Bloomberg News

China Moves to Loosen Residence Limits in Li Urbanization Drive

March 28, 2013

A northern Chinese province will allow some people who live in the countryside to get social benefits in the capital, easing residency limits that may hamper a government push for urbanization to drive economic growth.

People in Ningxia province who live in rural areas under the jurisdiction of Yinchuan, the capital, will now be allowed to switch their residency to the city itself, the Xinhua News Agency said today. The rules took effect March 27, it said.

The changes mark a loosening of China’s residence-permit, or “hukou” system, which stipulates that people can only get most health and welfare benefits in the place where they were registered, usually at birth. The system can prevent China’s tens of millions of migrants from putting down roots in the cities where they work because they can’t get government help or send their children to school for free.

Premier Li Keqiang, appointed earlier this month, has championed urbanization as a “huge engine” for growth as leaders seek to shift the world’s second-largest economy toward a model that relies more on consumption than on exports. Last year, growth slowed to 7.8 percent, a 13-year low.

“The new strategy will be developing the smaller cities in central and western China,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. “Hukou reform is extremely difficult in the big cities -- in the tier-three, tier-four cities it’s easier to push forward.”

The hukou registration program was imposed under leader Mao Zedong in 1958 to bind farmers to their land. China’s biggest cities including Shanghai, Beijing and Chongqing have yearly quotas on the number of people allowed to become residents.

The rule changes in Ningxia aren’t a total abandonment of the registration system: People with residency in Yinchuan, a city of 2 million people, won’t be allowed to register to live in rural areas, Xinhua said.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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