Thu, May 28, 2026 page7

• China’s urban reforms have a long way to go

  • By Juliana Liu / Bloomberg Opinion
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  China’s unique system of registering households by splitting the population into rural versus urban dwellers has long outlived its usefulness. However, a much-needed policy revamp just unveiled misses some key details of how reforms would be paid for, potentially hobbling its effectiveness.

  New guidelines announced on Friday last week give migrant laborers access to public services in the cities where they work, regardless of residency status, in a continuation of a decade-long effort to gradually dismantle entrenched regional disparities. The household registration system has its roots in imperial bureaucracy and ties eligibility for entitlements to a person’s official hometown.

  This is important because the process of converting villagers into urban residents by providing similar retirement and medical benefits would be expensive. To be successful, China Inc must help shoulder the financial burden along with the regional and national governments.

  Without a basic social safety net such as healthcare and education, the transient workforce of 358 million people has powered China’s economic rise, but not been able to fully benefit from the prosperity they helped create. Being barred from putting down roots in the most desirable cities has limited their social mobility.

  Getting companies on board to pay their employees’ social security contributions might be the most straightforward part of the effort. E-commerce giant JD.com Inc vowed to provide full-time riders with benefits when it began food delivery services in February last year. Larger rivals Meituan and Alibaba Group Holding Ltd followed soon after.

  It is no accident that Beijing is pushing for change now. Integrating migrant workers into the urban economy is one of the most direct ways of boosting domestic consumption. At about 40 percent of GDP, household spending in China is about 10 percentage points lower than Japan, another famously frugal nation.

  Chinese migrants have long tended to save at double the rate compared with their urban peers and much more than neighbors who never left their villages.

  If they give up their precautionary savings and spend at the same rate as city residents, the country could unlock consumption equivalent to 13 percent of current household spending, research group Rhodium Group estimated. That would be a meaningful contribution toward rebalancing the economy away from export-led growth.

  Practicalities aside, it was important for Beijing to signal that basic services should not be tied to someone’s place of birth. Over decades, the household registration system had created a population of second-class citizens disrespected by people in the very cities they were helping to build.

  It also meant families had to live apart. Because young people from rural families were barred from metropolitan school systems, many were separated from their parents, creating two generations of so-called “left-behind” children.

  The plan issued by China’s Cabinet included no details on funding measures. It only briefly touched on the responsibility of provincial governments to prepare financial support and increase land quotas to expanding cities.

  The cost of turning an average worker from the countryside into a city dweller is about 133,000 yuan (US$19,618) when equivalent pension and healthcare contributions are factored and after deducting personal obligations to fund those future social security services, Rhodium associate director Allen Feng said.

  Extending that to the entire migrant population would amount to roughly 48 trillion yuan. That is equivalent to about one-third of GDP. However, not everyone would need to be converted.

  Some people might opt to return to their hometowns instead of settling down in urban areas. Also, given this is such a large group of people, the entire undertaking could take years. However, it is important to begin as soon as possible, because the gap would only widen with time.

  The guidelines put the onus on provincial governments to step up, but that is a tough ask. A prolonged economic slowdown has strained the coffers of regional authorities traditionally reliant on land sales, which have slumped following the collapse of the real-estate sector five years ago.

  Beijing might need to intervene more directly with central funding if it is serious about reform.

  Former China State Council Development Research Center deputy president Liu Shijin previously proposed raising 10 trillion yuan via special bonds over two years to improve healthcare, housing and education for migrants and their families.

  With public finances under strain, there is no doubt the measures would take time to implement. Beijing and companies should pick up the slack if regional governments struggle to find the resources to move forward. Migrant workers have been the muscle behind China’s ascension to superpower status. They deserve better.

  Juliana Liu is a columnist for Bloomberg Opinion covering corporate strategy and management in Asia. She was a former CNN senior business editor for Asia, and a correspondent at BBC News and Reuters. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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