Introduction1

The internal migration policy in China has always been controversial even among the left. The strict migration control in the planned economy period (1950s to mid 1970s) was often criticized as to have deprived people of their freedom of migration. When such control was lifted in the reform period, rural residents could work as migrant workers in the urban sector. They became the main target of heavy exploitation and form the basis of China’s cheap-labor based development model. Although rural residents are allowed to migrate freely for work, China’s household registration system (i.e. hukou) requires that residents’ entitlement to social benefits is linked with the place they were born. Since the resources of highest quality (i.e. infrastructure, educational and health resources) are concentrated in the urban sector, and particularly in the first-tier cities (i.e. Beijing, Shanghai, Guangzhou, Shenzhen), it becomes that the rural migrant workers are prevented from enjoying the resources in the urban sector where they work, and are forced to leave the social reproduction part of their life (i.e. child rearing, care for elders) back in their birth place in the rural sector. This social reality becomes the foundation for the claim that the hukou system is an institutional basis for the broader rural-urban inequality. Some scholars compare it to the Apartheid system in South Africa, arguing that the hukou system has divided the population into two “castes”, the agricultural and non-agricultural population. They prescribe that such inequality can be alleviated by repealing the hukou system. However, the urban-rural inequality worsened after the migration restriction was lifted in the early 80s and the distinction between agricultural/non-agricultural status of hukou repealed in 2014.

To understand this puzzle, we need to clarify the relationship between the internal migration mechanism and the hukou system in China in the planned economy as well as in market economy period. Specifically, hukou is no more than a neutral and passive legislation. It performs opposite functions depending on the particular economic system and development model it is operating under. It can aggravate inequality as in the market economy period when squeezing the agricultural sector was considered as a necessary sacrifice to develop the industrial sector. It can also reduce inequality in the planned economy period, with a steady decline of the price scissors between manufactural and agricultural goods, when rural industrialization and agricultural infrastructural building was part of the development plan.2

Migration Control and its Significance Under Planned Economy

In the planned economy period, all the migration control is subordinate to the economic planning of that time. The planning logic is as follows: to achieve industrialization, the industrial sector needed food subsistence produced by the agricultural sector. It also needed rural workers to join the urban working class but not to the extent that labor shortage on the farm would lead to food shortage. To generate surplus labor from the rural sector without harming the agricultural production, there must be a massive rural mechanization and infrastructure building that significantly raises agricultural productivity. This rise in agricultural productivity allows labors to be freed from agricultural-related work while guaranteeing sufficient agricultural production to feed both urban and rural population. When more rural workers migrate to work in the urban sector, industrial output grows faster, which would in turn assist further mechanization of the agricultural sector. On the other hand, rural population are also the consumers of some manufactured goods (i.e. agricultural machinery) produced in the industrial sector.

The challenging part of the national planning was therefore to maintain a population balance between the urban and rural sectors to ensure that the rural sector provided food and labor to the urban sector while at the same time consuming industrial goods to raise agricultural productivity.

Contrary to the mainstream explanation, the internal migration in China was effectively controlled not by the establishment of hukou system in 1958, but earlier by the implementation of the Unified Procurement and Marketing of Grain policy (UPMG) in 1953.3 This policy was initiated to prevent speculation on the grain prices. The state purchased specified amounts of grain from the rural sector and rationed the food to urban residents. The grain prices indeed stabilized very quickly. At the same time, rural-urban migration became more difficult. With the food ration system, rural people were no longer able to purchase food in the urban sector as much as they wanted. Rural people could still stay in the urban sector temporarily either with food they had brought to the cities or provided by urban relatives. Yet the stay would not last long. With the grain policy, rural-to-urban migration rate dropped almost half from 4.6 percent to 2.7 percent in 1953. In the following year, migration rate continued to decline to only 0.1 percent. In 1955, the migration rate turned negative (-2.3 percent), implying that the more people migrate from the urban sector to the rural sector.4

However, the goal of such migration control in the planned economy was not to simplistically restrict the rural residents within their birth places forever. Rather, it was to extend the national economic planning to the employment sphere. After the hukou system was officially launched in 1958, every household in cities and towns was required to have a Household Registration Book issued by a local public security organ. For rural to urban migration, one must obtain a “move-in permit” first issued by an urban labor department or urban school enrollment certificate, in order to apply for a “move-out permit” from one’s original residential place. This means only those who were admitted either to work or study in the urban sector were allowed to migrate.

