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Economy

How the roots of growth sowed the seeds of inequality

A building in the Shanghai village of Yonglian is marked for demolition.

SHANGHAI   Deng, a 43-year-old native of China's Sichuan province, has lived in Shanghai for 23 years. But like many migrant workers who came to the city from China's rural towns, he is not officially recognized as a resident of Shanghai.

     In China, a part of a city in which many migrant workers live is called chengzhongcun, which means a "village within a city." The Chinese government wants to redevelop these areas, which it sees posing social problems in terms of fire prevention, public security and hygiene.

     On Jan. 16, a team of experts led by Jiang Ping, secretary of the commission for political and legal affairs in the Communist Party of China Shanghai Committee, made a fact-finding visit to Yonglian, an example of such an urban village. The team pointed out a number of problems, such as illegal construction, unlawful discharge of wastewater into rivers and the danger of leaving propane gas tanks unattended in the open.

     Deng lives in Yonglian, and now the city wants him out. 

     Shanghai began issuing eviction notices to migrants like Deng early this year as part of the redevelopment plans. On Jan. 11, residents of Hongqi, a migrant worker village in the city's northwestern region, woke up to find eviction notices ordering them to leave by March. Any who do not, the notices said, will be forced out at their own expense. 

     Neither Deng nor his wife hold Shanghai household registration. They live in a hut made of galvanized iron sheets in a vacant lot by a river, a typical example of illegal construction. The hut has no water or sewage system, and the kitchen has a single old burner connected to a propane tank. "We bathe and go to toilets outside," Deng said. Rent is 620 yuan ($95) a month, far lower than the average rent in the Shanghai area.

     Deng was at a loss over the order he received to leave. "Even if they tell me [to leave] all of a sudden, what am I supposed to do?" he said.

POPULATION CONTROL   Deng's marginalized status is the result of a residency registration system that draws a sharp distinction between rural and urban populations.

     The hukou system, as it is called, was established in the 1950s to safeguard China's food supply by preventing a surge of migration into cities. Schools, hospitals and other public services prioritize registered residents. Shanghai bars those who migrated to the city from buying homes, and city residents are favored in college admissions. Because Deng was unable to enroll his son in Shanghai's public schools, he was forced to send the child back to Sichuan province to live with Deng's parents.

     The central government has been working to reform the hukou system. Looser regulations implemented in January allow permanent residents of smaller cities to register for hukou papers, though stricter standards are applied for larger cities.

     Shanghai introduced a point-based system in 2013. Those seeking permanent residence are assigned a score based on factors such as education and age. This makes it tougher for less-educated people from rural areas to work in Shanghai. Some don't see this as a drawback. "We only need highly skilled talent," said Yang Xiong, director of the Institute of Sociology at the Shanghai Academy of Social Sciences.

     Under the changing structure of the Chinese economy, a greater share of jobs comes from the services sector. Previously, migrant workers mostly used to work for factories, which provided accommodation, but now such workers face a growing need to find a place to live themselves. Residency and housing are emerging as major issues in China's new economy. 

     At a session of the Shanghai Municipal People's Congress, the municipality's assembly, in late January, Shanghai Mayor Yang Xiong declared that the city will "keep the population of local residents within 25 million during the next five years." As the population stood at 24.26 million at the end of 2014, the allowable increase is slightly more than 700,000 people.

DIFFICULT LEGACIES   Zifeng Temple sits amid fields of lychee trees in the city of Jieyang, in China's southern Guangdong province. The city is a hub of toy and other factories that employ many rural migrants. The factories generally have no day care facilities, so it is difficult for workers to raise children if they cannot leave the children in the care of grandparents in their hometowns. 

     A sign posted on the temple's gates warns that those who abandon their children will reap what they sow. But a steady stream of parents still leave their babies there; 20 children live at the temple now.

     Under the one-child policy that was in place until last year, poor parents in outlying areas often abandoned second or disabled children. These children, unable to register for hukou, cannot attend school, ride trains, use other services, or even stay at hotels. China has 13 million such unregistered citizens, making up about 1% of the population.

     Former leader Deng Xiaoping famously said that "those who are able to should get rich first." The mechanisms that supported the nation's explosive but unequal growth remain in place today, and the country lacks measures for redistributing wealth, such as taxes on inheritances and fixed assets. Health insurance and pensions vary from place to place.

     People with a rural household registration as a percentage of China's total population have trended down, but still account for around 65%. In addition, China has 70 million residents living on less than 2,300 yuan ($349) a year. Poverty relief is "China's top-priority challenge, and the government will achieve the goal by 2020," said Wu Guobao, a senior researcher at the Rural Development Institute of the Chinese Academy of Social Sciences. The government has also pledged to tackle the issue of unregistered citizens, but has yet to take concrete steps to achieving either goal. 

     The quote from Deng Xiaoping goes on to say that those who have become rich should help those who have not. If China cannot build an economic system that spreads wealth to every corner of the country, eliminating the urban-rural inequality of opportunity, there is little chance it will be able to transition to the consumption-driven growth model Beijing envisions.

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