Urban-Rural Divide

Even if the difference between urban and rural environment normally grows in developing states, it is unusually large in China. This is partly due to the traditional separation between cities and the countryside in view of governance structure, property rights, and social security. One can say that people living in the countryside and those residing in cities have two different forms of citizenship.

This situation did not basically change after 30 years of reform and a huge influx of country people to the urban labour markets. It contributes to the enormous income gap between farmers and urban residents, deters migrants from taking residence in cities, prevents a regular development of urbanization, and precludes the emergence of efficient social management structures in the local administration of cities. Just recently various local governments began with experiments of abolishing the exclusive urban residence system (hukou 户口), for example, in Chongqing.

During the Maoist era, farmers were bound to their commune – and often not allowed to leave it as they wished, for instance, during the famine years following the Great Leap, while urban residents were organized by their place of employment, the "unit" (danwei 单位). This work unit, coordinated in a top-down pattern, was a "comprehensive system of social benefits and entitlements to welfare" (Naughton 2018: 128). In contrast to this system of privilege, farmers, organized in production brigades (shengchan dadui 生产大队) or communes (gongshe 公社), had access to communal land and resources, but social services were organized in bottom-up style by the communes (if funds were available), and not from the side of the government, nor were there any universal rules of distributing resources for social welfare.

This harsh treatment of rural residents had its origin in the Stalinist modernization model in which the countryside only served to nourish the urban industries, on which the focus of development was lying (Davies 1994: 14, 16). Farmers were forced to sell their produce to the government at artificially low prices (as a tax surrogate), while industrial workers were given ration coupons entitling them to obtain cheap staple food. Another reason for enforcing a dual system of rural-urban divide was to prevent crowds of poor farmers from seeking employment in the cities, particularly after the Great Leap. There might even have been the spectre of tens of thousands of starving peasants (liumang 流氓, liumin 流民) roaming the countryside in search for food, as was often the case in pre-modern times. The government therefore had to enforce permanent residence of peasants in their home districts.

Urban residence permits allowed the authorities to control migration and to send back non-urban residents to the countryside. The hukou system with its separation between cities and villages was thus similar to the internal passport system of the Soviet Union (propiska). On the other hand, urban residents might be sent to the countryside for re-education, particularly in the "up to the mountains and down to the countryside movement" (shangshan xiaxiang yundong 上山下乡运动) in the mid-1950s, and during the Cultural Revolution, when Red Guards were tamed by being sent off the cities. Some of them were permanently resettled in the countryside (chadui luohu 插队落户) to work with production brigades.

With the launching of the reform agenda in the late 1970s, the control of the residence system was largely neglected. The huge number of rural labours having migrated to the cities stimulated the economic boom, and control of it would have had a negative impact on overall growth and welfare. China profited immensely from this 'illegal' migration at the cost of migrant labourers, who had no access to health care, social security, and education for children accompanying them. They were excluded from the rights which urban citizenship warranted. Their illegal status made them fair game for construction enterprises which could deal with m as they desired. They lived at the margin of society and faced – and still face - widespread discrimination.

Urban citizenship guaranteed into the 1990s job security (life-long employment in a danwei), low-price access to staple food and scarce commodities, hearth care, pension, primary and middle-school education, and low-cost housing. These privileges are usually dubbed the "iron rice bowl" (tie fanwan 铁饭碗), and constituted for many decades a kind of urban social compact.

Urban areas were fully administered by the state, which assumed responsibility for water, transportation, public security, and education. Yet the local administration and the assets and goods they distributed were seen as delegated by the national government. The changes initiated with the reform agenda therefore required constant negotiations between the central and the local urban governments (Naughton 2018: 132).

Land in urban areas is owned by the state, but use of land can be bought and sold for decades, and a market for transferrable leaseholds of urban land developed in the 1990s. According to the law, apartment owners may have a customary right to dwell on the land, but do not own it rightfully.

In the countryside, land (and non-agricultural enterprises as well) belongs to the local communes and villages. Farmers had the right of use of allotted tracts of land, but were owners only of the houses they lived in, and owned special rights on access and use of the land where the buildings (living and usage) were constructed. The amounts of land individual families or persons were given for cultivation was negotiated between families and the collective. In this way, the collectivization of Chinese agriculture in the 1950 was realized in a relatively fair and just way, and there are virtually no landless farmers. As the contracts between farmers and collectives are concluded for longer periods, land redistribution occurred regularly over the past seven decades, also to accommodate natural population changes.

Yet as peasants do not own the land they use, there is little incentive for high production. Part of the land lease contract is the rule that soil must be used; otherwise it will go back to the commune. Peasants having left the village to work in the city therefore never totally abandon their ties to the countryside and leave back some family members who meet the requirement to use the land. The village has the right to renegotiate the land as "non-agricultural", and can thus obtain the right to sell it. In such a case, farmers still residing on the ground must be compensated and resettled. Such disputes over land are the largest source for social conflict and lawsuits. Villages are profiting from the remittances by migrant workers of their earnings.

Not only has the relaxation of the discriminatory hukou system changed the relationship between urban and rural regions. The process of modernization and industrialization brought about a change between the clear divide of countryside and cities, particularly in the economic development of the suburbs in East China, with the expansion of the rural industries (Naughton 2018: 310). More and more villages transformed into cities, and small cities into larger ones.

