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April 2013, Volume 20, Number 2

China: Urbanization, Education

About 700 million--54 percent--of China's 1.3 billion people live in cities, up from an urban population of 200 million in 1980. The movement of 500 million Chinese into cities over the past three decades is one of the most rapid urbanizations in human history. However, at least 200 million urban residents are officially registered as rural residents and living "temporarily" in cities, meaning they have limited access to city services.

Some 12.7 million urban jobs were created in 2012, up from 12.2 million in 2011. Minimum wages are set to rise at least 13 percent a year in 2013, 2014 and 2015.

China is expected to have a billion urban residents in 2030. Tom Miller's book, The Urban Billion, notes that top-down city planning has produced cities where, as in Los Angeles, urban land areas increase faster than urban populations.

Analysts urge three policy changes. First is an end to China's one-child policy, adopted in 1980 to slow population growth and urbanization, but which today makes it hard to support the rapidly rising number of elderly Chinese with contributions from current workers. If the one-child policy were ended, the fertility rate would likely rise from the current rate of 1.5 children per woman.

Second is ending the hukou or household registration system that limits government services to the place where a person is registered. If changed, rural residents living in cities could get government services there. Half of China's residents live in cities, but less than 40 percent have urban hukous.

In 1958, the government developed the household registration system to limit internal migration.

Some cities have point systems that allow rural-urban migrants to buy urban hukous. For example, Zhongshan requires those seeking urban hukous to have 140 points. It offers 80 points for a university degree and 50 to migrants who own a house or condo but deducts 60 points from those with more than one child. One proposal is to develop an urban or metro hukou for the 50 million residents of the six major Pearl River delta cities, Shenzhen, Guangzhou, Dongguan, Foshan, Zhongshan and Zhuhai that would allow holders to receive city services in any of these cities.

The State Council's Development Research Center estimates that the average cost of education, health care and pensions for rural migrants who become urban residents is 80,000 yuan ($13,000).

The third reform would allow private land ownership, so that farmers could sell their land rather than lease their land-use rights, the current policy. Many local leaders seize farm land, pay farmers a low price for their land, an average two percent of its value for development according to one survey, and then sell the land to developers at a much higher price, using the profit to fund local services and enrich themselves. Analysts urge a reform that would allow farmers to use the profits from the sale of their land to developers to help them to move to and integrate into cities.

The number of Chinese between 15 and 59 fell to 937 million in 2012 from 940 million in 2011. Slower labor force growth could presage slower economic growth. However, some academics note that, if the government were to end its extensive family planning policies, hundreds of thousands of workers would lose their jobs.

Industrialization and urbanization have increased inequality. Average disposable income for Chinese urban residents in 2012 was $4,000, compared to $1,300 for the 650 million people in rural areas, explaining why many rural Chinese move to cities. Both the outgoing government of prime ministerÿWen Jiabao and incoming PM Xi Jinping have pledged to reduce income inequality.

Education. China, often described as the world's factory, is trying to move up the value chain by increasing the number of college graduates. However, many factories rely on high school students and temporary workers to cope with periodic surges in orders. In February 2013, Hewlett-Packard joined Apple in ordering its Chinese factories to limit the employment of students and temps to a maximum 20 percent of a factory's employees.

The number of Chinese colleges and universities doubled to 2,400 between 2002 and 2012, producing six to eight million graduates a year (the US has about three million college and junior college graduates a year). By 2020, when the US is projected to have a total of 120 million college graduates, China is projected to have almost 200 million.

Unemployment is higher among college graduates than among Chinese with little education, 16 percent compared to four percent in 2012. Many college graduates refuse to accept factory jobs, even if they pay more than the white-collar jobs they seek. The government acknowledges an "employment problem among college graduates," and some analysts point to the potential for unrest if graduates who believe that their degrees should make them part of the elite cannot find jobs.

The most popular major among Chinese students is engineering. China has the world's largest auto industry, producing twice as many cars and trucks in 2012 as the United States or Japan, but exporting few of them. Some say that there is a Confucian tradition that educated people do not engage in manual labor in China. Many college graduates want government jobs, preferring stability over risk.

Between 1996 and 2011, the Chinese government reported that 2.2 million Chinese students went overseas to study and a third have returned.

Economy. China's economy expanded by 7.8 percent in 2012. China's economy expanded fourfold between 2002 and 2012, one of the world's fastest sustained economic expansions.

Over 700 million people traveled for the Lunar New Year or Spring Festival that began February 9, 2013, including 225 million who traveled by train. One issue is unpaid wages for migrant workers who want to return home with gifts. The Chinese government promised to require employers to pay back wages owed to migrants before the holiday.

Local governance remains a contentious issue in China, especially in areas with minorities. Minority Uyghur farmers in China's Xinjiang Uyghur Autonomous Region in February 2013 said that local officials required them to contribute labor or pay a penalty of 1,500 yuan ($240). Money collected in fines from Uyghurs was used to hire Han Chinese workers, increasing Uyghur resentment.

Hong Kong. There are 310,000 foreign domestic helpers in Hong Kong, most from Indonesia and the Philippines. For the past five years, the usual HK$400 a month employer-paid levy on foreign domestic helpers has been suspended, and the government is considering ending the levy July 31, 2013. The levy, in effect between 2003 and 2008, generated funds to train local workers to be domestic helpers.

Taiwan. A survey of 500 migrant workers from various countries employed in Taiwan found that migrants paid $1,000 (Malaysia) to $6,300 (Vietnam) to get their Taiwanese jobs. About 40 percent of the recruitment fees paid by Vietnamese workers stays in Vietnam, where recruiters and local governments collect fees (government fees are supposed to be a maximum $750). The remaining 60 percent is divided between Taiwan brokers, employers and the government.