July 19 (Bloomberg) -- China’s growth and the future of the Communist Party rest on giving farmers their land and allowing equal rights for migrants in cities, according to the state researcher who wrote a reform road-map.
“Land and hukou reform is the cornerstone for future economic growth and political-system reform,” said Yuan Xucheng, of the China Society of Economic Reform, who was the lead author of a report submitted to top officials. Yuan spoke in an interview in Singapore last week. Hukou is the term for a household registration system which limits migrants’ rights.
Changing land rules and the hukou system will decide whether China’s growth is sustained and the Communist Party retains power, said Yuan, 62. His report last year suggested a plan for reforms for the next decade under President Xi Jinping and Premier Li Keqiang, who were installed as the government’s leaders in March.
“Hukou reform is not simply about registration -- it’s about giving people civil and political rights, including access to education, welfare coverage and even rights to vote,” Yuan said. The term “hukou” is used both for the system and the document entitling a resident to services and benefits.
The new leadership is wrestling with sustaining growth and boosting incomes as China’s population ages and the dividends fade from past reforms, including opening up the economy starting in 1978 and the nation’s accession to the World Trade Organization in 2001. A cash crunch jolted banks last month and exports fell by the most since the global financial crisis.
“Migrant workers leave their big houses in the rural areas unoccupied, with only mice living there, while five or six of them have to squeeze into one small room in the cities,” Yuan said. “You have to allow farmers to trade land so that they can have wealth to settle down in cities.”
Under existing regulations, farmers own land collectively and can’t sell to developers directly, leading to grabs by local governments. While China had 163 million migrant workers in urban jobs as of the end of last year, only 14.3 percent had pensions and 16.9 percent had health insurance in the cities and towns where they were working, a statistics bureau annual survey said.
“Some people have spent almost 20 years in Beijing, working there and having kids there, but they can’t have the local hukou,” Yuan said. “It’s unfair for them.”
China’s government could release a blueprint for reform at a key party meeting in October or November, Yuan said. He described the new leaders as “tougher” than predecessors, and said they may show their teeth by speeding changes. The researcher advocated establishing a State Reform Commission as part of overcoming vested interests opposed to change.
“The central government has a greater determination than local governments,” he said. “The general masses are looking forward to changes as well -- with the power from both above and from the bottom, the reform process is expected to accelerate.”
Asked about the likely pace of the nation’s economic expansion, Yuan said the days of at least 10 percent growth are over, partly due to demographic change and rising environmental awareness. A 7 percent pace could be acceptable, while 6 percent would be too low, the researcher said.
In the second quarter of this year, the pace was 7.5 percent, while Finance Minister Lou Jiwei said July 11 in Washington that growth as low as 6.5 percent may be tolerable in the future.
“It seems that the government is quite confident that its reforms to be unleashed in October or November will greatly boost growth -- that’s my guess,” Yuan said.
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