Hukou reform expected to be a gradual process

Central government to tackle issue through indirect means, analysts say

Xu Shaoshi, minister of the National Development and Reform Commission, promised to "revise and improve the policy suggestion on urbanization" that his commission submitted to the State Council in June.  [Special coverage]

He made the remarks on Wednesday during the first internal conference since the recent plenum.

Xu's stance appeared to confirm predictions that the central government will gradually modify urban and rural hukou (household registration), rather than canceling the controversial system overnight.

In June, the commission suggested the government should completely lift hukou control in small towns and cities — a bid to ease restrictions in middle-level cities — while gradually broadening conditions to apply for hukou in big cities. It also urged revamping hukou application conditions for megacities.

Experts believe the central government will approach the hukou issue indirectly by providing farmers with more "property income" and basic citizen-welfare treatment.

Hukou reform would be one result of rural land reform, urbanization and social security, although the communique of the just-concluded Third Plenum of the Communist Party of China's 18th Central Committee did not mention it by name. The communique rather stressed a balanced distribution of public resources and equalization of social welfare, which some say will ultimately yield the desired result.

"The communique has actually pointed out a clear direction and roadmap to break the hukou-based dual structure of city and countryside by addressing the welfare disparity," said Zhang Liqun, an economy researcher at the National Development Research Center of the State Council. "The integration of rural and urban is good for modernization of agriculture and healthy urbanization."

Wang Yongjun, professor of finance at the Central University of Finance and Economics in Beijing, said the equalization of welfare "does not mean giving all citizens exactly the same level" of social security.

"It means that the minimum welfare standard for all citizens should be guaranteed by the government as its obligation to the people," he said.

Analysts believe the equalization of public services mentioned in the communique is the Party's direct response to the public's cry for hukou reform — especially for migrant workers — with the concept of granting property rights to farmers part of the same message.

Cao Yuanzheng, chief economist of the Bank of China, told the media: "The integration of public services is the essence of healthy urbanization, and farmers will have the freedom to make a choice between the city and the countryside."

China has about 300 million migrant workers, many of whom leave their farmland uncultivated to work in cities without having the privileges that come with having hukou there.

The integration of urban and rural, in particular, welfare and public services, will diminish the difference between city and countryside hukou by a large margin, and then the hukou system will exist only in name, Cao said.

"All depends on the future implementation, as no reform can be carried out separately."

The plenum's call for a unified construction-land market for city and countryside is crucial for achieving long overdue property rights for farmers, experts say. Granting them the right to transfer, mortgage or rent land is an immediate way to provide benefits since it takes a long time for public resources and services to adjust.

A widely held belief is that government should set up a profit distribution system that is well regulated — along with the "unified land transfer market" — to avoid grassroots governments' peeling away the farmers' profits.