In 2016, 57% of the Chinese population was urban, in contrast to 18% in 1978 (Naughton 2018: 310, 316). Yet there were also phases of de-urbanization in the pre-reform era, for instance, after the GLF, when it dropped to 14 million (xxx %). Nonetheless, urban industrial production grew at 7% per year before 1978. From the 1980s on, the urban population grew for about 5% annually, since 2010 by 3%. Of 793 million urban residents today, 223 million have no urban hukou residence permit. Of the urban population growth, 40% is due to migration, another 40% to reclassification of rural/suburban population as urban, and the remaining 20% the 'natural growth' of urban population (Naughton 2018: 135, 137). In 2014, 18.5% of the total population belonged to the type of migrant worker, or more than 250 million in absolute figures (Naughton 2018: 139-140). While most of them migrated from the inland provinces to the east in the first two decades, the opportunity to find jobs in provinces of central China has increased in the past 20 years.

With the abolition of the strict administrative rural-urban divide, more suburbs were defined as urban area, and the land of it was accordingly defined as non-agricultural, or land for building. Yet this advance of cities into former rural areas is not homogeneous, and there are many "urban villages" and farmland in-between clusters of cities. In some respect, the rustic character has been preserved, leading to the phenomenon of "urbanized countryside". This trend is supported by the central government which has capped the size of cities to 23 million and plans to distribute population over wider areas instead of concentrating them in megacities. One of these projects is the region of Beijing-Tianjin-Hebei, with the planned creation of several medium-sized cities with up to 2 million inhabitants (Naughton 2018: 138).

Mixed clusters of urban-rural blending allows farmers to access easily urban markets and the convenience of cities and thus relieves them from the necessity to aspire an urban hukou permit.

In the 2000s, more than 10 million people migrated to other provinces. In 2014, nearly 20 per cent of the total population of China, or more than 250 million persons, were migrants, but the trend stopped, and the number of migrants is slightly declining (Naughton 2018: 139). Pull-factors for migration were higher wages and greater job opportunities in general. It is highest for young people, particularly for males. In the early decades of the reform period, three of four migrants were male, but by 2000, the relation between the genders is equal. While male migrants mostly work in construction business, females work in manufacturing and the services. Quite surprising is that among present-day migrants, less than a third are solo individuals, and more than a third have children with them, even if living conditions have not substantially changed since the 1990s: 16% of migrants live at their work sites, 29% in dormitories, and 37% rent rooms (Naughton 2018: 141-142).

85% of urban hukou holders own a home (Naughton 2018: 142).

While the amount of land cultivated remained stable through the Maoist era, the rural population increased which exerted population pressure on the villages. Moreover, the marginal physical productivity in the countryside declined.

In the urban areas, there was full employment, even if integrating females into the industrial labour process. The introduction of the One-Child policy aggravated the demand for labour in the cities, while the dependency ration was declining.

At the beginning of the reform era, the rural-urban divide was already very large, with an income gap (per capita) in the cities being 2.6 times larger than that in the countryside. The gap widened with the economic development during the first two decades of the reform period, and was visible in a gap of 3.3 times in c. 2008 (Naughton 2018: 144), as a result of the higher growth in urban wages that earnings in the countryside. Since that year, the gap is slightly narrowing. In theory, this phenomenon is called the Lewis turning point, signifying that the rural surplus labour is exhausted and real wages in the countryside become on par with those in the cities. Whether China has really reached the Lewis turning point in 2009 or 2010, is under debate.

This achievement was partially due to the dedication of the Hu/Wen administration to the countryside which had been neglected for long and might face greater problems with WTO membership. They defined the "three rural issues" (sannong wenti 三农问题) to be tackled, namely

In order to support the countryside, taxes were drastically reduced after 2003 and in 2005 the basic agricultural tax was even abolished. Grain farmers were subsidized to allow them to comply with the WTO requirements. The property rights of land have been strengthened. Land contracts are now valid for 30 years or more, and the frequency of regular re-distributions of land have declined. The step of privatizing rural land will not be made because the government fears widespread land speculation and an overall decrease in cultivated areas. China is currently carrying out a nation-wide detailed cadastral survey. This will allow the authorities to define certain tracts as "permanent agricultural land", a classification preventing speculation, and only fit for rent to other farmers. All other land qualifies for lease to households or corporations for commercial use, for instance, TVEs, or for construction. Even if such steps might reduce the amount of cultivated land, it will allow farmers or collectives to increase their income, and so reduce the rural-urban income gap. Much of the land rented out is used for industrial development zones (xiangzhen qiye fazhan qu 乡镇企业发展区).

Finally, the government invested into education, health, and social services in the countryside. The Xi administration added to these measures a relaxation of the discriminatory hukou system and affirmed the right of migrants to have their children educated and live in cities without discrimination from urban residents. 'Smaller' cities of 1 million inhabitants will eliminate the system altogether, middle-size cities in steps, but large cities with more than 5 million people are ordered to check the increase of their population. In Beijing, Shanghai, and Guangzhou, migrants working regularly for a certain period of time in the same city will qualify for a local urban hukou permit, but permission depends on a quota system (Naughton 2018: 148). Yet an end of the hukou system has not been announced.

Even if these measures signify a deviation from old structures, problems remain for the children of migrant workers who do not enjoy education, and for their parents who stay back alone in the countryside.