Link Between Migration And Urbanization In China Economics Essay

The rapid migration of the Chinese population toward urban areas and the rapid urbanization is an unstoppable and perhaps imperative movement for China’s ascension towards being a world power. The issue of migration and urbanization in China are inseparable and deeply intertwined with one another and are very much natural and necessary toward China’s development into a significant world power. China has try to control and restrain the huge influx of migration and rapid urbanization. The current patterns or flow of migration and urbanization right now is leading China to economic growth, but Chinese government has been rather inefficient in handling migration and urbanization issues preventing more efficient economic growth of China and need to change up their policies to strive toward ideal economic growth.

The patterns of migration and urbanization in china are very much connected with each other and they are many factors contributing toward these developments. Historically, the big starting point was the surpluses of food supplied created from the improvement of agriculture productivity. Under the reforms of the Den Xiaoping around late 1970’s and 1980’s, the agriculture sector started booming and created a big food surplus allowing urban populations grow without worrying about food shortage. The growth in efficiency of the agriculture sector allowing farms to create much more food with significantly less labour created many unemployed workers in the rural areas. The advancement of agricultural practices ends up increasing the number of the unemployed among the rural population and the unemployed end up looking to seek employment within the urban areas. Those who are unemployed from the rural seeking employment in urban areas are calling the “floating” population. The trend of agricultural labourers going unemployed is increasing and will likely to continue throughout to the future due to the constant advancement of agricultural technology. Also under Deng Xiaoping’s reforms, China adopted an open door policy which permitted international trade and foreign direct investments within China and created massive growth in employment opportunities in the cities. Also during the Cultural Revolution during Mao’s reign, the government relocated many of the youths from the cities to rural areas. After Mao’s reign was over, the relocated youths were allowed to go back to the cities and most of them did causing an influx in urban population.

The other factors in migration also include escape from poverty, higher living standards, education, business opportunities. It is only natural that people will go after opportunities to gain economic improvement from their current modes of living. It is well known that the income gap between rural and urban areas is significant (World Bank, 2009). This fact alone gives a tremendous incentive for the rural population to migrate toward urban areas.

Historically, China restrained migration through use of the Hukou system, in part to limit the problems and costs caused by having large population of migrants moving around the country and ,in exchange, also slowing down urbanization of china as many cities need the migrant population for work forces to keep up the rate of growth of their cities and economy. Hukou system makes people need to a residency permit to reside in the city they are in and will not allow residence to those who do not have a permit, And in many cases, many of the migrants workers do not have residency permits in where migrant’s occupations are and where migrants are search for their occupation. Today while many of those restrictions have been relaxed, there are still too many barriers restraining migration and urbanization in the expense of the nation’s economic growth.

While urbanization of China has been the crucial cog in the China’s economic

transformation, China’s annual rate of urban population growth, at 3-4% during 1990

2004, was below the 5-6% rates typically experienced by other developing countries

during their periods of rapid economic growth (World Bank, 2002).

Incidentally, China’s level of urbanization in 2008 (45.7%) was below the 55% level

typical for a country with China’s level of income per capita(World Bank, 2009).

While the amount of people who migrated from rural to urban areas has been at its peak historically, the numbers seem to show that China is under-urbanized. As previously stated, China has slowed the migration rate with use of the hukou system, to limit the side effects of having even more too much migration and urbanization. While many of the barriers have been loosened , there are still many barriers to migration despite the fact China is still under-urbanized and the slowing the migration and urbanization is seemingly only slowing down and hurting China’s economic transformation.

