On the surface, China has been a powerhouse in diminishing global poverty. Measured by individuals living with less than $6.85 a day, China’s poverty rate decreased from 63% in 2010 to 25% in 2019. Based on the country’s official poverty line, the World Bank states that, as of 2020, China’s national poverty rate is 0%. Martin Raiser, the World Bank’s representative in China, claims that China’s work accounts for roughly 70% of the world’s absolute poverty reduction. However, the People’s Republic of China maintains ingrained inequities due to how its hukou system restricts mobility.

What is the Hukou system?

The hukou system is the administrative tool used for population management and registration. The hukou system classifies individuals into urban and rural categories, assigning certain services to each classification, such as access to hospitals and schools. This policy dictates where individuals can live, work and own land in China. This restricts population movement by reserving government services like social security and public education only to citizens with proper hukou for the area in which they live. Changing one’s hukou is often expensive and almost impossible, depending on where the individual wants to live. Due to these policies, the PRC directly shapes available opportunities for urban and rural residents, contributing to stark disparities between its civilians.

China’s hukou system controls internal migration, manages social protection and preserves social stability. By restricting the legal right to live and work in cities without proper hukou, China achieved its goal of limiting the growth of megacities. This process helped mitigate the uncontrolled growth of urban slums, but many rural residents ignored hukou restrictions in search of better economic opportunities in cities.

Hukou Controls Mobility in China

Being born in a rural area causes those Chinese citizens to lose access to the job market in prosperous cities. Thus, they are often confined to living in the same region for most of their lives. Citizens need a temporary residence permit to spend more than three days outside their city or town, preventing free mobility like in other countries such as the U.S.

Some people born with rural hukou endure a complex and costly process to change their status, but many others lack the resources to go through this legal avenue. As a result, many rural residents migrate to cities without the allowed hukou, losing access to beneficial government services and often resorting to poor housing conditions.

Larger cities often limit new hukou to wealthy households, thus, leaving poorer urban residents with worse living conditions. Smaller cities usually accept rural migrants, making it easier for them to receive their desired hukou. While this process deters migrants from moving to larger cities like Shanghai and Beijing, it also puts millions of Chinese migrants in threatening conditions.

Ingrained Inequities in the Hukou System

The hukou system exists in tandem with growing income inequality. China’s Gini coefficient reveals high-income inequality: measuring inequality on a scale from 0 (low) to 1 (high), China’s is approximately 0.47 compared to 0.41 in the U.S.

While moving to urban areas increases access to higher-paying jobs, rural-to-urban migrants face significant penalties if they do not have an urban hukou. These workers lose access to health insurance, retirement allowances, unemployment insurance, maternity benefits, work insurance, employment and education. With more than half of China’s population living in cities, only 35% of urbanites have a city hukou. This disparity means more than 250 million migrant workers do not receive social security benefits.

The hukou system disadvantages rural residents more than city-designated dwellers by limiting their opportunities. On average, a farmer’s annual income equals about one-sixth of the average salary of an urban citizen. This steep income disparity is exacerbated by how farmers pay a tax rate three times the amount urban residents pay, presenting a great challenge for upward social mobility.

The Borgen Project spoke with Lauren He, a former resident of Shanghai, about the hukou system’s inequities. He stated, “Because of my urban hukou status, I have evaded many barriers migrants face when moving to cities like Shanghai.”

“My grandparents did not grow up with the hukou system, so they were able to move to Shanghai from the countryside with fewer complications than what migrants face today. This system deeply disadvantages those who cannot get the necessary hukou,” said He.

Consumption Poverty Rates Show Inequity

Despite persisting inequity due in part to the hukou system, studies have shown that rural-to-urban migration reduces poverty. Migrant workers move to increase their salaries, with many sending money back to their families in less prosperous rural areas, expanding economic growth and lowering the risk of poverty.

However, the hukou system has widened inequities in many ways. Many migrants work jobs more susceptible to market change, indicating a higher risk of impoverishment. In addition, while migrants may have lower income poverty, they still face the challenges of high consumption poverty rates. Migrant workers with urban hukous consume up to 30% more than their counterparts without the proper hukou status, revealing a disparity linked to the hukou system.

The Future of Poverty Reduction in China

While reforms continue in the hukou system, other programs in China are working to counter poverty through more direct action. In 1989, the China Foundation for Poverty Alleviation began its mission to combat poverty by organizing projects ranging from health care and education to economic development through infrastructure construction. Headquartered in Beijing, the CFPA targets domestic and global poverty, aiding the mission to end poverty for all.

With the work of organizations like CFPA and liberalizing restrictions on hukou, change may come to help eliminate disparities between urban and rural citizens in China.

– Michael Cardamone
Photo: Flickr