Skip to main content
Part of complete coverage on

Opinion: Why China needs to turn its workers into consumers

By James McGregor, Greater China chairman APCO Worldwide
updated 10:25 PM EST, Tue January 21, 2014
STORY HIGHLIGHTS
  • China's economic future depends on empowering migrant workers
  • The current investment-based economic model is running out of gas
  • Making migrants legal urban residents will create a new wave of consumers
  • However, sustainable urban development will be huge challenge

Editor's note: James McGregor is Greater China chairman for APCO Worldwide in China, a global PR and communications consultancy. He is the author of "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism," published in October 2012, and "One Billion Customers: Lessons from the Front Lines of Doing Business in China," published in 2005. He appears as a guest on the latest episode of On China with Kristie Lu Stout. The views expressed are solely his own.

(CNN) -- China's plan to guarantee its economic future depends on empowering and enriching the most downtrodden of its citizens: migrant workers.

These are the approximately 250 million people from the countryside that now live and work in Chinese cities but they cannot access government healthcare, education and other social services once they leave their home villages and towns.

These migrants are handcuffed by the Soviet-inspired "hukou" system of housing registration.

Introduced in the 1950s, it aimed to prevent farmers and peasants from flooding into the cities and during the Mao years such a move was nearly impossible.

James McGregor
James McGregor

Since reforms began in 1980, however, the government has allowed farmers to migrate to the cities to fill jobs at factories, construction sites, restaurants, hotels, shopping centers and the like.

This population of migrant workers is now estimated to consititute as much as 25% of the residents of major Chinese cities today.

Just over 50% of China's 1.3 billion people now live in cities, as compared to some 20% when reforms began in 1980. The United States hit the 50% mark in 1920. Britain became majority urban in 1850.

MORE: China's urban explosion: 'Sim City' on steroids

China's future growth depends on "hukou" reform to make these people legal urban residents and turn them into the next wave of consumers

The reason is that the current economic model is running out of gas.

The model -- based on state enterprises and driven by loose credit and government spending on infrastructure -- must be transformed into an economy driven by consumers.

Why China must urbanize
Household registration reform in China

When the new Communist Party leadership of President Xi Jinping and Premier Li Keqiang came into office a year ago, consumption was only about 35% of GDP, as compared to 54% in India and nearly 75% in the U.S.

The existing urban population -- with legal housing registration -- mostly have done well in the past couple of decades.

Many have already splurged on apartments, cars and large electronics.

They alone can't drive the level of consumption the Chinese economy will require going forward.

The "China 2030" report published by the World Bank and the Development Research Center, a Chinese think tank that advises the leadership, said that if China can provide legal urban housing registration for 10 million migrant workers a year and transform them into the next wave of consumers, then China can enjoy 6% annual growth for the next couple of decades.

MORE: China's migrants seek a life back home

This World Bank report also estimates that China will have from 13 million to 15 million people per year moving from the countryside to cities for the next couple of decades.

A huge challenge for China's leadership is developing a sustainable urban development model.

For the past 20 years, city planning and urbanization has been driven by real estate sales that funded city governments and enriched well-connected property developers.

The government owns all the land in China and only property usage rights change hands.

This month\'s episode of \
This month's episode of "On China" tackles urbanization.

So city planners have focused on turning rural land into urban land so it could be developed.

All too often this was done by constructing ring roads around cities to delineate ever larger areas for development.

A serious consequence of this model is heavy pollution, tangled traffic and urban designs that favor massive developments instead of housing, workplaces, education and recreation facilities that are organized around how people live and work and socialize.

Demographers and planners in China are now debating the best models for future development.

These include encircling China's existing metropolises with satellite cities in a hub-and-spoke pattern that would allow migrants to live an hour away with legal housing registration.

The government's current five-year plan designates 20 such centers of urbanization.

This includes the five cities that have the same status as China's provinces -- Beijing, Shanghai, Tianjin, Guangzhou and Chongqing -- as well as such "regional centers" as Nanjing, Wuhan, Chengdu, Xian, Shenyang and Shenzhen.

In the Pearl River Delta inland from Hong Kong, China plans to spend $350 billion to mesh together nine cities with a population of 50 million.

The views expressed in this article are solely those of James McGregor

ADVERTISEMENT
Part of complete coverage on
updated 3:57 AM EST, Thu December 18, 2014
Chinese students show a handmade red ribbon one day ahead of the the World AIDS Day, at a school in Hanshan, east China's Anhui province on November 30, 2009.
Over 200 Chinese villagers in Sichuan province have signed a petition to banish a HIV-positive eight-year-old boy, state media reported.
updated 6:44 AM EST, Mon December 15, 2014
A Chinese couple allegedly threw hot water on a flight attendant and threatened to blow up the plane, forcing the Nanjing-bound plane to turn back to Bangkok.
updated 12:03 AM EST, Mon December 15, 2014
China's 1.3 billion citizens may soon find it much harder to belt out their national anthem at will.
updated 7:21 PM EST, Tue December 9, 2014
Like Beijing today, Los Angeles in the last century went through its own smog crisis. The city's mayor says LA's experience delivers valuable lessons.
updated 12:42 AM EST, Sat December 6, 2014
At the height of his power, Zhou Yongkang controlled China's police, spy agencies and courts. Now, he's under arrest.
updated 3:26 AM EST, Fri December 5, 2014
China says it will end organ transplants from executed prisoners but tradition means that donors are unlikely to make up the shortfall.
updated 1:48 AM EST, Fri December 5, 2014
China's skylines could look a lot more uniform in the years to come, if a statement by a top Beijing official is to believed.
updated 3:55 AM EST, Wed December 3, 2014
Despite an anti-corruption drive, China's position on an international corruption index has deteriorated in the past 12 months.
updated 7:01 AM EST, Wed November 26, 2014
A daring cross-border raid by one of Russian President Vladimir Putin's associates has -- so far -- yet to sour Sino-Russian relations.
updated 7:51 PM EST, Sun November 23, 2014
A 24-hour Taipei bookstore is a hangout for hipsters as well as bookworms.
updated 8:53 PM EST, Mon November 24, 2014
China is building an island in the South China Sea that could accommodate an airstrip, according to IHS Jane's Defence Weekly.
updated 5:57 AM EST, Wed November 19, 2014
North Korean refugees face a daunting journey to reach asylum in South Korea, with gangs of smugglers the only option.
updated 6:19 PM EST, Fri November 21, 2014
China and "probably one or two other" countries have the capacity to shut down the nation's power grid and other critical infrastructure.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT