China has already shown signs that the new urbanization policy will come with a rethinking of the hukou policy. There are also a number of pilot programs in cities across China that have allowed, on a limited basis, a greater number of urban hukou permits to be distributed each year. In these cities, a points system based on education, employment and tax history allows a small number of people to apply for and obtain urban residency in their adopted cities.

These projects, however, have been small-scale and have been implemented in wealthy cities.

Moving to smaller cities

Attempting to shift migration into smaller cities could provide a solution, but Chan is skeptical of this plan.

“Recently, the Chinese government made clear that they want to ... open up the smaller cities,” says Chan. “But already getting hukou in a small city is not really that difficult. So, why is that not working?”

It’s not working, he notes, because migrants have minds of their own and still prefer the big cities, where jobs are more easily found.

“I think at this stage of the Chinese economic development, it is still Beijing, Shanghai and Guangzhou that are the big magnets,” he says. “Not only do they have many service jobs, these places have very large nearby industry as well; they are major hubs, and they have the jobs that attract migrants.”

Comprehensive approach

In 2009, a report from McKinsey Global Institute offered some details on what a comprehensive approach to urbanization would look like.

Cities will have to stretch their social services, increasing efficiency to do more with their resources, the report noted.

Concentrated growth — increasing density in larger cities rather than expanding a city’s footprint — is a more efficient model than the urban sprawl that past development initiatives have supported.

These sorts of dense, super-sized cities would also be well-served by implementing city development plans that are centered on public transport and developed according to strict zoning regulations.

Administration takes up a large percentage of government spending, and cities could work to streamline their bureaucracy and eliminate any repetition. Cities could also stretch their health-care services by encouraging primary care, opening convenience clinics and boosting initiatives related to prevention.

“Public housing is something they will have to expand,” adds Chan. “Certainly, a portion of the migrant population will qualify for public housing.”

Chan says the hukou system can be reformed gradually with little additional cost. “There are a lot of good advantages to this, like making the urban labor force younger, that would help ease the financial burden,” he says. “I’ve proposed a program that would need to be very gradual — it would take at least 15 years.”

Under Chan’s plan, urbanization would favor the educated and skilled first and then move on to other social groups. Moving gradually would help China realize the benefits of urbanization without overtaxing city resources.

“This will also give people the incentives to improve themselves,” he notes.

Adapted from http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2838