China’s population is highly concentrated in the eastern part of the country,
especially in the coastal zones. Roughly one billion Chinese live in only a lit-
tle more than 30 percent of the country’s land area. In contrast, 50 percent of
China’s inland areas are very sparsely populated. China is under-urbanized given
its level of economic development. According to the 1 percent National Population
Sample Survey conducted in November 2005, 561.57 million mainland Chinese
are classified as urban residents living in 662 cities and 20,358 towns. Thus, urban
population accounted for about 43 percent of the national population in 2005 as
compared to 36.22 percent in 2000. The potential for urban growth in China is
therefore substantial. China has launched its ambitious urbanization program
aiming at transferring more than ten million rural farmers annually into urban
areas over the next 20 years.
With the process of urbanization, a large number of people are increasingly
concentrated in small geographic regions, particularly in the Yangtze River
delta, the Pearl River delta and the Beijing-Tianjin region. These big metropoli-
tan regions have played an overwhelmingly important role in China’s recent
economic growth. For instance, in 2003, more than 21 percent of China’s total
GDP was produced in the Yangtze River delta area covering 110,000 square
kilometers (1.14 percent of the national total) and 16 prefecture-level cities
including Shanghai, Hangzhou and Nanjing, with a population of 82 million
(6.32 percent of the national total). The rapid development of big metropoli-
tan areas or urban concentrations has certainly benefited from the “openness”
policy initiated by late Deng Xiaoping in the 1980s, and also indicates a shift
of China’s urbanization strategy from focusing on small and medium-sized
towns and cities to a balanced development of big, medium and small cities
and towns. Urbanization is viewed as one of the decisive factors driving future
economic growth in China.
As China’s economic growth during the reform period (except for the initial
years) has been mainly concentrated in urban sectors, the ratio of urban to rural
per capita income (urban disposable income to rural net income) increased from
1.86 in 1985 to 3.11 in 2002. If public housing subsidies, private housing imputed
rent, pension, free medical care, and educational subsidies were included, as
the China Human Development Report 2005 points out, the urban to rural
income ratio would be four or higher instead of 3.2 as acknowledged by official
document.
This rise in urban-rural income difference is caused partly by China’s dual
development path. China has been for a long time a dual society with an overt
socio-economic line drawn between urban and rural part of the country, based on
the household registration system, known as Hukou in Chinese. The Hukou system
has developed over the last half a century. The system was formally established in
1953 with the initial function of public security. In 1956, food rationing was intro-
duced in urban areas based on Hukou status, and the urban-rural division began
to surface. It was in 1958 that for the first time, as stipulated by the government
“Regulation on Household Registration”, households were divided into agricul-
tural households and non-agricultural households. The recovery of the economy
from the Great Leap Forward movement and the great famine of 1961 led to fur-
ther control on migration, and kept the system in effect for more than 20 years.
The dual system was a kind of institutional arrangement for China’s indus-
trialization. Based on the system, the State purposely lowered the price of agri-
cultural products, and collected a huge amount of financial resources from the
agricultural sector to invest in the industrial sector. With the passage of time,
more functions were added to the Hukou system. As a result, the system led to
discriminative treatment of rural population in dispensation of almost all pub-
lic resources, including education, employment, and social welfare entitlement.
Without urban Hukou, one would not qualify for job assignment, which was the
only method of gaining employment in urban areas before the 1980s, because
private employment virtually did not exist. Without urban Hukou and formal
urban employment, it was impossible to have housing and difficult to gain access
to other major necessities for living, because these were rationed to urban resi-
dents before the mid-1980s.
The functions of Hukou have been gradually diminishing since the launch of
economic reform in the early 1980s. However, as Hukou has been functioning as a
base for social segregation with respect to social welfare and many other entitle-
ments as well as an essential tool of political and social control for a long time
in China. It is likely to take a long time to change the system in a systematic and
comprehensive manner.
The large-scale rural-urban migration that China has been witnessing in recent
years can be a very efficient vehicle for social enlightenment, with profound
social and political implications and entailing relatively very small cost, particu-
larly for the government. The demographic impact and economic contribution of
the migration are apparent in both rural and urban areas. It is estimated that the
rural-urban labor mobility contributed to about 16–20 percent of China’s GDP
increase in the 1990s. The remittance sent back by those migrants has become a
very important source of income for rural families. Therefore, migration is viewed
by the Chinese government as one of the best ways to alleviate poverty and to
make rural surplus labor force employed.
On the other hand, the migration is also creating a number of problems, includ-
ing generation of social tensions between regular city dwellers, on the one hand,
and temporary migrants, on the other. Arrival of migrants in large numbers has
also given rise to a challenge to the existing governance structure of the cities.
Many institutions established in the central planning era have remained as
obstacles to rural-urban integration. Migrant workers are generally excluded from
the urban social welfare system although some efforts have been made recently
to protect the basic rights and to improve the general living and working condi-
tions of migrant workers. Measures have been taken to include migrants into
urban “formal” labor market, so that an integrated urban labor market could
be established. One of the specific steps necessary is to include migrants into
the urban social security system. Such a step, on the one hand, can extend
the contribution base of urban social security funds, and thus partially solve the
problem of an increasing deficit in the urban pension system, caused mainly by
rapid population aging in urban areas. On the other hand, the step will help to
reduce the labor cost gap between local urban workers and migrant workers. To
the extent that migrants generally originate from and maintain connection with
Chinese farming households, improvement in the conditions of the former will
have beneficial effects on the latter too.