The fact that migration control was subordinate to the priority of industrialization can also be observed by the fluctuating rural-urban migration rate, with peak (22 percent) occurring in year 1958, and nadir (-10.1 percent) in year 1962, instead of a steady decline one.5 In autumn 1958, the same year when the hukou system was officially established, 38 million people were reported to be mobilized to leave their villages to join iron and steel production projects in the cities, in response to the explosion of urban industrial and construction jobs.6 Obviously, the hukou system that was established in the same year was not being strictly enforced. As the General Manager of the Huhhot Iron and Steel Mill said, this was a year of “jobs scrambling for people. As long as you could read and write and had good health, you are qualified for employment in any factory. Mangliu (Blind Influx) were also welcome. No migration certificate was required.”7

Except the few years of turbulence, the pattern shows that agricultural growth usually predicts industrial growth in the following 1-2 years, and net migration rate adjusts according to both agricultural and industrial growth.8 When the agricultural sector shows steady growth, positive net migration occurred and contributed to fast industrial growth. But when agricultural growth started to decline, net migration rate soon turned negative to adjust to the agricultural needs.9

Clearly, the migration policy was more flexible than often imagined. When things get in the way of the industrialization priority, even the newly established hukou system could become just a formality. Hukou, as a tool under the planned economy, was adjusted and loosened so as to encourage, rather than restrict, migration based on the needs of industrialization.

Although the economic planning period witnessed fast industrial development and agricultural output growth, as well as significant increase in life expectancy and literacy rate, we acknowledge the fact that urban workers still enjoyed more privileges than the rural residents. For example, urban workers were guaranteed full employment, job tenure and social benefits. Such benefits included free compulsory education for their children, as well as free or subsidized health care and housing.10 Although gaps between the urban and rural sector exists, it was declining over time. By the late 1970s, barefoot doctors and clinics were set up in almost all villages. By 1980, the school enrollment rate among rural children reached about 90%.11

Yet although social benefits and material wealth are improving steadily in the rural sector, the physical hardship innately associated with agricultural work still suggests to many as inferior to industrial jobs. This is why migration control, often associated with the hukou system, becomes a common target for critique of the urban privileges.

Economic Reform and Hukou Reform

Contrary to the common view, hukou’s reform was not initiated for the sake of granting rural residents the rights to move freely. It was part of the state plan for “market reform”, which started with pushing rural laborers into the urban sector. The repeal of the UPMG policy in 1985 that effectively lifted the restriction on migration occurred almost a decade earlier than hukou’s first reform in 1992, which started to allow purchasing of urban hukou. Prior to hukou’s reform, the Chinese government launched a series of policy that made available a massive pool of rural surplus laborers as well as a much more flexible labor market in the urban sector. Hukou was only adjusted so that it can work with these reform policies to facilitate the migration of the rural surplus labor to the urban sector.

Since 1978, the state started to push for the de-collectivization of the agricultural sector. By the end of 1983, majority of the individual rural households had become the de facto owners of land although the ownership of the land remained collective in theory.12 The agricultural de-collectivization led to a massive increase of rural surplus laborers. At the peak of the collective communes, 100 million people were mobilized annually for the “winter works” programs of capital formation and maintenance (i.e. irrigation works). With de-collectivization, these people became the surplus laborers “freed” from their rural collectives.13 More and more households became unable to afford basic subsistence by cultivating small pieces of land they were entitled to. Those with fewer laborers, draft animals or agricultural tools were the ones who were hit first. They appeared less competitive in agricultural production than others so they had to accept side-line work to support their families. Moving to urban areas to find jobs or begging became these people’s only choices.

