Poverty in China - Restrictions On Migration

Restrictions On Migration

See also: Urbanization in China and Metropolitan Regions of China

Pre-reform China had a system that severely restricted people’s mobility, and that system has only slowly been reformed over the past 25 years. Each person has a registration (hukou) in either a rural area or an urban area, and cannot change the hukou without the permission of the receiving jurisdiction. In practice cities usually give registration to skilled people who have offers of employment, but have generally been reluctant to provide registration to migrants from the countryside. Nevertheless, these migrants are needed for economic development, and large numbers have in fact migrated. Many of these fall into the category of "floating population". There are nearly 200 million rural residents who spend at least six months of the year working in urban areas. Many of these people have for all practical purposes moved to a city, but they do not have official registration. Beyond the floating population, there are tens of millions of people who have left rural areas and obtained urban hukous.

So, there is significant rural-urban migration in China, but it seems likely that the hukou system has resulted in less migration than otherwise would have occurred. There are several pieces of evidence to support this view. First, the gap in per capita income between rural and urban areas widened during the reform period, reaching a ratio of three to one. Three to one is a very high gap by international standards. Second, manufacturing wages have risen sharply in recent years, at double-digit rates, so that China now has considerably higher wages than much of the rest of developing Asia (India, Vietnam, Pakistan, Bangladesh). This rise is good for the incumbent workers, but they are relatively high up in China’s income distribution, so that the wage increases raise inequality. It is hard to imagine that manufacturing wages would have risen so rapidly if there had not been such controls on labor migration. Third, recent studies focusing on migrants have shown that it is difficult for them to bring their families to the city, put their children in school, and obtain healthcare. So, the growth of the urban population must have been slowed down by these restrictions.

Though, it should be noted that China’s urbanization so far has been a relatively orderly process. One does not see in China the kinds of slums and extreme poverty that exist in cities throughout Asia, Latin America, and Africa. Nevertheless, urbanization goes on: the urban share of China’s population has risen from 20% to 40% during the course of economic reform. But at the same time the hukou system has slowed and distorted urbanization, without preventing it. The system has likely contributed to inequality by limiting the opportunities of the relatively poor rural population to move to better-paying employment.