Small cities to get a lift as China relaxes ’hukou’ system

December 30, 2019 08:00
Smaller cities will benefit from the relaxation of China’s household registration system as they get to draw in migrants from other parts of the country to help boost labor supply and local consumption. Photo: Reuters

China is eliminating the hukou, or household registration system, in cities with less than 3 million residents and relaxing the rule in cities with populations of 3 million to 5 million, according to a statement released by the State Council on Wednesday.

There are more than 70 mainland cities with populations in the 1 million to 5 million range. The new policy will make it much easier for migrant workers to settle down in these cities.

In fact, China is the only country in the world that has such a household registration system. In other nations, citizens can move freely within the same nation and enjoy benefits in the city they live. But in China, people can choose to work and live in other cities, but their social welfare benefits are still tied to their hometowns.

For example, a young migrant worker can work in Shanghai, but the person is not entitled to medical, education and retirement benefits of the metropolis.

China has maintained the household registration system to prevent excessive inflows of people into top cities, which would create problems like sanitation and safety, among other issues.

Smaller cities are less densely populated than big ones, and they need more labor to support economic and consumption growth, which is why they are chosen as targets for relaxation in the policy.

Under the new rule, anyone can apply to become a citizen of cities with population under 3 million. For those with populations between 3 to 5 million, migrants who have worked and paid social insurance for 3-5 years would be eligible to settle permanently there.

Still, top cities are off the limit. Currently, China has five mega cities -- Beijing, Shanghai, Guangzhou, Shenzhen and Chongqing -- with over 10 million residents each. There are 12 big cities that have 5 million to 10 million populations. Hukou system will remain in these 17 big ones.

With the population aging trend and pressure from the double whammy of slowing domestic growth and trade war, it is believed that small cities will complete aggressively to draw more migrants.

This article appeared in the Hong Kong Economic Journal on Dec 27

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist