In the popular media and the business world, urbanization is often the most cited fundamental driver of global economic growth, especially for the next few decades. The assumption is that such a rural-urban shift will transform poor farmers into industrial and office workers, raise their incomes and create a mass consumer class. Imagine farmers who once led simple, subsistence lives becoming workers in the city, now residing in apartments furnished with appliances. Picture them as occasionally eating out, and perhaps even sending their kids to college.
Not surprisingly, China has been considered the poster child for this linear model of rural-urban shift and accompanying inexorable consumption growth. To the China “boomsayer,” even more impressive consumption is yet to come: another 300-400 million rural dwellers will be converted into city folks in the next 15 years. “Prepar[e] for China’s Urban Billion,” McKinsey & Co. beckons. Think about how many millions of new apartments and how many cities like Shanghai will be needed for all these new arrivals; how many more Ikea-like home furnishing stores? The list goes on.
Indeed, China is undergoing rapid urbanization on paper, if one simply looks at the number of people relocated. But while its epic rural-urban shift has many trappings of what amounts to contemporary urbanization elsewhere in the world, urbanization in China is a more complicated phenomenon that requires an understanding that goes beyond the superficial one-dimensional narrative.
Present China’s urbanism on the surface can be quite deceiving, for statistics are often misleading (a topic on which I have written voluminously), and city bureaucrats excel at choreographing window-dressing “image projects” and sequestering poverty. Most important of all, behind China’s sparkly modern urban facade, there is one crucial foundation of its prosperity that is unique in modern times, but that continues to be largely ignored in the business literature: China remains an institutionalized two-tier, rural-urban divided society. This is a consequence of the Mao era social engineering that continues to this day. This division not only manifests itself in economic and social terms, as in many Third World countries in the throes of urban transition, but is also tightly enforced in clear de jure terms, mainly through a system of hereditary residency rights, called the hukou.
The hukou system has created, on one hand, an urban class, whose members have basic social welfare and full citizenship; on the other is the underclass of peasants who has none of those. In Mao’s era, peasants, forbidden to go into the cities, were confined to tilling the soil to grow food for urban workers. With China’s opening and participation in the global economy, peasants have been allowed to come to the city, where they are compelled to take up low-paid factory and service jobs, many of which are dirty and dangerous, while at the same time denied access to urban welfare programs and opportunities because the great majority of them are not allowed to change their hukou from rural to urban.
“Rural migrants” work and live in the city but they are not part of the urban class – not now, and not in the future, no matter how many years and how hard they have worked in the city. This group now numbers about 160 million and continues to rise. The fact that they are purposely held down as a massive permanent underclass is precisely what supplies China with a huge, almost inexhaustible, pool of super-exploitable labor. Little wonder that China is the world’s largest – and the most “competitive” – manufacturing powerhouse!
China’s rapid urban population growth trend, as represented by the blue line in the graph below, is all too familiar. However, that single-line description has left out an important point: the majority of the migrants to the city do not have urban rights. Alarmingly, the gap between the total population living in cities and the number of those who possess urban rights has widened as the country moves forward.
That expanding gap represents starkly the greater number of people who are in the city but not of the city; they get no part in the benefits package assumed to be associated with urbanization: better housing, better educational opportunities and health care. With meager wages and no chance of legally settling in the urban areas, they also lack an incentive to invest in the future in the city. They will not spend on major appliances in a place that does not want them. In fact, most migrant workers have little purchasing power that would position them even to dream of any decent housing in the city. Lots of them remain crammed into dormitories or consigned to the Chinese equivalent of slums, the “villages in the city,” where they must eke out their living on the urban fringes.
Far from becoming the new consumer class, they form a mammoth underclass, whose size will easily swell to 300-400 millions in a decade. That in itself is frightening and has serious implications, but, for the moment, this class has nothing to do with China’s recent housing boom, other than by providing muscle power at building sites.
When examining the notion of urbanization as the path to rapid consumption expansion, it is clear that its relevance to China, under its current configuration of economic and legal inequities, has to be hugely discounted. There are many myths behind the perception and sustainability of China’s recent economic rise. Urbanization remains one of the biggest.
Kam Wing Chan is Professor in Geography at the University of Washington. His research focuses on China’s migration labor and urbanization.