When China Loosened Restrictions on Migration Its Economy Boomed

The term China’s Great Migration refers to the period between 1978 and 2012 when more than 260 million Chinese people migrated from rural areas to the country’s urban centers. These economic migrants are the focus of “China’s Great Migration” – a new book by Bradley Gardner, who examined the role that mass relocation of people had in China’s economic miracle.

Yermi Brenner: Why did China’s Great Migration happen? What were the circumstances that led to this mass movement of people?

Bradley Gardner: There were a few things that happened. First of all, when the Great Migration started there were a lot of people in the countryside who shouldn’t have been there. Between 1949 and 1978, the Communist government maintained the dual goals of maintaining full urban employment, and eliminating private employment. The only way that they were able to meet these two contradictory goals was by pushing a lot of the population out into the countryside, first through incentives and eventually by force.

This lasted until the end of the Cultural Revolution. When it ended, the 17 million people who had been “sent down to the countryside” over the previous 10 years almost immediately returned to cities looking for jobs. The government, lacking resources to employ them in state-jobs, decided to legalize private employment and reformed rural land rights to make it easier for people to do side work. As a result, the barriers to employment in urban centers were lowered and industrial employment bounced back.

Migration went from being more or less impossible under Mao, to more or less cost free. A young person could take a bus to the city, and go straight to a recruiter, who would place him with a factory willing to pay them triple what he or she made at home, including free housing in a dormitory. After a few years of job hopping the migrant would be fully established with a good job, a better knowledge of the economy, and often a permanent residency.

YB: How did China’s Great Migration affect the Chinese economy?

BG: Over the long-term the effects are pretty clear. The move of people from agriculture to industry contributed about 20 per cent of China’s economic growth between 1990-2010, adding a bit over US$1 trillion to GDP. The rate of absolute poverty in the country plummeted, as young poor people, were able to fairly easily enter the industrial economy. In short, China got richer.

The system that China had in place before the Great Migration was fundamentally unsustainable, but that doesn’t change the fact that the Great Migration has substantially disrupted how the government interacts with its citizens, and, not always in a good way. The Chinese government adapted it’s fiscal system to the Great Migration mostly by restricting access to social services, and expropriating rural land for sale to urban developers.

YB: To improve contemporary immigration policies, what lessons can be learned for China’s Great Migration?

BG: Build more. Denser urban building means more access to the urban economy for more people, and less front-side risk to migrants. The other big lesson, and China’s big failing, is to pay special attention to the sustainability of social services. Dealing with migration requires a strong consensus around why the government provides certain services and how robust the provision of these services are to population growth. For example, the decline in health insurance coverage during China’s Great Migration is credited as being one of the major drivers of the 2003 SARS epidemic. That’s a risk faced by any country that can’t adapt its health sector to a growing and more mobile population.

YB: Why did China’s Great Migration end? And how is this trend affecting – or will affect – the Chinese economy?

BG: China’s Great Migration hasn’t ended yet, but there is a limited number of rural dwellers in China, and eventually they’re going stop wanting to move to the city. The general consensus is that China’s Great Migration will end in the mid-2020s, but China’s growth rate has already slowed down significantly as urban construction has dropped off. The big consequence of this change will be that China’s economy will be a lot more normal. That may sound boring, but it’s a big deal. An economy growing 10 per cent a year can take on a lot more debt than an economy growing 3% a year. An economy growing 10 per cent a year can afford to subsidize loss making state-owned enterprises, or restrict access to financial services.

YB: Are you currently – or in the near future – doing any research about migration? If yes, can you introduce what you are interested in researching?

BG: I’m currently working on a novel looking at the economic and social consequences of the Chinese exclusion act – the law that, from 1882-1943, put substantial restrictions on Chinese coming to the U.S.. It’s set in 1918, during the last major Chinese gang war to break out in San Francisco, and features a beautiful Russian refugee, morally ambiguous human smugglers, the Spanish flu and a lot of research into the structure of Chinese-American business networks at the time. I’m having fun with it.

Bradley Gardner is a Research Fellow at the Independent Institute, and a Foreign Service Officer with the U.S. Department of State. The positions expressed are his personal opinions, and not necessarily those of the U.S. Government.

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