23 July 2019
General Economy As China Reforms Attempt to Stoke Growth

The Big Picture: HUKOU REFORM

China will kick off reform of the permanent residency, or the so-called “hukou”, system nationwide next year, with the government hoping that the move will stimulate economic growth in small and mid-sized cities while easing the population pressure in top-tier cities, state news agency Xinhua reported over the weekend.

The central government will cancel all the hukou restrictions for small towns and cities, ease the restrictions for mid-sized cities and reasonably determine the hukou requirements for large cities, the report said, citing decisions made at the Central Urbanization Work Conference that ended on Friday.

The wording has been somewhat different from a presentation made by National Development and Reform Commission director Xu Shaoshi {徐紹史} to the National People’s Congress’ standing committee in June. At that time, the economic planner said the nation will gradually ease the hukou requirements for large cities. 

Meanwhile, officials also decided at the two-day meeting that the country should develop city clusters in the central and western regions and another in the northeast, following the successful experience in the Pearl River Delta, Yangtze River Delta and Bohai Rim.

Observers say small and mid-sized cities will become the main theme of the urbanization in the coming decade while hukou requirements in top-tier cities such as Beijing, Shanghai and Guangzhou will remain tight. The central government wants to step up the pace of urbanization in small cities by directing investments from the developed regions to the lower-tier cities while slowing the population growth in major cities to ease the pollution problem.

The central government’s new hukou reform will help stimulate consumption in the third- and fourth-tier cities, especially those located in central, western and northeastern regions, as there are clear signals that top leaders will unveil more measures to boost economic growth in those regions. It will provide a new growth engine for telecom, banking, property and energy giants, helping them strengthen their businesses in the regions in the next decade.

However, local debt problem remains the major obstacle for the central government in implementing the urbanization plan as many lower-tier cities have overspent their budgets and issued a lot of debt during the past few years. 

Authorities are expected to step up efforts to resolve the local debt situation while sticking to a prudent monetary policy and a proactive fiscal policy next year. 

More market access for foreign investors

The government will ease market access for foreigners next year, steadily opening a number of service industries including finance, education, culture, medical care and general manufacturing, Xinhua news agency reported Sunday, citing National Development and Reform Commission chief Xu Shaoshi. The government will focus on ensuring steady growth in investment and expanding foreign trade in high-speed railway, nuclear power, telecommunications and advanced equipment components, Xu was quoted as saying.

–Contact HKEJ at [email protected]



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