Former Chinese Central Bank Chief Advocates Easing 'Hukou' Registration Restrictions

By IndraStra Global News Team

Cover Image Attribute: The file photo of Yi Gang at the World Economic Forum, Davos

In a recent article, former People's Bank of China Governor Yi Gang has called upon China's leadership to reconsider the strict "hukou (户口簿)" household registration rules, aiming to facilitate urban migration as the nation grapples with a sluggish property market and seeks to stimulate domestic consumption.
Published on September 19th as part of a national political advisory body's discourse, Yi Gang's article emphasized the need for policy measures to boost consumption. This included moving forward with urbanization initiatives by reducing bureaucratic obstacles that impede individuals from relocating to different cities for work and residency.
Highlighting the tepid post-zero-COVID recovery in China, Yi Gang stressed the necessity of "city-specific policies" to enhance housing demand. Such policies could encompass more favorable loan terms for residential landlords and financial support for local governments to purchase vacant properties for use as affordable rental housing.
Yi Gang referenced estimates from scholars suggesting that reforming the household registration system could potentially increase consumption among migrant workers and newcomers to a city by up to 23%. The "hukou" system presently limits access to essential services such as healthcare, education, and property ownership to native residents of specific areas.
While authorities have implemented some limited reforms to the system, making it easier for people to establish themselves outside their hometowns, prominent figures like Beijing University of Science and Technology professor Hu Xingdou have called for a complete abolition of the "hukou" system. This is primarily due to the significant wealth and resource disparities between "first-tier" cities like Beijing and Shanghai and other regions, contributing to inter-regional inequality.
Yi Gang, who still holds a position on the standing committee of the Chinese People's Political Consultative Conference (中国人民政治协商会议), an advisory body to the government, appeared to cautiously endorse this perspective. He stressed the need for improved support for migrant workers in areas such as housing, healthcare, education, and social security while working in urban centers. Simultaneously, he emphasized maintaining a certain degree of labor mobility between urban and rural areas, different cities, and the eastern and western regions as a means to ensure economic stability.

Image Attribute: Hokou, China's residency registration system restricts privileges such as healthcare and education access, along with property purchasing rights, to individuals originating from a specific region. Image source: Public domain.
Ren Liqian, responsible for managing China investments at U.S.-based WisdomTree Asset Management, expressed support for "hukou" reform but remained cautious about its potential to significantly boost consumption. While acknowledging that reforms to the household registration system would have some economic benefits, Ren cautioned against expecting substantial economic gains from these changes.
The Chinese government faces mounting pressure to improve economic performance, with economist Li Hengqing noting concerns from various quarters, including the Chinese Communist Party Central Committee and the State Council. Many stakeholders attribute social unrest and growing public dissatisfaction to lackluster economic performance.
Given the central government's strained credit and mounting debts, traditional avenues for economic stimulation, such as massive spending on local infrastructure, are no longer viable options. Consequently, financing a stimulus package is becoming increasingly costly.
Economist Zheng Xuguang suggested that Yi Gang's article hints at broader dissatisfaction among party elders with President Xi Jinping's current policies. However, he cautioned that this suggestion may not significantly impact investor confidence or consumption due to long-standing pessimism about China's political situation and Sino-U.S. relations.
During a recent news conference, Cong Liang, deputy director of China's National Development and Reform Commission, remained optimistic about China's economic outlook. He asserted that the nation has successfully weathered previous financial crises and will rebound once more. However, he acknowledged that China's economy faces numerous difficulties and challenges.
Despite the optimistic tone of the news conference, some critics argue that it further widens the gap between the government's statements and public perception, potentially eroding the government's credibility. Public skepticism, they argue, may lead people to adopt a contrarian viewpoint in response to official pronouncements.


EDITORIAL NOTE: While China seeks ways to stimulate domestic consumption and bolster the property market, whether these proposed reforms will yield the desired results remains to be seen. The debate surrounding "hukou" reform reflects broader concerns about economic performance and government credibility within China's political landscape.

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