Shortly after founding the reserve army pool from the rural surplus labor, the state issued several policies to ensure that urban workers now can be laid off if managers consider them as not disciplined enough. Such reform in the urban sector is a complete negation of the full employment and job tenure policy implemented throughout the planned economy period.

With managers now equipped with power to discipline workers, large cities such as Wuhan started to evade the hukou regulation to attract rural workers to stay in the cities through issuing “Temporary Residence Certificates” to rural migrants as early as in 1983. Only two years later, UPMG policy, the most effective control over migration through food rationing, was also repealed as the state claimed that it now “largely hampered the development of agricultural commodities production and the improvement of economic efficiency”. Up to this point, the hukou system was not officially reformed yet, but grain policy and the labor policy changes had succeeded in granting legal status for the rural migrants to compete with their urban peer workers. Such competition is necessary for the shifting of the previous planned economy to a market economy.

The overall competition experienced two stages. When the urban private sector was still not well developed from the mid to late 1980s, rural migrants were mainly drawn to the construction and transportation sectors, or self-employed as vendors. During this period, the competition between rural migrants and urban workers was negligible as they were still working in segregated industrial sectors. Following the massive layoffs in the urban state-owned enterprises in 1990s, the urban private economic sector started to grow and was fully developed as an integral part of the economy. Compared with the urban laid-off workers, rural migrants were younger, physically stronger, and willing to work harder for lower wages.14 It was not until then that the laid-off workers in the urban sector started to face fierce competition within the full-fledged private sector as well as some self-employment opportunities.

Under the market economy, the migration policy was revised to support the establishment of a Lewis development model, a typical non-inclusive development model that considers the agricultural sector as a source for cheap labor rather than the target for development.15 The natural consequence of a Lewis development path is the squeezing of the rural sector. As Taylor et. al (2003) argues, the major threat to the rural sector is that the most productive workers (i.e. the young, the educated and the skilled) will migrate out of the agricultural sector, leaving older and weaker family members to hold the plots of land as a form of income insurance.16

The nature of the urban privileges also changed after the market reform. Since the urban labor reform in 1984, the “iron rice bowl” system no longer existed. As a result, the key difference between urban versus rural residents was no longer related to the nature of their work. Now the difference was about the social resources that agricultural hukou holders have access to in the urban sector, and the wages they are paid in the urban sector compared to urban hukou holders. Such barriers between urban and rural hukou holders were more directly confronted because they were now competing for the same jobs and resources, including water, electricity, transportation, and stably priced food in the urban sector.

Conclusion

In the planned economy, Hukou played important roles in civilian registration, migration control and employment regulation. Yet we should recognize that Hukou’s only independent function was civilian registration. The other two roles were only made possible by the food rationing policy (UPMG) and the overall planned economy. In fact, migration control in China was already effective in 1953 following UPMG policy, five years prior to the official launching of the hukou system. The guiding development model was to solve the rural surplus labor within the agricultural sector through mobilizing labor resources for infrastructure building. Rural to urban migration was guided based on the state planning through employment regulation.

In the market economy, Hukou’s main role was to work with other reform policies to facilitate rural-urban migration of the rural surplus labor, which is the basis for a Lewis development model. The hukou system seemed to be an obstacle to the market reform because it binds the rural labor force on their land. But the true obstacle to the reform is not the hukou system alone, but the planned economy within which the hukou system is operating. In that sense, the repeal of the Unified Procurement and Marking of Grain (UPMG) policy and reducing urban workers’ bargaining power were more important factors in promoting market reforms. The government, step by step, generated a massive pool of surplus laborers in the rural sector, and broke the “iron rice bowl” system in the urban sector, thus creating the supply and demand conditions for a massive rural to urban migration.