There is a very significant indicator of the need for bigger labour market in the urban areas and the need for rural to urban migration is the huge 3.3 times differential in urban-rural income in 2008(World Bank, 2009). That means on average urban employees earn about 3.3 times the income that the rural employees earn. That income differential seems to mirror productivity differentials (Au and Henderson, 2006a). It seems that urban sector economy seems to tend to far more productive than rural economy currently in China. It seems likely that a worker moving from a rural to urban sector would substantially raise that person’s productivity, which in turn would raise China’s total output and contributing to the growth of China economy. This comparative gap between urban and rural income also show that income inequality in China is the highest in Asia. The gap reflects low productivity in agriculture due to under-investment in the agriculture sector and low land per agricultural worker currently, as well as higher productivity in the urban sector. This is a significant economic growth issue as there are tremendous gains in national income achievable by further increases in urbanization (Knight, J., L. Shi, and L. Song, 2004). Above shows that, restraining urbanization is costly in terms of nation’s economic growth and individual human development. Not only that, although once it improved drastically under Deng Xiaoping’s reforms, it shows that rural areas seems to be lagging significantly behind currently in terms of worker productivity and income that may need to addressed to prevent a collapse or failing of the Chinese agriculture market, which would impact China’s growth significantly since it would hinder China’s economic growth process significantly as you need food surpluses to supply the urban growth. So it seems that instead of restraining migration and urbanization in China, the country needs to manage these two issues by controlling their side effects and costs without slowing down the nation’s economic development.

Currently, rural migrants of urban areas in China are discriminated against due to the current policy with the hukou system, leading to decreased productivity of these migrant workers. The migrants have almost no access to formal housing markets and usually reside in dormitories or urban villages within and concentrated in the border of cities. These areas are under rural governance and conditions are very crowded with poor sanitation (Logan, 2006). These workers are separated from urban civil society away from the city centres. In terms of basic urban services, rural migrants are denied in those services, or can just access low-quality services at a very high price. They are not eligible for some job-training programs, and only a tiny fraction are part of local social insurance (unemployment, health, accident) and social security programs (Cai, 2006). And they face discrimination in the labour market, working in dirty tedious jobs with little hope for advancement and training for significantly lower wages for the same education and skills and far longer hours (Henderson , 2009). According to the Chinese Household Income Project, the income differential gap was estimated to be over 40% (Cai, 2006). These factors tend to significantly lower worker productivity and stability which in turn hurts the nation’s productivity rate and stability economically. As the migrant live in poor urban living conditions and creating rather slum like areas and bringing possible bouts of social unrest which could cost the country in other ways besides in terms of dollar figures. So the discrimination against migrant workers that are supposed to restrain urbanization and migration to stymied their side effects actually seems to counterproductive and ineffective overall.

Due to the changing and most likely continuous nature of the rural to urban migration and the overall likely under-urbanization and the growing idle agricultural workforce in China, it seems that reforms that would have great effect on the nation’s economic development would be having the hukou system to allow the migrants the right of access to urban public service, credit, housing markets, social insurance, social security, education and job training. This will help economic growth and reduce urban-rural income differences by providing more of an incentive for migrants to leave comparatively unproductive rural sectors for higher-productivity urban sector jobs. The reformation of hukou system will help drive away any perceptions of unjust and unfair urban society based on hukou status, which might be ,in the long term, a threat to socio-political stability due to social unrest. It will make the inevitable urbanization process go a lot smoother with less future repercussions from social unrest and discriminatory conditions.

As previously stated, national income will rise and rural-urban gap will decline if migration barriers were to become more lenient, promoting rural-urban migration and urban growth. However, it leaves the problem of market favouritism which often cause excessive migration toward select group of “elite” cities and areas. Many countries have a long history of favouring particular regions or cities of a country. Most obvious example of favouritism of cities happens to capitals or seat of political-economic elite cities or areas (Henderson 2003). Favouritism might be in the form of capital market allocations, fiscal advantages, and allocations of import, export and FDI licenses (Henderson 2003). This phenomenon, described previously, brings in domestic and international companies and also migrants who are searching for employment and higher standards of living and public services in the favoured cities. That usually leads to those areas becoming potentially over-populated which increases congestion and localized cost-of-living and lower quality of life. Some of the largest mega-cities of the world appear to reflect that problem. According to Henderson, latest econometric research found that such type of over-population in a favoured location or city tends to be detrimental to national economic growth.

