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Equal Signs

Amid demographic and economic transformation, China is relaxing its once-rigid household registration system to expand social benefits to new urban residents

By Yu Xiaodong , Zhang Xinyu , Chen Yuan Updated Nov.1

In early July, the government of China’s prosperous Zhejiang Province released an implementation plan that would remove household registration restrictions throughout the province except for Hangzhou, capital of Zhejiang. The same month, the provincial government of neighboring Jiangsu Province unveiled plans to scrap all household registration restrictions, except for urban areas in two of its biggest cities, Nanjing and Suzhou.  

Experts believe these moves indicate that the much-criticized household registration system, which aims to control the population growth of Chinese cities, will become increasingly irrelevant amid China’s demographic and economic transformation.  

China’s household registration system, known as the hukou, has long been criticized for standing in the way of the country’s urbanization and causing social inequality. Set up in the planned economy era in 1958 to control people’s movement, particularly from rural to urban areas, it links a resident’s access to public services, such as childcare, education and subsidized healthcare, to where they are registered rather than where they habitually reside. The place of registration is usually where the individual was born.  

After many Chinese cities, especially megacities such as Beijing and Shanghai, adopted strict quota systems to limit the number of new residents who can transfer their household registration, they became known as “migrant workers.” This encompasses people in all sorts of professions, from manual laborers to college graduates from other regions, who if they secure employment in a city, will often be entitled to a prized urban registration. Yet the system still effectively deprived hundreds of millions of new urban residents from accessing public services, resulting in split households, where parents leave their children in the care of elderly relatives in villages, and created a two-tier system for other services, such as healthcare.  

According to China’s National Bureau of Statistics (NBS) 2022 report on migrants, there were 172 million migrant workers in China, who are registered in rural areas but live outside their hometowns for six months or more during the year and are considered new urban residents, though there is no breakdown by socio-economic background. A higher estimated figure of 295.62 million migrant workers in the same NBS report includes all temporary urban workers of rural origin.  

People wait to process residency-related affairs at a public service center in Tongxiang, Zhejiang Province, February 2 (Photo by VCG)

Challenging Demographics
However, as China is increasingly challenged by an aging population with urban birth rates considerably lower than in rural regions, at least 18 provincial regions in China, including Jiangxi, Qinghai, Yunnan, Jilin, Hunan, and Shandong, have relaxed requirements for household registration requirements, with some provinces actively encouraging migrants to settle in cities. In 2018, the total fertility rate in rural regions was 1.69, 0.4 higher than in urban regions. The government of Northeast China’s Heilongjiang Province, where the population has been slowly declining amid economic woes, has removed all registration restrictions throughout the province. 

At the national level, China’s central government launched the National New Urbanization Plan in 2014. Dubbed “China’s first comprehensive urbanization plan,” it aims to push forward the nationwide relaxation of household registration restrictions.  

According to Yin Zhi, the executive deputy dean of the China New Urbanization Research Institute at Tsinghua University, the country’s rapid industrialization is driven by the migration of a large surplus labor force from rural areas to cities. But while cities want rural residents in many sectors, such as construction and hospitality, they are denied access to urban public services like school enrollment for their children or healthcare. This means they have become a perpetually transient population. “From this perspective, China’s urbanization is only ‘semi-urbanization,’” Yin said.  

Yin told NewsChina that Zhejiang’s new policy marks a major step toward achieving complete urbanization. While urban settlement is open to anyone nationwide, even in tech-industry centric Hangzhou, where a points-based policy is used in the system to transfer household registration, the requirements will become far less strict than before. Under the plan, anyone under 40 with a high school diploma who has resided in Hangzhou and made social security contributions for four years can register their household in the city, no matter what job they do, or where they come from.  

Zou Yinan, a professor at the Economic Research Department of the Party School of the Central Committee of the Communist Party of China (CPC), told NewsChina that according to the central government’s guidelines, it is mandatory for cities with a population of fewer than three million to cancel household registration restrictions completely.  

According to the National Development and Reform Commission (NDRC), this goal was completed by the end of 2020. Zhejiang’s plan, which covers first-tier cities with 8-9 million people, such as Wenzhou and Ningbo, is “quite substantial,” Zou said.  

The NDRC also released a guideline in 2021 that pledged to promote the mutual recognition of some social security benefits, like pensions, so contributions made in one city will be recognized in another, as well as recognizing accumulated years of residence among qualified urban clusters and metropolitan areas. Zhejiang is the first provincial government to address this issue. Its plan pledges to expand mutual recognition of length of residence and other household registration entry requirements within the Yangtze River Delta region, meaning that qualified migrants can freely relocate to any other city in the region.  

A police offfcer answers inquires about residency policies at a public security bureau in Shenyang, Liaoning Province on September 6, after the local government loosened residency requirements (Photo by VCG)

Potential Impact
For a long time, a major argument against relaxing the household registration policies was that it would rapidly increase the number of registered residents, overwhelming a city’s public resources. But as many provinces have already reformed the household registration system without negative effects, experts believe the impact of the recent reforms will be limited. 
Many public services, such as pension funds and medical care, have already been delinked from household registration status and are now linked to employment status and resident permits.  

The only public service still strictly tied to one’s household registration is education. According to Professor Zou, the reforms proposed by Zhejiang and other provinces may have a major impact on those needing to enroll their children in local schools. However, it is less significant for most new urban residents.  

To legally register their household in cities, many residents of rural origin are required by law to forsake their rural land ownership rights.  

