Aug 07, 2013 02:19 PM

Abolishing Hukou System Should Be One Goal of Reform

Come autumn, the government will consider a series of major reforms, one of which is household registration reform. The reform, which is closely linked to urbanization, involves people's land, welfare and a host of other issues, and progress has been slow.

In the face of China's declining growth potential, a shrinking demographic dividend and growing social tensions, changing the dual rural-urban social structure is the effective way to move human resources to areas and regions where production is more efficient. At the same time, it accelerates the country's switch to a new pattern of economic growth so as to prevent falling into the "middle-income trap."

Therefore, household registration reform is a major step the country must take.

Household registration, or hukou, is embedded in the social system. Established in 1958, the system was intended not only to be a community management tool, but also intertwines with many social welfare issues unique to cities.

Following the large-scale movement of the population since reform and opening up started, the function of the household registration system in terms of community management has been weakening. At the same time, a welfare system for city dwellers led by local governments has taken shape in the past decade, which has further widened the gulf between urban and rural households.

Reform should focus on decoupling social welfare from household registration and building a system to deal with relevant welfare issues according to people's residential addresses. To this end, the government should promote equal access to basic public services while deepening reforms for social security.

However, to date, the central government is still only responsible for arranging for reforms in principle while the power to implement them has been left to local governments.

The plan for household registration reform in small towns has been a topic for discussion since as early as 2001, but it has never been carried out. Even since a 2011 report called for categorical implementation of the reform, limited progress has been made.

In June, the National Development and Reform Commission reaffirmed the steps to carry out household registration reform. They included scrapping the restrictions on household registration in small towns and cities; lifting such restrictions in medium-sized cities; and gradually removing those in big cities.

This step-by-step approach is clear, but will be hard to implement if local governments continue to make use of it selectively. In fact, local governments should not carry out the reform or bear the costs alone. The central government should take the lead.

Admittedly, the reform comes with high costs. As seen in the past, people who buy homes, invest or are regarded as talented are on a fast track to getting city hukous. But this cannot be the national approach.

The practice of allowing farmers to trade their land for urban household registrations was adopted in many cities, but was eventually c0alled off because the interests of farmers were hurt.

Scholars estimate the cost of urbanizing rural residents at about 100,000 yuan per case. Professor Chan Kam-wing of the University of Washington reckons that, if the reform can be completed in 15 years, the cost each year would be one-fifth of the cost of hosting the Beijing Olympics. The government could well afford that.

Currently, local governments are bearing most of the cost of the reform, which is why progress has been slow.

One source said the authorities are considering relaunching the shelved residence permit system this year. This system classifies residential rights into "national" and "city" levels. Compulsory education and other basic public services would be provided for all permanent residents and migrants in a city. This is only a temporary arrangement, but its significance lies in the implication that the central government might take up part of the cost.

Undoubtedly, the central and local governments should share the costs of reforms, with the central government responsible for most public service spending. But in practice, it would be reasonable to phase in reform measures according to respective responsibilities of the central government and local governments.

The government might want to kick-start reform in small towns. Yet in the past, the metropolises have been the ones to draw immigrants, while local governments elsewhere failed to lure the people to live and work in the smaller cities.

The situation should be tackled in two ways. First, small to medium-sized cities should be made more attractive, while big cities should grant household status to residents with stable jobs based on a methodical timetable.

The government should also speed up reforms such as land reform to raise agricultural productivity. All of this requires early moves by the central government.

Reforms should be carried out in stages with the ultimate goal of abolishing the household registration system. When this day comes, the people will have their complete and equal rights to reside and migrate freely – once a basic civil right provided under China's constitution.

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