China’s hukou reform needs long-term vision

Stressing that China will substantially relax residency limits on domestic migrants for China’s biggest cities, the document marks a significant shift from a priority that had focused on limiting the population of major cities. The plan requires cities with a population of between three and five million to “comprehensively lift or relax restrictions on household registration” and cities with more than five million should “lower the threshold and boost the number of people gaining household registration.” 　

The system of household registration (hukou), designates people according to where they live and divides them into rural and urban residents. The hukou system has long been considered a major obstacle to China’s urbanization push. The decades-long system ties an individual’s eligibility for public services, including education and healthcare, to their registered location. As most of China’s big cities adopt a strict hukou policy, millions of migrant workers, who have made enormous contribution to China’s economic development, have been denied access to basic public services, which creates social problems. 　

In the past years, many small cities have gradually liberalized the hukou policy, and from 2017, some of China’s big cities also started to loosen controls. But according to data released by the National Bureau of Statistics, by the end of 2018, still some 286 million people, one-fifth of China’s entire population, live in a different locality to where their hukou is registered. 　

If the reform plan is fully implemented, it would constitute major social progress in granting urban dwellers equal access to public services regardless of their origin. But to ensure the successful implementation of the reform, the government should have a long-term plan. 　

First, the government needs to increase expenditure on education and medical services to ensure the reform will not undermine the quality and quantity of public services in cities. The NDRC document requires all affected cities to provide adequate resources to local public schools to meet increased demand by the end of 2019. The same doctrine applies to public hospitals and other public institutions. 　

Second, to encourage free inter-city and inter-regional movement, the central government should push forward the integration and synchronization of the welfare system. Currently, most of China’s welfare system, such as the pension system and medical support system, is governed independently by provincial and city governments. Many migrants find it very difficult to transfer their pension scheme and medical support benefits between cities. In the future, China should establish a national scheme to coordinate welfare programs between different cities and regions. 　

Third, the government should not distort the reform plan to meet its short-term goals. In the past year, cities like Xi’an and Shijiazhuang drastically lowered the requirements for issuing residence permits. But the policies in these cities are typically tied to eligibility to purchase property, and this has driven up housing prices in these cities. While these policies can boost the real estate market and increase government revenue in the short term, it could lead to a sustainability problem if local governments do not back up their policies with long-term planning.　

All in all, the focus of the reform plan should be about achieving social justice and fairness, rather than economic benefits. In the past years, the leadership envisioned a Chinese Dream, in which all people can fulfill their potential – to live in health with dignity and equality. Successful hukou reform will help to make that dream come true.