Growing at approximately nine percent per annum over the last decade, China's gross national product is projected to overtake Japan's by the year 2000, and the United States' by 2010. With forecasts as sunny as this following on the heels of nearly 40 years of negligible growth, it is no wonder that China's economy has been popularly dubbed a "miracle." The dramatic turnaround of the Chinese economy owes far more to post-Mao era economic reforms, however, than to any supernatural force.

Ushered in by Deng Xiaoping in 1978, these economic reforms set out to revitalize China's economy by stimulating both agricultural and industrial production. To increase labor productivity, reforms re-introduced the incentive of material rewards for hard work. In agriculture, the household responsibility system, which allows individual households to retain all profits from production in excess of fixed state quotas, replaced the collective and the work-points system. In industry, reforms loosened the control of Communist Party secretaries over state enterprises, turning greater decision-making power over to the factory managers and encouraging growth of non-state sector enterprises. After over a decade and a half, China's rising standard of living and growing trade surplus with the United States can attest to the efficacy of reform.

The free-market mechanisms responsible for China's economic boom have also forced the government to relinquish much power over the economy. Perhaps the most blatant evidence of this loss of control is the dramatic increase in the freedom of mobility; right now, masses of migrant workers are now crowding into urban centers in search of more lucrative job opportunities. While migrant workers have always existed in China, they have never before, except during periods of war and natural disaster, existed on such a large scale. Conservative estimates currently put the number of the liu min, or "floating populations" at 120 million. This is, one should be reminded, approximately one-tenth of China's total population.

Indeed, during the Maoist era, mobility was virtually nonexistent. According to the hu kou or household registration system, each person was assigned either rural or urban status with little hope of changing this registration. Basic necessities such as grain and cloth were available only in strictly rationed amounts through the work units and collectives to which individuals were officially assigned. Therefore, a person who was moving from the country to the city without offical approval--and such approvals were far and few in between--could only obtain the materials for his subsistence with the greatest difficulty. This effectively ruled out changes in residence.

Economic reforms did not do away with the household registration system, which even today remains intact in law, but by developing a private sector that can provide goods and services outside official channels, they have undermined the system's power to restrict mobility. Today, the government has little direct control over the movements of vast segments of the Chinese population. A peasant traveling to the city no longer needs to bring along a supply of grain to last through his stay: he can always buy it on the open markets where farmers, enabled by the household responsibility system, sell surplus grain and cash crops. Economic reforms, thus, opened the door for millions of peasants anxious to visit or relocate to the cities.

New Labor Mobility

Although the enhancement of mobility was a consequence of the economic reforms and not the explicit aim of government policies, it is clear that labor mobility has become a positive factor in China's overall economic development. Stepped-up industrial production, an expanding number of non-state enterprises, and modernization of urban infrastructure all require massive amounts of cheap labor, which migrant workers from rural areas are more than happy to supply. According to the official Xinhua News Agency, the rural migrants, by performing tasks that local residents are unwilling to do, "just manage to fill the gap in the local work force" in Shanghai, a city dominated, on the one hand by a highly trained technical work force, and on the other by a severe shortage of manual laborers. The economies of many cities have thus become dependent on the presence of migrants. Construction in Beijing, one of the city's most vibrant industries, is dominated by more than 800,000 non-residents. Migrants also comprise 80 percent of Beijing's housekeepers, and operate most of the restaurants and vegetable markets.

The migrant workers are happy to work for low wages, because wages low by urban standards are very high by rural standards. Indeed, the gap between rural and urban wages is still widening. In 1993, the average urban income was 2,337 yuan per capita, more than double the rural per capita income of 921 yuan. Furthermore, wages earned in the city serve only to supplement the income of many migrants, who stay on the land except during downtimes of the agricultural season. In fact, the migrant laborers serve to strengthen the rural economy. They pump money into their hometowns through remittances, and upon return, often bring back with them technical skills and modern ideas. According to Professor Fan Gang, a leading economist at the Chinese Academcy of Social Sciences, the migration phenomenon serves to transfer wealth from rich to poor areas of the country.

