Hukou reform and the tale of two papers

20140801-115350-42830010.jpg© 2013 Chris Aston

One paper issued this year by China’s State Council, and one dissertation paper written thirteen years ago by doctoral student Xi Jinping (习近平).

On July 30th the Chinese government released its latest paper on household registration system reform 《关于进一步推进户籍制度改革的意见》. The overall aim of reforming the household registration system, better known as the hukou system, is to balance the rights of rural and city citizens, paving the way for continued urbanisation in China.

This article released on July 31st puts the cost of urbanisation at RMB 5.1 trillion (almost USD 1 trillion). An astonishing figure, but put in context, this is needed to achieve the government’s aim of moving 390 million rural residents into urban areas before 2030. A goal which is designed to increase economic efficiency, and boost domestic consumption.

The current system prevents rural citizens from settling long term in the cities, as they’re effectively barred from receiving the city’s welfare, despite their labour and tax contributions. Thus the system has long had its critics, including Xi Jinping.

News released on July 30th reveals Xi Jinping, whilst Governor of Fujian province, penned a PhD dissertation paper in December 2001 at Tsinghua University, calling for the abolition of the two-tier system. At the time there was much public debate on whether or not to scrap the hukou system. Xi Jinping believed “vast numbers of migrant workers are unable to assimilate into the cities, the root cause being limitations in the household registration system”.

In the paper, Xi Jinping wrote “No matter whether one views from the need for rural marketization, market economic development or modernisation, removing the planned economy era household registration system, which splits citizens into either rural or non-rural classes at birth, is an inevitable development trend in history. The government must deal with the reality in a rational and brave manner, boldly proceed with household registration reform, firmly eliminate various socio-economic disparities, and diverging rural urban labour markets, which can be attributed to the household registration system”.

Xi Jinping also outlined a roadmap for hukou reform, recommending implementation first in the smaller cities, before moving onto the larger cities and metropolises. Those migrant workers who meet certain criteria, such as a stable income and long term residence in the cities, could count towards qualifying for a city hukou. Such an initiative was carried out in Shanghai in 2008, around the time Xi Jinping was Shanghai Party Secretary. Under that scheme, one thousand highly qualified migrant workers were issued with city hukous.

In fact Xi Jinping has made calls for hukou reform on previous occasions, yet it’s only now news of his dissertation paper written 13 years ago has been released. It’s no coincidence that following the public announcement of the investigation into Zhou Yongkang (周永康), hukou reform discussion has risen to the fore again.

A People’s Daily article published on July 31st accuses Zhou Yongkang of blocking reforms, which has been the public reason cited by the current administration for chasing Zhou Yongkang. For example Hukou reform is broadly popular, with netizens leaving comments on the news of Xi Jinping’s dissertation paper, praising his “warm human feelings”.

Yet although today a lot of discussion centres on the driving forces behind this ant-graft campaign, what matters from an economic perspective are the public reasons given. If Xi Jinping states this is all to pave the way for economic reform, then the Party must be seen to push through such changes, in order to justify hunting these ‘tigers’. Thus one hopes reform goals, such as giving the free-market control over the allocation of resources, and reducing the role of SOEs, will be implemented quickly and in earnest.

(Article not to be copied or reproduced without permission or citation).

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