China is now under the spotlight for her stunningly rapid economic growth, as she now places second behind the United States, with a gross domestic product of US$7.298 trillion in 2010 according to the World Bank. Yet there have been doubts and concerns about the differential treatment of urban and rural population by the Central People’s Government (CPG). Since Hong Kong has become more closely linked with the Mainland, and sustainable growth has been increasingly important, it is crucial for the CPG to review the policies of promoting advancements and economic growth, as they should be catering the entire nation rather than being selective in order to achieve an overall improvement in living standards.
The economic developments in rural and urban areas are increasingly imbalanced in recent years. The ratio of disposable income of residents in urban areas to that of residents in rural areas has increased from 1.86 in 1985 to 3.33 in 2009. The economic growth rate of rural areas is way lower than that of urban areas. The richest population is concentrated in Zhejiang, Fujian, Guangdong etc., while the poorest population lives in Tibet, Qinghai and Gansu etc.
In China, the nation’s economy can be regarded as a dualistic one, divided into the rural agricultural economy and the urban industrial economy. There are different sets of principles, social welfare and economic development policies for these two economies.
When China started to open up under Deng Xiaoping’s reform, foreign companies set up their factories and branches in the budding nation. Investments were brought in and an enormous amount of cheap labour for the quickly developing manufacturing industries at that time. This demand of labour was satisfied when the CPG brought over 200 million people from the countryside to the cities, and they formed the first batch of what we now call “rural migrants”. They were the ones who helped establish the prosperous scene we see now. After 30 years since the reform, the rural migrants are still the ones doing the hard labour in the cities, but they have not received the treatment and benefits they deserve. One of the reasons is the household registration system, which is also the backbone of the dualistic economy in China.
Under the household registration system, a person is defined by his household, whether it is in the city or the countryside. The person is treated according to his household, and no matter where he resides, the hukou sticks with him. The system literally divides the population in two, resulting in two distinct economies and systems under which policies are devised differently.
Take social welfare as an example. The rural population enjoys no assistance in housing. They have financial difficulties in building their own houses, while their urban counterpart are under a housing policy reform, under which a Housing Provident Fund was set up and “economically affordable housing” were built to offer better housing to low-income urban residents.
Education is often considered a way to climb up the social ladder, yet this may not be an easy option for the rural residents and migrants. The schools in the countryside are apparently of low quality. But it is not easy for those migrant children studying in urban schools either. They are required to pay extra fees, including jiedu fee (borrowing a place to study), school selection fee and sponsorship fee etc. As a result, parents may be reluctant to send children to school as they regard education as a superior good as mentioned by Bhagwati in his book In Defense of Globalization and Banerjee and Duflo in Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. It is hard for these children from poor families to use education as a means of obtaining a higher social status.
The slanted emphasis of the CPG can also be illustrated...