The increase in mobility has also yielded some unintended positive effects for the government. A 1994 survey conducted by the family planning department of Guangzhou Province found that population movement reduces overall birth rates. No longer tied down to the land and dependent on agriculutral production, rural couples do not feel the need to produce their own labor force. The survey found that the general birth rate of the floating population is 34.5 per thousand lower than in the non-floating population, and that the peak child-bearing age is 28, two years later than in the non-floating population. Jiang Xiaodong, an official from the Family Planning Commission, said that migrants must spend most of their time struggling to survive competition, and this compels them to delay marriage and control birth. In addition, migrant workers are exposed to urban, and therefore often more modern, ideas on marriage and family, which undermine traditional rural ideals of "more children, more fortune."

Problems with the Migration

Thus far, it appears that migrant workers are providing a host of economic benefits; why then the uneasiness about their growing ranks in government circles and even among the urban citizenry? Indeed, many arguments exist that demonstrate that the floating population creates serious economic, social, and political problems that threaten to slow down China's economic growth.

First, precisely because mobility allows a wealth transfer from cities to the country, there is growing tension between permanent and temporary urban residents. Rightly or wrongly, migrant workers are blamed by long-time city dwellers for the increasing urban unemployment rate and the intensifying competition for jobs. The low wages and profits that migrants are willing to accept are seen by urbanites as unfair and invidious competition. The Los Angeles Times reported the indignation felt by one Beijing clothing shop owner who faced migrant vendors across the street, "I buy my jeans for 40 yuan and sell them for 90. That is the Beijing way to do business. But those people from Anhui [a pre-dominatly rural province in Eastern China]--they will buy the same thing for 40 yuan and sell it for 45."

However, tension does not grow only from greater competition. The floating populations place great strains on the urban infrastructure. Cities are simply ill-equipped to cope with the needs of the millions of temporary residents. At any point in time, Beijing has a floating population of 3.4 million in addition to a permanent population of 10.5 million. In other words, the city is forced to stretch its capacity by nearly a third in order to serve all of its population. The migrants literally clog up the roads and transport systems. Authorities say that 70 percent of the riders of the Beijing subways are rural job seekers.

Though perhaps the most visible, traffic congestion is by no means the most serious of the problems the floating populations have created. Migrant workers also exacerbate water shortages. Three hundred out of 500 Chinese cities run out of water every year, with 100 suffering severe shortages. At the end of 1993, China's daily urban water supply was 192 million cubic meters for 240 million permanent urban residents. That is less than 0.8 cubic meter per capita. This paltry amount has to be shared with half as many temporary residents in addition.

The housing shortage is also severe. Usually poor and often in the midst of seeking employment, migrant workers often reside in shantytowns on the urban fringe. Scarce supplies of space, electricity, and water in these shantytowns contribute to poor hygiene and sanitation, which in turn increase the likelihood of outbreaks of infectious diseases. The probability of an epidemic, in face of an already overtaxed medical system, is especially dangerous given the growing incidence of Acquired Immune Deficiency Syndrome (AIDS) in China. The 1,361 cases of AIDS in mainland Chinese are concentrated near border areas, coasts, and major cities--areas that attract the greatest numbers of migrant workers. Often single or leaving family behind, migrants form a high risk group since they fall easy prey to prostitution as either practitioners or clients. Moreover, as migrants return home, they may spread diseases from cities to the country. The constant movement of people, however, means that the government has little power in the way of quarantine.

There is also the widespread perception that floaters have increased the crime rates in major cities. Officials in Beijing have blamed non-residents for up to 80 percent of crimes, and official figures suggest that 44.5 percent of crimes that occured in Beijing in the first half of 1994 involved floaters. As outsiders, migrant workers are seen as having no real connection to the community and therefore little concern for its well-being. Such a perception is understandable on a prima facie level: in Beijing, 16 percent of the temporary residents have resided for more than a year, and only 7 percent have stayed for more than three. In a society where the pressures of the community are a very important component in the regulation of behavior, migrant workers do not have the personal bonds that make them feel the weight of community indignation. Conversely, few of the permanent residents would care much if the migrants should themselves become victims of crime. Because migrants usually move to the cities without proper registration, law enforcement is at a loss to monitor their activities. The removal of mobility constraints has created a new society that thrives outside of the formal legal framework and a new culture that takes a much more tolerant attitude toward the grey areas between legality and illegality. A renewed inculcation of respect for the law, so eagerly anticipated by countries such as the United States, will not be easy.

