BEIJING -- China has told local governments to reform the controversial residency permit, or hukou, system proactively but cautiously as part of efforts to increase rural migration to towns and small cities, a top level government notice showed.
A circular from the State Council, China's cabinet, said the reforms must not force rural residents to give up claims to land by simply reclassifying their status to urban -- a land-grab tactic that is a typical complaint heard from farmers and a key source of social unrest across the country.
"Some places just ignored state policies to harm people's basic interests, and if these problems can't be solved properly, it would seriously affect the legal process of urbanisation, undermine economic development, and hurt social harmony," the State Council said in a notice on its website.
The notice added that local authorities must review their policies to make the rules more friendly towards migrants.
The State Council reiterated that it would encourage rural residents to settle in towns and small cities, not big cities that are already too crowded.
The circular is dated Feb. 26, 2011. The government did not explain the near one-year delay of publishing it on its Internet portal (www.gov.cn). It appeared on Thursday, Feb. 23.
China's hukou system classifies 1.35 billion people into two groups, farmers and non-farmers.
Farmers have little of the social security coverage given to town-dwelling non-farmers, but they are entitled to "collectively-owned" land to farm.
The rigid regime means an officially rural resident has no access to education, health and other welfare services in the towns where they live and work, even though they may have been there for years. China has 158 million migrant workers.
City dwellers topped 50 percent of the population for the first time last year and signals that reform is becoming more urgent, especially as Beijing wants to unlock the potential of urbanisation and rebalance the economy towards domestic demand.
Academics and economists say hukou is a major impediment.
Hukou is cited as a convenient way for China's city managers to prevent the creation of slums that plague other developing countries.
But it can also be used to drive away people from the provinces when the central government wants flagship events to go without a hitch, such as the 2008 Beijing Summer Olympics when campaigners say tens of thousands of people were removed from the city.
And it can be used to enforce economic policies, such as in the present real estate calming measures which stipulate that in Beijing a home buyer can only own one apartment if he does not hold the Beijing hukou, instead of two permitted otherwise.
Hukou dates back 2,000 years and was reinvigorated under Mao Zedong's rule. The Chinese government says the system is necessary to manage its people.
However, as local governments are keen to grow a housing market and labour shortages are emerging, hukou has become less potent in many smaller towns and cities. A local permanent residency can be secured by buying a home, making an investment, or signing up to a long-term employment contract.
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