Home Blogs Asian Chemical Connections China Urbanisation Complications

China Urbanisation Complications

Business, China, Company Strategy
By John Richardson on 18-Apr-2012

 By John Richardson

EVERY time you come back to the subject of China, it becomes ever-more complex and uncertain.

An excellent example is an article published in the academic journal, Eurasian Geography and Economics, in February, by University of Washington professor Kam Wing Chan.

It questions to what extent China’s economy will benefit from further urbanisation because of the harmful impact of the hukou residency system that was introduced in 1958.

The system, designed to ensure that enough people remain on the land in order to keep the country sufficiently fed, has created a two-tier society.

Tier one comprises urban residents eligible for unemployment benefits and pensions.

Hundreds of millions of former rural residents, who have moved to the cities and towns in order to find work, but without being able to officially change their residency status from rural to urban, occupy the second tier. They are ineligible for welfare payments, and even for free public education as hukou status is hereditary.

Chan, who studied population statistics from China’s National Bureau of Statistics and the Ministry of Public Security, discovered that 460m people had urban hukou status in 2010 compared with a total 666m city-dwellers.

The remaining 206m were therefore caught in an economic no man’s land, creating “a pool of super-exploitable labour,” he wrote.

New rules have been introduced by the central government, which allow migrants, under certain conditions, to apply for a change of residency status after they have moved to small and medium-sizes cities. But the majority of employment is in the big cities, such as Beijing and Shanghai, argued Chan.

If much of this increased urbanisation is going to involve former rural residents trapped in severe poverty by Western standards, they will hardly be rushing out to buy BMWs and Louis Vuitton handbags.

This, of course, has major implications for the nature of chemicals demand growth.