In China in this decade two cities have been heavily favoured: Beijing and Chongqing. The annual population growth rates in these two areas are still around 4 to 5% annually, despite their tremendous population size. However the sources of growth are very different. For Chongqing it is internal migration as local rural residents move to cities and towns; for Beijing it is migrants from outside the province. In fact even Shanghai still faces very high in-migration rates from people outside the province(Henderson, 2009). With favouritism in effect, it appears that these favoured urban cities of China are bordering on over-population. Not only that, as favouritism grows strong, the regional income gap between mega cities and non-mega city areas will grow significantly as most of the capital and allocations of trade and investments will concentrate on the mega cities and only providing great financial growth in those very small number of favoured cities, which wouldn’t promote balanced economic growth within China. This issue also impacts the rural areas as it seems that to close the gap between rural and urban income so the agriculture sector region need to grow in terms of investments and trades to promote financial equality among all region across China and favouritism toward mega cities only hinders this crucial development.

China’s urbanization is also highly local, with not much long-distance migration unless it involves migrating into favourite cities like Beijing. In the 1990s, half of China’s increased urbanization by redefining the definition urban, or reclassification of ‘rural’ areas as cities(Chan et al, 2008). Also local migration (meaning migrating to just a nearest urban area) was the prevalent practice that people leave the land but not the village and take any migrants into nearby towns. The result of local migrations and reclassified “rural turned urban” areas were small and scattered urbanization, leaving most “rural areas turned” cities in China too small to become a truly efficient urban economy, which in turn, limits productivity gains and economic growth. According to Du, relative to the rest of the world in 2000, China is dearth of cities in the population range of 1-12 million. While China has mega-cities such as Shanghai, Beijing and Guangzhou, “Au and Henderson (2006)” pointed out that, around 1997, many of China’s smaller cities were about half their efficient sizes. According to them, basically doubling the populations in such cities would lead to 20 to 35% increases in real output per worker. So while some cities have had heavy migration traffic in the last few years, it seems that much of China has too many cities with too small of a population.

Chan and Co suggest one solution which encourages migration and urbanization overall, but limit localized migration. China should permit migration within but not across provinces meaning migrants would mostly like have to move to those undersized urban cities to fuel the cities’ population growth. But they believe in the end, proper market reforms would help avoid the development of over-populated mega-cities and millions of underdeveloped and under-urbanized cities. It seems that China will also need to concert effort into developing policies that improve rural education as “better-educated farmers are better equipped to adopt new technologies, make better crop and input choices, and understand market conditions(Henderson, 2009)” and bring changes about the financial market promote more trade and investment in agriculture sector. And if country is able to close the gap on rural-urban income gaps, it may help retain talented young youth in the workforce in the agriculture sector instead of having them migrate to the urban areas in the future.

According to Henderson and Au, the most effective reform overall would be the slow and gradual opening of the entire capital market to free competition for financing across all firms, cities, and the rural sector. But it seems that the Chinese government will also need to create policies that help promote the under-developed areas to better be able to attract investments, trades, and migrants to promote a healthy and balanced economic growth across all of China. The reform would promote continuous economic growth by allowing capital goes to the highest return projects by the power of the free market among available opportunities within still rather under-developed areas of China. As the capital, investments, and trade is promoted equally among all cross regions of China, it will also create more job opportunities and increase the ability of cities and towns be able to take on a bigger population among all regions of China to take on the nation’s growing population with its grow economy. Reformation of capital markets to create a more efficient national market is absolutely vital in complementing the labour market and hukou reforms for an even more efficient Chinese national economic growth.

Lastly, there are several concerns about issues surrounding urbanization and migration and its effect on natural resource use and the environment in China not only a national level, but from a global perspective. There are issues about food(and water) security, efficient land use(to help avoid urban sprawl and keep land on its current state), increased operating vehicles, energy consumption, and climate change. For example, there are the energy needs and demands of industrialization, rising urban development and overall population growth that can result in energy shortage and environmental degradation without proper and well-enforced policies. It seems that, while managing migration and urbanization more efficiently to promote even greater economic growth rate is an important task, China also needs to heed very careful attention to the issues that arise from rapid urbanization and economic growth for sustainable and long terms growth of China.