Why China's Urbanization Isn't Creating a Middle Class

The nation's infamous two-tier classification system prevents rural migrants from rising up in cities.

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Reuters

The rapid rate of development in China manifests itself most clearly in its cities. With some populations rising into the tens of millions, China’s cities are the economic powerhouses of the country, and are helping to create a whole new era of financial prosperity. For some observers, this translates into 1.3 billion people who now have the money to afford the sort of commercial goods many of the country’s factories had previously been producing for the affluent populations of other countries. China is seeing its own affluence rise, and some surmise that this will translate into a Western-style nation of relatively well-off consumers; that, as this report from the McKinsey Global Institute suggests, China’s middle class is emerging to help propel the country’s economic success even higher.

The only problem is that this middle class doesn’t actually exist. And unless decades-old rules change, it won't.

In a recent paper published in the journal Eurasian Geography and Economics, geographer and University of Washington professor Kam Wing Chan argues that all of the country’s urban growth and prosperity is not actually filtering down to the majority of the rising urban population. The reason is that the majority of the urban population is prevented from fully participating in the booming urban economy because of a Mao-era rule that draws a harsh line between those from urban areas and those from rural ones.

Established in 1958, hukou establishes a two-tiered population structure of rural and urban citizens. Urban citizens are given access to social services and welfare programs, including public education and affordable housing. Rural residents are not. Status is hereditary, meaning that once a family is in one tier it will always remain in that tier. This has been a problem for many rural residents who want to leave their agricultural lifestyles to earn the higher wages in cities working in factories or construction, but who are faced with slum-like living conditions and an effective low ceiling over their social and economic mobility.

Chan says it is this system of official discrimination that has enabled China to experience such economic growth – and what makes it unlikely that the second-class citizens will be able to become the sort of consumerist middle class outsiders are predicting.

“I would argue that this is one of the most powerful forces creating the modern global economy that we see,” says Chan. “There’s 150 million super-exploitable, very young migrant workers in China. And this is all very much created by the hukou system.”

He points to Shenzhen, where only about 3 million of its roughly 14 million residents have urban hukou classification.

“After a quarter century of development, it still remains very much a migrant city. It’s very, very young. 60 percent of the population is between 15 and 35. When you compare that with the general age profile of all the cities, it’s very extraordinary,” Chan says. “What that means is that they can come here to work in their youthful years and they can stay in the dormitories, but if they want to raise a family, they’re going to face a tremendous amount of difficulties.”

“At some point, some of them will be so-called ‘voluntarily’ forced out of the city. They will go back home, back to the countryside.”

Chan says this reality flies in the face of suggestions that China will soon have a broad middle class with a huge spending power.

But the system is changing, slowly. New rules were recently announced by the central government that lift some of the restrictions that prevent rural migrants from gaining permanent residency rights, a move Chan sees as at least a small sign of hope. The new rules allow migrants, under certain circumstances, to apply for residency permits in medium- and small-sized cities. The 40 largest cities – places like Beijing, Shanghai, Shenzhen – are not included. And though Chan says these newly lifted restrictions are a positive change, he also notes that it’s mostly symbolic.

“There’s not really a lot of jobs in smaller cities. So it’s not exactly targeting the areas that it’s really needed and where there’s large numbers of migrants. Like Beijing, easily you have several million migrants,” Chan says.

And the smaller cities also have fewer resources and are therefore unable to offer high levels of urban welfare and public services – benefits of having permanent resident status in a city.

“There’s not really much to offer by having a small town hukou status,” Chan says.

The rule change may create benefits in some cities, says Chan, but even those will not come quickly. It can often take years for such rule changes to be implemented.

Until the hukou system is dramatically changed in job-rich big cities, the hundreds of millions of rural migrants who have come to China’s emerging cities will remain officially removed from the stunning pace of economic development there. If a middle class is emerging in China, they almost certainly will not be part of it.

Photo credit: Joe Tan / Reuters

About the Author

  • Nate Berg is a freelance reporter and a former staff writer for CityLab. He lives in Los Angeles.