Under China’s legal system, only citizens with rural household registration can own rural land through village-based collective ownership. In contrast, urban residents can only own urban properties (excluding the land beneath) and cannot transfer their household registration to rural areas except on special occasions.  

As rural land has become ever more valuable, especially in Zhejiang, one of China’s most wealthy provinces, giving up rural registration has become less and less attractive. Official data shows that during the five years between 2016 to 2020, the gap between the household registration-based urbanization rate and the permanent residency-based urbanization rate has expanded against expectation to reach 18.5 percent in 2020 from 16.2 percent in 2016.  

Zou said this is because more and more new urban residents choose not to transfer their household registration even when allowed to.  

Chen Ye, a new resident of Taizhou, Zhejiang Province, is among those who show no interest in transferring her household registration to the city. Growing up in a rural area in Hubei Province, Chen told NewsChina that in order to enroll her child in a local school, her husband, Liu Tianming opted to transfer his household registration from rural Inner Mongolia Autonomous Region to the city a few years ago, so their child could enroll in school where they live. Under the hukou policy, children can choose to inherit either their mother or father’s hukou location and type. But by doing so, Liu had to give up his land in his home village.  

Chen said that she now sees no point in giving up her land in her home village despite Zhejiang’s new policy, as she can already access services where she lives.  

A new development of homes and new roads amid farmland shows progress in new urbanization in Jingba Town, Jiangxi Province, March 16 (Photo by VCG)

Improving Public Services 
According to Li Guoping, dean of the Capital Development Institute at Peking University, the focus of China’s household registration system reform should not solely be on relaxing requirements, but on expanding public services to new urban residents.  

In the 20th National Congress report of the CPC released in October 2022, the central leadership called for achieving equal access to basic public services and incorporating it into the overall goal of achieving China’s modernization by 2035. Li said Zhejiang’s new household registration policy is a step in that direction.  

In its plan, Zhejiang pledged that it would establish a sounder basic public service system by 2027, in terms of quantity of schools and teachers, affordable housing and medical insurance, which will be based on permanent residency rather than household registration status.  

Li said this would tackle the fundamental problem of shortages of public services, which is currently allocated based on the registered population, rather than actual resident population. A typical example can be found in Shenzhen. Dubbed “migrants’ city” and “China’s Silicon Valley,” Shenzhen has a reputation of being one of the most migrant-friendly cities. But at the same time, Shenzhen is also known to have the most competitive high school entrance exams due to a shortage of schools.  

Zou said the reason behind the shortage of public services is not due to the lack of financial resources, but of a well-rounded appraisal system for officials. Zou pointed out that under the current appraisal system, growth-related indicators, such as GDP and fiscal revenue, carry more weight, while indicators related to people’s livelihoods, such as education, healthcare, employment and elder care, have relatively low weighting.  

“In eastern regions, factors related to public services account for around 30 percent, and in the central and western regions, they only account for around 10 to 20 percent,” Zou said. The result is that local governments are not motivated to increase expenditure on public services.  

Another factor is the opposition of existing urban residents, many of whom argue that it is unfair to grant new urban residents of rural origin equal access to public services and welfare benefits in cities when they are allowed to retain their rural land ownership while urban residents continue to be denied such rights.  

But for Professor Yin Zhi, people should consider that China’s rural population already paid a heavy price during industrialization and urbanization. “Now that socio-economic development has reached a certain level, we can give back to them,” Yin said.  

He argued that extending public service coverage to new residents provides a safety net. “Not all new urban residents will successfully settle down, and if they encounter employment difficulties in cities, they can have a basic livelihood in the countryside,” Yin added.  

As government expenditure on public services will only increase incrementally, Yin said the reform could lead to conflicts between existing urban residents and new arrivals, which Yin said will take several years to “smooth out.” “It is inevitable in any major reform, but society needs to evolve,” Yin added.  

Cai Fang, member of the 13th National People’s Congress Standing Committee and former vice president of the Chinese Academy of Social Sciences, told NewsChina that if coverage of urban public services is extended to migrant workers, it could provide a much-desired boost to consumption power.  

According to Cai, although the average annual income of migrant families reached 42,000 yuan (US$5,833), approaching the average level of 44,000 yuan (US$6,111) in 2022 for urban middle-income groups, their consumption is much lower due to lack of access to urban public services. If they had the same access to public services, their per capita annual consumption could increase by 6,686 yuan (US$910), amounting to an increased consumption of over 1 trillion yuan (US$136.2b) in total.  

While many expect Zhejiang’s reform will soon be replicated in more regions, Yin stressed that China’s reform does not aim to give a rural resident the freedom to walk into any city and apply for household registration. “There are prerequisites; they need to achieve stable employment,” Yin said.  

Yin pointed out that in Latin American cities, the prevalence of slums is mainly due to rural dwellers moving to the city without sufficient job opportunities, which China tried to avoid with the establishment of a household registration system in the first place.  

“The uniqueness of China’s household registration system lies in the historical connection with welfare benefits due to resource scarcity in the past,” Yin said.  

“The goal of household registration reform is not to eliminate the entire system, but to delink it from social welfare systems.” 

A 10-year-old boy looks on as charity volunteer Chang Shaohui stacks books on a shelf, Daguan County, Zhaotong city, Yunnan Province, September 16, 2017. Though the boy lacked a local residence permit, Chang was able to enroll the boy in a local school in September after approaching local offfcials on his behalf (Photo by VCG)