Effects on Rural Areas

As peasants crowd into cities, rural areas suffer from an exodus of their strongest and brightest. Chinese officials are worried that the stream of migrants to the cities may reduce the country's capacity to produce enough food to feed itself. Between 1989 and 1993, when the whole economy enjoyed growth rates in the double digits, the average growth rate in the agricultural sector was only 1.88 percent. Moreover, the outflow of labor is not being compensated for by an inflow of capital. In 1993, the state invested 10.5 billion yuan in capital expenditure for agriculture; yet, after allowing for the price factor, the growth in capital expenditure was actually negative. Private investment presented an even drearier picture: per capita private investment in agriculture fell by 4.3 percent. In the same year, total sales of the agricultural inputs, such as machinery and feeds, decreased by 7.8 percent in real terms. In 100 counties surveyed by the Ministry of Agriculture, local government expenditure on agricultural science and technology was cut by an average of one third.

Minister of Agriculture Liu Jiang attributes the drop in agricultural production input to greater investment in secondary and tertiary industries: "If we examine the situation by area, we will find that the more developed the area, the smaller the growth rate in agricultural investment made by peasants. It is the objective reflection of the law of value under the market economy that agricultural input, driven by comparative advantage, flows toward the industries in which high returns on investment can be achieved. However, if this tendency continues, agricultural production will inevitably deviate from the macroeconomic goals of the state, eventually hampering the development of the national economy."

The neglect of the countryside caused by labor and capital outflux poses a grave political concern as well. Agricultural reform has always been among the top priorities of the Chinese government, whose revolutionary victory in 1949 relied on the support of the peasantry. China is still primarily an agricultural country, with 80 percent of the population residing in the countryside. Deng Xiaoping repeatedly recognized that "the whole political situation will not be stable unless the rural areas are stable," and that "China's economic development depends primarily on whether its rural community can develop or not." But the development of the countryside lags considerably behind that of urban areas. Between 1992 and 1993, the value added in agriculture was only one-fifth of that in industry. Migration under such circumstances is almost inevitable.

Perhaps the most disturbing phenomenon associated with the floating population is the neglect of the education of migrant children. Unable to qualify for education because of their illegal status, or kept back because of the disturbances in relocation, the offspring of migrant laborers frequently drop out of school, joining ranks with juvenile delinquents or menial laborers. Dorothy Solinger at the University of California at Irvine estimated that 500,000 of the approximately 10 million migrants in Guangdong Province are child laborers, with many working in sweatshops. The high drop-out rate is particularly worrisome for the government, which sees increased literacy and skill levels as essential to its future competitiveness. The government fears that a neglect of education will doom the country forever to low-skilled, labor-intensive industries.

Government Responses

The floating populations have caused a wave of complaints and resentment, but the government does not need local complaints as an impetus to take notice of the migrants. It is very much aware that the instability caused by their presence could worsen in the future, particularly under less prosperous economic conditions. The flux of population under the political instability of the post-Deng era could spell doom for the Communist Party. The private praise given by many Chinese leaders, including reportedly President Jiang Zemin, to the officially banned book, Viewing China Through a Third Eye, is a key indicator of this wariness. The book predicts catastrophe if peasants continue to pour into the cities: "Open the Chinese history books and we will be reminded of an obvious fact; every dynasty, without exception, was destroyed by roving masses. The roving masses are peasants who have lost their land or who are not satisfied staying on the land."

The book also recommends harsh measures to control these roving masses: "To develop the economy, maintaining order is most important. To maintain order, autocracy is the appropriate way." But the government is reluctant to revert to autocratic measures, because restricting freedom will only reduce the ill effects of floating populations at the expense of the much larger benefit of economic reform. Indeed, while economic freedom has increased individual mobility, mobility has also facilitated economic progress. Richard Baum, a political science professor at the University of California at Los Angeles, sees the mobile population as "a shock absorber" that can flow from one sector to another "to cushion the transformation of the Chinese economy."

