BusinessWeek: “Li Zuobing is adjusting well to urban life in Chongqing’s Yubei district, where he lives in a massive housing complex built to house former farmers. He enjoys his job as a supervisor in the community service office, his wife says she is delighted to have a kitchen with natural gas (rather than coal), and his daughter has opened a clothing store. It’s a great improvement on their life growing rice and corn on a small plot. “A few years ago, the idea I could ever live this well was unimaginable,” he says, as instructions on living a “civilized life” drone from loudspeakers on the grounds.
Such success stories are essential for China’s future. As President Xi Jinping tries to bolster China’s international standing, the most daunting challenge at home is getting urbanization right, a task that falls to Premier Li Keqiang. Li is embarking on one of the most radical reconfigurations of Chinese society since the Mao era. His goal is to cut the rural population of 642 million roughly in half by nudging, urging, and sometimes forcing farmers and their families to settle in China’s cities.
Theoretically, this process will create a new, willing workforce to staff the cities’ service industries and factories. The ex-farmers’ incomes will rise, their children will get a better-quality education, and when they grow up they’ll land better jobs than their parents. The multiyear process will increase average income in China, where annual rural incomes of 7,917 yuan ($1,291) are less than one-third the income of city dwellers. “Urbanization will usher in a huge amount of consumption and investment demand, increase job opportunities, create wealth for farmers, and bring benefits to the people,” said Li in his first news conference after being named premier. This grand population shift comes as China’s three-decades-long export and investment-led boom starts to lose steam.
The 57-year-old Li is China’s first premier to have a doctorate in economics, earned at prestigious Peking University. He worked in the countryside during China’s Cultural Revolution and has made transforming farmers into city dwellers a career theme, including during his time as governor of Henan and Liaoning provinces. Li recently asked the World Bank to work with his administration in drafting sustainable urbanization proposals. (World Bank officials were unavailable to comment.)
Cities such as Chongqing have been experimenting with urbanization for years, and Li wants to speed up the process across all of China. Another benefit of this policy, Li says, is that it will be easier to launch large-scale agriculture as farmers move to the cities. Chinese farmers tend plots that average a little bit more than one acre in size: Farms are three times larger in South Korea and Taiwan, 30 times larger in Europe, and 300 times larger in the U.S., says Cai Jiming, director of the Political Economy Research Center. “With such a small scale, it is impossible for any one farmer to become wealthy.”
It won’t be easy to get the economic payoff China’s leaders are counting on. One obstacle is China’s hukou, or household registration policy, which designates all citizens as officially either rural or urban, depending on what family they are born into and regardless of where they reside. Hukou prevents some 230 million migrant workers who already live in China’s cities from enjoying the health care, education, pensions, and access to lower-cost housing available to those with urban hukou. “None of them enjoy the rights of full urban residents. That makes their consumption ability much lower,” Cai says.
Another obstacle: Under the constitution, all rural land is owned collectively, a legacy of when agriculture was produced by people’s communes. That means farmers have no right to rent or directly sell their leased land, allowing them to set up life in the city.
Li hopes his policy will stop local governments from continuing their forcible takeovers of rural land. Local officials provide limited compensation to the farmers, then sell the long-term leases to factory owners and real estate developers. The authorities usually sell the seized land for 18 times what they paid the farmers, estimates Li Ping, senior attorney at the Beijing office of Landesa, a Seattle-based nonprofit that focuses on land-rights issues. “Local governments have an incentive to push this distorted urbanization, to grab all that profit,” says Landesa’s Li.”