Huang Yasheng is a renowned Chinese-American economist. He is a tenured professor in international management and the vice-dean at the MIT Sloan School of Management. He earned his bachelor’s degree in government from Harvard University in 1985 and went on to earn a doctorate in government from Harvard University in 1991. Later, he joined Harvard Business School in 1997 and MIT in 2003. At MIT, he founded and heads the China Lab and India Lab. His research areas include political economics, international business and Chinese economy.

Playing an important role in China’s urbanization, the reform of household registration system has become a focal point among scholars. Recently, Professor Huang Yasheng shared with a CSST reporter his views on urbanization in contemporary Chinese cities and the barriers that dual urban-rural household registration system (hukou) brings.

CSST: You once published three articles about China’s urbanization in Chinese media: The Uniquely Chinese Urbanization, How Could Urbanization Benefit Migrant Workers? and Urbanization in China Needs To Be Depoliticized. In these articles, administrative urbanization is frequently mentioned. Could you please elaborate on it?

Huang Yasheng: Urbanization refers to the process by which the agricultural population is converted into non-agricultural population and becomes concentrated in cities, which means the transformation of the population’s behaviors, lifestyles and values—from being agrestic to being civic.

In both ancient and modern times, the process of population conversion has been mostly spontaneous and driven by economic factors. For migrant workers, working in cities means relatively higher incomes but also higher living costs. If the economic benefit is lower than their expectations, they will be reluctant to stay in cities.

Conversely, if their economic status and other benefits grow by living in cities, they will be more inclined to become urban citizens. This is a natural process of urbanization.

The status of villages and towns in China is mostly determined by top-down administration: It is the local governments that decide the definition of villages and towns, the spheres of which should have been divided by population scale, population density and economic activity.

The most salient manifestation of administrative urbanization is the dual urban-rural household registration system. Barriers to household registration coercively exclude the migrant workers who labor in cities from the social rights and welfare system that urban residents enjoy.

CSST: The Chinese government promulgated the National Plan on the New Urbanization (2014-2020). So far, the plan has been implemented for over two years. The document pointed out that “more respect will be given to the market law,” and “urbanization will become a natural, market-dominated process.” This is a noteworthy development in the process of urbanization.

Huang Yasheng: If the household registration system is not reformed, it will be difficult to realize a type of urbanization that is natural and market-dominated.

CSST: Will the cancellation of the dual urban-rural household registration system result in the disordered mobility of population and its clustered distribution, which seems to run contrary to the goal of the new urbanization?

Huang Yasheng: Relevant research and the practice of developed countries have proven that as long as population management is employed in a scientific way, the demographic migration will be structured and disorder will not appear. On the contrary, if well utilized, migration can help boost a city’s development.

Definitely, the reform of household registration system might bring about problems. But we need to have confidence in people’s rationality and their ability to weigh the advantages and disadvantages. And mistakes should be allowed. At first, the migrant people will probably make some mistakes, but it is mistakes that offer experience.

It is the same with companies offering initial products that are not necessarily suitable to the market or competitive. But they have to be first placed in the market. Only in this way can the feedback information from the market be collected, based on which, the products can be improved.

The negative impact exerted by the current household registration in China can be easily found, and there are many examples of this. With the hukou of the registered cities, one’s children are entitled to receive local schooling, and one’s family members are able to go to local hospitals for medical service. They are eligible to access a series of public goods that the hukou brings them. Otherwise, the education of their children would have to be self-funded.

And one major way to solve this is by savings. But saving directly inhibits consumption. Compared with members of the white-collar class who do not hold an urban hukou, the migrant workers have a higher savings ratio. According to a survey on the migrant workers in Guangdong Province conducted by the Sun Yat-Sen University, Southern Metropolis Daily and me in 2009 and 2010, the saving ratio of the migrant workers in Guangdong Province has reached 40 percent of their total incomes. The most important reason for savings is children’s education, which accounts for one-third of the overall consumption expenditures. Building houses in their hometowns ranks second.

Since most migrant workers are struggling to find a foothold in cities, they would definitely be unwilling to consume in cities. China has been stressing the urgent need to boost domestic demand, but if the government can end the discrimination under the household registration system that 230 million migrant workers currently face, the situation of insufficient domestic demand and the overdependence on foreign demand might be largely improved.

In addition to the fact that household registration system impacts consumption, the system also has societal consequences. More than 60 million left-behind children are victims of it. Without parents by their sides, the left-behind children are more vulnerable. They are exposed to a higher possibility of having their rights infringed upon, and they are denied a good family life and education. And there is also a lack of timely psychological support for them.

Children who grow up under such circumstances tend to have more psychological problems and higher criminal tendencies. One main factor that has contributed to China’s rapid economic growth in the past 40 years is its high population quality relative to other developing countries that also have large populations. If the problem of left-behind children is left unchecked, it will exert direct negative effects on China’s economic and social development in the next 10 and 20 years. And the root of the problem lies in the hard rules of the dual urban-rural household registration system. Everyone should have their own right and freedom of choice.

CSST: If restrictions on migration are loosened, will it aggravate the big-city problems in Beijing, Shanghai, Guangzhou and Shenzhen?

Huang Yasheng: Big-city problems surely exist. However, the chief reason for this is the relatively low capacity for urban management. The migrant population should not be scapegoated. The population density of Beijing and Shanghai is far lower than that of Singapore, Tokyo and Chinese Hong Kong but these cities function in an orderly manner. In fact, some developed countries and regions, where the cities are densely populated, are where order, environmental friendliness and sound transportation can be found. Stress should be placed on city management instead of controlling mobility.

To be specific, one city problem is traffic. But the traffic congestion in Beijing, Shanghai and other big Chinese cities is not merely caused by the migrant population. Take Beijing for an example, when the municipal government of Beijing started vigorously building the network of subways around 2008, the total quantity of the city’s automotive vehicles had reached 3 million. By early this year, the number had soared to 5.61 million. Since China joined the WTO in 2001, sales of automotive vehicles have continued to surge, particularly in the country’s large cities, where the governments did not take timely measures, such as license plate lotteries and tax increases to check the rise of private cars.

China followed America’s example by encouraging the purchase of private cars in the 1990s and early 21st century. But the fact is that the population density of most big cities in America is not as high as that of Beijing, Shanghai, Guangzhou and Shenzhen. Therefore, the root cause of big-city problems is the lack of effective city management.