own leadership over the Party and economic policies. Addressing the hukou system in a very public manner emphasizes this rural connection to Hu and Wen. And with nearly 900 million of China's population still considered rural, the wealth of the remaining 300 million coastal and urban Chinese might not be enough to overcome Hu's rural backing. Revolution comes from the masses, and Hu is continuing to try to harness these masses to ensure that revolution is guided by himself, not left to its own devices.