Hence, it is understandable why the government has chosen, at least for now, a much more lenient policy. Instead of trying to force migrants back to their rural communities, the government has sought to redirect the population flows, and to develop services that address their needs. Trying to restore sight to this dangerous mang liu, or "blind flow," of migrant workers, the government has tried to divert labor away from cities creaking under the weight of an excess population, toward cities that are still looking for extra labor. Aside from the destinations of the migrant workers, the government has also tried to regulate the timing of the flow. Because many of the migrant workers only take on urban work between planting and harvesting, the flow is especially heavy during the winter. Accordingly, the government has banned hiring migrant labor in major urban areas for one month during the traditional employment season following the Chinese New Year--usually in late January or early February.

The government has also begun a propaganda campaign to discourage migration and encourage the return to rural villages. Through the official media, the government has run numerous stories describing how rural incomes have risen, and how farmers now live better and spend more than ever. One article reported that 2,000 business people in Zhejiang province had given up their city jobs to return to the land, quoting one of the group as saying, "No matter how much money we make, we cannot forget the land on which our ancestors have toiled for generations."

The persuasive rather than coercive nature of government policy reflects, in part, a realization of its powerlessness in solving or even assessing the problem. Old regulations requiring visitors' registration and temporary residence permits are openly flouted and have become largely useless. In 1994, when the Beijing municipal government set out to find out exactly how many temporary residents were in the city, it took the step to assure the migrants that the census data would not be used against them in evictions or prosecutions. Regulations put into effect by the Labor Ministry in 1994, establishing an official channel for hiring migrant workers who have obtained temporary work permits, have been similarly accompanied by reassurances that no punitive measures will be taken against those who identify themselves as migrants. In this way, the government hopes that it will at least acquire sufficiently accurate information for planning policies and developmental plans. In fact, not only is the Chinese government not cracking down on the migrant workers, it is trying to protect them from urban hostility. Worried that the census might degenerate into a witch hunt, the government media has attempted to represent migrants in a positive light.

Some limited and tangible steps have also been taken. To address the rising crime rate and the difficulties in tracking down criminals in this new age of mobility, a new national criminal intelligence computer network was established at the end of 1994. Meanwhile, the Ministry of Public Security has been trying to establish a network of criminal Intelligence centers throughout the country to improve communication between the provincial and municipal centers. The central databank will make details on wanted criminals accessible to 11 areas, includIng the migration magnets, Beijing, Tianjin, Shanghai, and Suzhou.

Another area in which the government has already taken substantial initiative is education. In November, 1994, Liu Bin, Deputy Minister of the State Education Commission, announced that compulsory education for children in the floating population will be strengthened. Migrant children will no longer be forced to absorb all the scholastic material covered in each grade; they will have more option of transferrIng to vocational training programs. City governments such as Shanghai's have even set up schools especially for the education of adult rural migrant workers, where they can take junior and senior middle school courses.

The need to educate the laborers is urgent because increasingly, the available jobs are ones that require skill, and because urban unemployment will only fuel the problems of vagrancy and crime. The government has, for this reason, established 2,500 vocational training centers, serving over 1.1 million people. With unemployment projected to reach 268 million by the year 2000, the government has striven to free up jobs by encouraging earlier retirement and to create jobs by coming up with labor-intensive projects. The government is also trying to play the role of an employment agency, setting up hiring centers across the country. According to The Straits Times, there are over 15,000 employment agencies in China, which register job-hunters, survey company needs, and gather information on the labor market. Eight million people each year have found jobs through these agencies, yielding a success rate of 70 percent.

Walking a Thin Line

Although the absolute numbers appear impressive, they are insignificant compared to the estimated 120 million-strong floating population. The government has yet to begin to address the crux of the migration problem: how to create employment opportunities in an economy in transition to a more market-oriented system. Furthermore, the government must do that without causing large social and political dislocations. The task is a difficult and ironic one; in order to push ahead with market reforms, it must further loosen its control over economic decisions and economic agents; yet by so doing, it undermines its own ability to provide quick and decisive solutions to socioeconomic problems. In the minds of Communist leaders echoes the lesson learned from the revolution--their triumph over Chiang Kai Shek's Kuomintang was based on the latter's Inability to manage a stable and prosperous economy. Now, the government must feel that the hold it has enjoyed over the country is also slowly slipping away. Moreover, the floating population largely consists of the peasants who have been the very foundation of the Maoist revolution. Allaying their discontent in an age of socialist market economy may be the biggest challenge facing the Communist Party yet.

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By MERRY JEAN CHAN

Merry Jean Chan is a Staff Writer for the Harvard International Review.