The act of migration does not necessarily imply more freedom. In the context of China, when the rural sector is being squeezed as the necessary cost for urban development, with all the resources diverted to and concentrated in the urban sector, rural residents had no choice but to migrate to the urban sector to survive in the market economy period. Rural people today are deprived of their rights to stay back, work and raise families at where they were born.

It is important to recognize that such rural-urban inequality was not a result of hukou, a neutral and passive civilian registration system, but rather a comprehensive development model under a capitalist economic system. Hukou, therefore, should not be the scapegoat for an economic system that thrives on inequality.

Footnotes

1 This short article is based on my article to be published in Review of Radical Political Economics. Ying Chen (2018). The Myth of Hukou: Re-Examining Hukou’s Implications for China’s Development Model, Review of Radical Political Economics, forthcoming. Shortened as Chen (2018) hereafter.

2 Lin, Justin Yifu and Miao Jie Yu (2008). The Economics of Price Scissors: An Empirical Investigation for China (April 20, 2008).

3 Prior to the UPMG policy, migration control was largely based on persuasion and was unsurprisingly not successful.

4 See calculation in Chen (2018).

5 Ibid.

6 See Cheng, Tiejun and Mark Seldon (1994). “The origins and social consequences of China’s hukou system.” The China Quarterly (139): 644-668.

7 Ibid.

8 See more detailed discussion in Chen (2018).

9 The turbulence that occurred in the Great Leap Forward years was a result of many complex factors, including politics, planning techniques and natural disaster that are beyond the scope of this article. Data show that the massive influx of rural labor for the sake of Great Leap Forward mainly occurred in the year of 1958 on the basis of significant improvement in agricultural machinery in previous years. However, the goal of industry growth was set higher and higher and eventually went beyond what the real agricultural basis could support in terms of both labor availability and crop production. Then the natural disaster came as the last straw for the agricultural sector. Such turbulence further proves the importance of regulating migration according to reasonable economic planning.

10 In the rural sector, healthcare and education services were also provided but were of lower quality. Healthcare services were offered with a focus on preventive rather than curative measures. Education services were provided at the commune level.

11 Zhang, Xiaobo and Ravi Kanbur (2005). “Spatial Inequality in Education and Health Care in China.” China Economic Review (16): 189-204.

12 Meisner, Maurice (1986 [1977]). Mao’s China and After: A History of the People’s Republic. The Free Press. New York, N.Y. 10022.

13 See Patnaik, Utsa and Sriram. Natrajan (2000). “Output and Employment in Rural China: Some Post-Reform Problems.” Economic and Political Weekly 35(38): 16-22.

14 Solinger, Dorothy and Kam Wing Chan (2002). The China Difference: City Studies Under Socialism and Beyond. Understanding the City. J. E. a. C. Mele, Blackwell Press.

15 According to Arthur Lewis (1954), due to an overpopulated rural sector relative to the available arable land, the marginal productivity of rural labor is zero or even negative. Meanwhile, the urban sector exhibits relatively higher productivity, thus offering relatively higher wages, which would attract an “unlimited supply”of rural surplus labor at this subsistence wage. As more and more rural laborers leave the village for the urban sector, those who are staying in village will have a larger share of food supply at a given output level. Meanwhile, urban capitalists start to accumulate profits by paying workers only the subsistence wage at the initial stage of capitalist development. The profit they earn translates into investment which drives the economy. This accumulation period ends when the unlimited supply of labor from the rural sector is exhausted and capitalists start paying wages higher than the subsistence level. When the overall wage level in the urban sector is lifted, the country is considered developed.

16 Taylor, Edward et. Al. (2003). Migration and Incomes in Source Communities: A New Economics of Migration Perspective from China. Economic Development Cultural Change, Vol. 52, No. 1 (October 2003), pp. 75-101.