China’s ‘two sessions’ 2024: long-awaited reform for 300 million migrants could open wellspring of demand

China is mulling providing equal social benefits for its 300 million migrant workers, a move that would grant that group the same level of coverage as urban residents and, the country hopes, open a previously untapped repository of domestic demand – highly sought after as a means of avoiding economic slowdown.

Creating incentives for migrants to settle down in cities and providing them with same entitlements would be a priority for the Chinese government this year as they represent a vast pool of potential investment and spending, Premier Li Qiang said in his government work report on Tuesday.

Those workers helped propel China’s economic rise but, because of the hukou – the national household registration system – had no access to the superior social services enjoyed by their city-dwelling peers. They are expected to be a force in the next stage of the country’s urbanisation, which still has “much to be achieved”, Li said.

“As a matter of priority, we will move faster to grant permanent urban residency to eligible people who have moved to cities from rural areas,” the premier told delegates of the nation’s top legislature and advisory body during their annual gathering, known as the “two sessions”.

This will help China generate more effective demand to prop up the economy, which is struggling with plunging exports and a property market crisis, said Huang Shouhong, director of the State Council Research Office and head of the drafting team for the report.

“The consumer demand brought about by a person moving to the city is much higher than that of rural residents,” he said while elaborating on the report to the media on Tuesday.

Migrant workers who helped power China’s economic miracle face bleak future

China reported a gross domestic product growth rate of 5.2 per cent last year after an uneven post-pandemic recovery, beating the official target of around 5 per cent. It kept the same target this year, widely seen as an ambitious goal considering the comparatively higher annual base and various challenges the economy is facing.

Slightly more than 66 per cent of China’s 1.4 billion people lived in urban areas as of last year, but this is quite low compared with the over 80 per cent urbanisation rate seen in many developed countries, Huang said.

As of the end of 2022, 47.7 per cent of the Chinese population had urban residency, meaning there are hundreds of millions of people who currently live in cities but are denied access to urban benefits, according to the Ministry of Public Security.

“Getting urban residency doesn’t mean people will get a [higher income], but their expectations for life and work would be stabilised,” said Shi Lei, a professor of economics at Fudan University.

“This means a lot for improving weak sentiment and spurring spending,” he said.

With a guarantee of stability, migrant workers would be more likely to purchase property in towns and cities, he said, which will aid in filling a large portion of previously unsold new homes.

Amid prolonged woes in the real estate sector and geopolitical tensions with the West, insufficient effective demand has remained one of the major challenges for the Chinese economy, China’s top economic officials said at the central economic work conference late last year.

It used to be easy for migrant workers to find jobs, but now it’s no longer the case

Shi Lei

In another attempt to nudge investment and spending in the right direction, the State Council rolled out a plan last week to encourage large-scale equipment renewals and trade-ins of consumer goods.

The permanent relocation of migrant workers may contribute to this initiative, but not at a massive scale, according to Shi.

“Traditional industrialisation in China came to an end in 2016, one piece of evidence being the surplus of labourers in cities,” he said. “It used to be easy for migrant workers to find jobs, but now it’s no longer the case, therefore there’s been a retreat to the countryside in recent years.”

Policymakers should now focus on making the “two-way flow” of people easier, he said, especially between villages and neighbouring towns and counties.

South China Morning Post