The easiest way for China to convince 90 million people to move from the countryside to the cities is to offer them free food, complimentary housing and visits to the doctor at no charge.
That’s not going to happen, so China is opting for the next best: residency status.
China published its first urbanization plan on Sunday, which focuses on expansion of health insurance, pensions and other public welfare services. Equally as important, it promises to ease up on requirements for household registration permits, known as hukou, easily the biggest stumbling block to urban migration.
Chinese migrant workers aren’t stupid, of course. When they decide to pull up rural roots and make a go at big city life, they go for the wealthiest cities like Beijing and Shanghai. After all, that’s where salaries are higher with more jobs to choose from, at least in theory.
China’s government, however, wants them to set their sights a little lower, so urban hukou will be granted in smaller cities in hopes that gaining permanent residency—and full access to a full range of a city’s public benefits such as health care and school — will be powerful enough of a draw. Premier Li Keqiang has promised to give more than 100 million people urban hukou status by 2020.
At stake is China’s grand plan to expand its cities to support economic growth.
The ruling Communist Party sees allowing people to migrate into cities for higher-paid jobs as a pillar of more sustainable growth based on domestic consumption instead of trade and investment, AP reports. The plan calls for raising the share of China’s population of almost 1.4 billion people living in cities to 60 percent from 53.7 percent now, a shift of about 90 million people.
“Domestic demand is the fundamental impetus for China’s development, and the greatest potential for expanding domestic demand lies in urbanization,” the report says, according to the official Xinhua news agency.
The urbanization blueprint calls for massive expansion of China’s transportation system and urban infrastructure.
Every city with more than 200,000 residents will be covered by standard railways by 2020, reports Reuters, with high-speed services connecting cities with more than 500,000 residents. The civil aviation network, meanwhile, will cover about 90 percent of the population.
People’s Daily also reported that significant investments will be made to build public service facilities and new housing. China also said it would invest US$162 billion to redevelop shantytowns that often house migrant workers.
China plans to set up a transparent financing mechanism for urban construction, allowing local governments to issue municipal bonds, says Bloomberg. The central government will also establish a management and rating system to increase the use of direct financing and consider establishing policy-financial institutions for both infrastructure and home construction.
The urbanization plan will help promote regional development, upgrade industries and increase domestic demand, according to the text released by Xinhua. Urbanization is important for accelerating the development of the service sector, which will create many jobs, it said.
Will China’s urbanization strategy work? Previous efforts have had mixed results.
Hukou status in small cities, for example, has not panned out to be a big draw. Wang Kaiyu, a researcher with the Anhui provincial academy of social sciences, says many small cities are less developed and do not have enough fiscal revenue to offer good public services.
In comparison, rural hukou brings many benefits including a courtyard house, farming subsidies and rents from farm land, China.org says. Some farmers near city suburbs even get huge compensation after land seizure.
According to Bloomberg, China’s stocks rose to the highest level in a week, led by property, auto and cement companies, after the government outlined its urbanization plan.
“Investors are optimistic about urbanization reforms because the government mentioned it in the policy meeting and seemed strong-willed about it, so related stocks surged today,” Zhang Haidong, an analyst at Tebon Securities Co. told Bloomberg.
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