Unlocking China Destiny: Yang Guang’s journey from a village farmer to a prosperous businessman in Zhengzhou highlights the transformative power of China’s urban hukou system. The coveted residency permit, often likened to a “cattle ear-tag” by Yang, is a crucial document determining access to vital services based on birthplace. When Zhengzhou briefly allowed hukou qualification through property ownership in the early 2000s, Yang seized the opportunity, registering his business and expanding across Henan province.
Recent months have seen authorities considering reforms to the decades-old internal passport system, with the Ministry of Public Security urging cities to abolish or relax hukou restrictions. However, insiders reveal that progress is slow, particularly in larger cities. While there’s acknowledgment of the economic benefits of reform, concerns about social stability and financial burdens on cities impede decisive action.
Jia Kang, president of the China Academy of New Supply-Side Economics, emphasizes the complexity of hukou reform, describing it as a “hard bone to chew.” Implementation depends on city resources and service capacity, and China’s largest cities face challenges like limited housing supply, pollution, and congestion.
Despite efforts to address local financial strains, comprehensive reforms encouraging urban settlement aren’t imminent. The advisers emphasize that hukou liberalization may proceed on a city-by-city basis, with a potential slowdown in urbanization and a greater focus on rural revitalization.
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The historical context of hukou dates back to Mao Zedong’s era, aiming to prevent famine-stricken peasants from migrating to cities. In its modern form, hukou restricts access to public services for millions of rural migrants, impacting their healthcare and retirement benefits. The economic implications are substantial, with migrants saving more and contributing less to domestic consumption, hindering China’s goal of boosting consumption-driven economic growth.
Cai Fang, a central bank adviser, estimates the potential economic loss from reduced migrant consumption at over 2 trillion yuan annually. The property market, accounting for a significant share of the economy, could benefit from hukou reform by stimulating demand for apartments.
However, the influx of migrants into cities poses risks, as seen in 2017 when Beijing’s expulsion campaign against those without capital-city hukou sparked public backlash. Mega-cities like Beijing, Shanghai, Shenzhen, and Guangzhou are unlikely to open up soon due to concerns about social stability.
In Zhengzhou, Yang’s success story after obtaining a city hukou underscores the life-changing impact of the residency permit. Beyond business expansion, he acquired property and a vehicle, enjoying a more vibrant social life. The complexities of hukou reform reveal the intricate balance between economic advancement, social stability, and urban planning in China’s evolving landscape.