Op-Ed Contributors
Debate: Hukou abolition
(China Daily)
Updated: 2010-03-22 07:53
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A large number of experts say the household registration system should be scrapped because it is discriminatory toward rural residents, especially migrant workers. But what after that? Two academics share their views.
Paul Kong: Scrapping hukou is easier said than done
Although Chinese society agrees that the hukou (household registration) system should be reformed, the process is still stuck in a systemic quagmire for want of a practicable scheme.
If the hukou system is abolished without having an alternative plan in place it would create new, more complicated problems. Or, a similar rigid population management mechanism would replace the old one, trussing up the rational movement of rural migrants in cities.
It is not an easy task to grant 1.3 billion people equal access to urban facilities, let alone providing them with the standard needs that citizens of advanced cities get. In fact, the country's limited resources and huge population makes that a very difficult proposition.
According to a rough estimate, the government would need to spend an additional 1.65 trillion yuan every year to ensure all citizens enjoy standard social security. The break-up follows:
Medicare: There are differences between the Urban Resident Medicare Security and the New Rural Cooperative Medicare Scheme. The lack of healthcare funds makes it impossible for the government to ensure urban and rural residents have equal access to medical facilities. Take 2009 for example. The overall national medical care security fund was about 350 billion yuan, while 2.5 trillion to 3 trillion yuan was needed to pay for the entire population's medical expenses. And to narrow the gap, the government provided an additional funding of about 250 billion yuan, which just met the basic medical needs.
Pensions: The pension systems for urban and rural areas are different as well. Urban residents may get a monthly pension of 500 yuan per head on average in the future. But the 100 million needy senior rural residents' pensions are embarrassingly low. If every senior rural resident is to get a pension of 500 yuan a month, half of which is expected to be paid by the government, another 300 billion yuan would be needed every year.
There is another problem: Most of the senior citizens in rural areas cannot afford to pay the other half of their pension contribution. It is almost impossible for rural residents to set aside 3,000 yuan a year as their pension contribution when their average annual income is only 5,153 yuan (going by last year's figures).
Subsistence allowance: Urban residents' personal subsistence allowance is about 300 yuan a month, which is more than half of the average monthly income in rural areas. That means the government has to contribute another 400 billion yuan to equalize rural and urban residents' subsistence allowances.
Education: There is a wide gap in education resources between urban and rural areas. The government has to increase its expenditure on education by a huge margin to meet the needs of rural immigrants' children. Vocational training is basically free for urban residents now. But the government has to spend another 700 billion yuan to train new rural immigrants - that is, if the annual per capita education cost remains at 10,000 yuan (according to current figures).
The additional annual spending on the four heads would be at 1.65 trillion yuan for the next five years only if the government does not abolish the hukou system without making contingency plans to deal with developing situations. And apart from the four heads of expenditure issues such as housing and transportation, too, would need additional expenses to be fixed.
Does the central government have enough money for the additional expenses? The answer is no. The government's overall revenue in 2009 was 6.8 trillion yuan, with the national social security revenue being less than 1.6 trillion yuan. If the income from transfer of land-use rights and public welfare lottery are taken into account, the total national revenue would be about 12 trillion yuan.
Compared with the global standard, China's fiscal revenue contributes a much bigger share to GDP. For example, China's GDP is only one-third of America's and its fiscal revenue two-thirds. This is a fairly high proportion because America's fiscal revenue is only one-fifth of its GDP.
The share of fiscal revenue in the Chinese government's income invariably leads to overpricing in the real estate market and to higher taxes. Hence, it doesn't make economic sense to aggravate the already intense social problems by increasing taxes to pay for the cost of abolishing the hukou system.
Besides, it is not that the government is reluctant to abolish the hukou system.
But it knows that before doing so it has to establish a set of practicable funding schemes to build a new, comprehensive national social security system. Hence, it is irresponsible and irrational to blame the government for the stagnation of the household registration system reform.
