Home' Trinidad and Tobago Guardian : March 27th 2014 Contents BG28 | THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt MARCH 2014 • WEEK FOUR
China s future is now firmly urban. Already around
54 per cent of its people live in cities, and the pro-
portion is rising fast as ever more jobs are created
in offices, factories and construction sites, luring ever
more people from the countryside. There are now
around 250 million rural migrants living in cities.
Despite many wobbles, in the property market and
elsewhere, this extraordinary revolution has been
There are, for instance, few shanty towns of the
sort that you see in Brazil or India. At the heart of
prosperous, urban China, however, sits an enormous
inequality, based upon the hukou system of household
To have full access to schools and hospitals in the
cities at subsidised urban costs, you must have an
urban hukou. If you were born in a rural area, though,
your hukou and that of your children is registered
there, and changing that is difficult. Only 36 per cent
of the people who live in cities qualify as residents
there. This has, in the past, helped control the flow
of people and kept urban labor costs down while let-
ting the new urban middle class retain its privileges.
The first generation of migrants was happy simply
to get paid more in the cities. Now many complain
about how unjust the system is, and it has begun to
look politically dangerous. The labour of these poor
migrants built China s new cities, and today they and
their children form an increasingly angry urban under-
class, unable to live the "Chinese Dream" being touted
by President Xi Jinping.
That explains the importance of the government s
long delayed "people-centered" plan on urbanisation,
released on March 16. It wants 60 per cent of China s
people to live in cities by 2020, putting it broadly in
line with the current average for countries with
income levels similar to China s, and it wants 45 per
cent of them to have full urban hukou.
This is a huge change. It involves giving full urban
hukou to 100 million of the 250 million migrants. It
could be a significant boon to the economy, too,
enabling migrants, who now save a large proportion
of their wages because of fears about the cost of
health care, to consume more.
The plan should, however, have gone much further.
There are two main areas in which it falls short.
First, the hukou liberalisation focuses on cities
with less than five million people. However, most
new jobs are being created in the 16 big cities with
populations of more than five million, and most of
the dubious government debt seems to be concen-
trated in the smaller cities whose officials are therefore
unwilling to fork out for benefits for new urbanites.
Large cities can give urban hukou, but only on a
complicated, points-based system which tends to
favor the prosperous, giving graduates and skilled
workers a better chance. When tried elsewhere, that
has ended up allowing mainly the elite to migrate.
The points-based system should be scrapped and
the door opened faster and wider.
The second problem is bigger. Though migrants
hate the way they are discriminated against in cities,
many are nervous about accepting an urban
hukou, even if offered, because they do not
see it as a reliable source of security. Urban
welfare systems are so new and so imperfect
that migrants doubt, with good reason, that
they will be able to draw on unemployment
benefits or a promised pension, especially
if they move to another city. So they keep
one foot in the countryside, holding onto
their tiny patch of land and never making
Even if they want to sell their land, they
still are not allowed to do so. The plan thus
needs two other important strands: more
cash for public services in the cities and the
establishment of a rural land market, so
that the buying and selling of land could
help enrich farmers in the same way that
it has enriched urbanites.
These are massive changes, but success
in the next stage of China s epic modern
development depends on them. Only then
can it become the urbanised, modernised
nation it longs to be, and only then can the
Chinese Dream become reality.
@2014 The Economist Newspaper Ltd. Dis-
tributed by the New York Times Syndicate
China's great transition
Xi Jinping, President of People Republic of China
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