CHINA'S CASTE SYSTEM: GOVERNMENT MOVES SLOWLY TO

C O N F I D E N T I A L BEIJING 007573 SIPDIS SIPDIS C O R R E C T E D C O P Y (SECTION INFORMAITON) E.O. 12958: DECL: 12/21/2032 TAGS: PHUM PGOV SOCI CH SUBJECT: CHINA'S CASTE SYSTEM: GOVERNMENT MOVES SLOWLY TO REDUCE INEQUALITIES OF HOUSEHOLD REGISTRY REF: A. OSC CPP20071120968198 ¶B. BEIJING 2459 ¶C. 06 BEIJING 22842 ¶D. CHENGDU 292 ¶E. GUANGZHOU 1287 ¶F. CHENGDU 129 ¶G. 06 CHENGDU 1265 Classified By: Deputy Political Section Chief Ben Moeling. Reasons 1.4 (b) and (d). Summary -------------- ¶1. (C) China's leaders, several contacts tell us, are increasingly concerned by the social inequalities created by China's household registration system ("hukou"),a legacy of the Mao era that prevents migrants from enjoying many of the social services available to native urban dwellers. China's State Council is reportedly at work on a long-anticipated new law to reform the hukou system, but our contacts predict the government will stick with a slow-and- steady approach to change. There were some modest advances in 2007: China Southern Airlines for the first time allowed rural migrants to apply for flight attendant positions and Beijing has announced the elimination of some discriminatory regulations. At least a dozen provinces have declared that they will eliminate the legal distinction between rural and urban hukou. However, in most cities in China, obtaining city hukou still requires the purchase of an apartment, something far beyond the means of most migrants. Despite these and other obstacles, our contacts are generally optimistic that gradual reform will, over the course of a decade or more, cause hukou to fade in significance. End summary. Consensus on Hukou Reform -------------- ¶2. (C) China's leaders, according to numerous contacts, are increasingly concerned about the bifurcation of urban society into two distinct groups made up of official city residents (i.e. those with official household registration in cities) on the one hand and migrants, many of whom live and work for years in cities but enjoy few of the benefits afforded to natives, on the other. In a November 20 speech, Zhou Yongkang, China's former Minister of Public Security who was recently promoted to the Politburo Standing Committee, urged the Chinese Government to provide better services for migrant workers and do more to protect them from discrimination (ref A). According to numerous media reports, reform of the household registration system, popularly referred to as "hukou" in Mandarin, will likely be on the agenda of the National People's Congress five-year legislative term that will begin next March. Beijing University sociologist Ma Rong (protect) told POLOFF there is a consensus within China's government that the "hukou" system must be reformed, but officials fear sudden relaxations would cause a collapse in urban social services. To address this, central and local authorities are adopting a gradualist approach that will, over the course of a decade or more, decouple social welfare from the household registry system. Social Immobility -------------- ¶3. (C) China adopted the household registry system in ¶1958. Families were granted either a rural (nong) or urban (fei nong) "hukou" booklet, which lists all members of the family and the family's official address. According to Zhang Zhanxin (protect),an expert on the household registry system at the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences (CASS),the system served the Communist Party's desire to maintain a large rural population (to boost agricultural production) and avoid migration to cities (which would have increased employment pressures and resulted in shanty towns). Under the system as it existed into the 1980s, Chinese could only access government services, including food rations, in the areas were they had household registry. Moving, or even travel, without official permission was extremely difficult. The Current System: "Negative Welfare" -------------- ¶4. (C) Today, the hukou system is governed by a complex patchwork of national and local regulations. Chinese citizens are now free to move and work where they please, and the government estimates (conservatively) that 150 million migrant workers now live in China's cities. Hukou, however, continues to have an enormous impact on a person's access to social services, especially subsidized housing and public education. During a recent meeting with PolOff, Qin Hui (protect),an expert on rural issues at Tsinghua University, used the term "negative welfare" to describe China's current system of distributing social services based on hukou. While in most countries welfare helps to decrease income disparity, Qin argued, in China social welfare actually exacerbates inequality because relatively well off city residents receive more benefits than holders of rural hukou. For example, the 12 million holders of Beijing hukou (who have among the highest per capita income in China) are entitled to an array of services such as: --guaranteed minimum unemployment income of RMB 330 (USD 45) per month; --the ability to purchase subsidized apartments; --free public education for their children through 9th grade; --preferential treatment for their children in the university entrance exam (Note: Beijing is allocated a disproportionately high number of entrance slots, allowing Beijing students to get into top schools with lower scores than students from other areas of China.); and, --free flu shots for those over 60. ¶5. (C) The five million additional people who live in Beijing, but who do not have Beijing hukou, are entitled to none of these benefits. Similar disparities between locals and migrants exist in most large cities. (Note: Beijing, in theory, grants migrant children equal access to public schools but in reality migrant parents must pay high "special" fees. Many instead opt to enroll their children in unlicensed private schools for migrants. (Ref C)) While many cities have programs to allow migrant workers to participate in some public benefit programs through their employers (e.g. pensions),migrants often opt out because these plans are not portable, meaning they lose any benefits they accumulate if they decide to return home or move to a new area. Zhang told POLOFF insuring the portability of work-related benefits is an important step towards bridging the social benefits gap between migrants and registered urban residents. The Gradualist Approach -------------- ¶6. (C) One of China's most outspoken proponents of hukou reform is Public Security University Professor Wang Taiyuan. In an August interview with the mass- circulation Xinjing Bao (The Beijing News),Wang predicted it would take China 10 years to eliminate the inequalities associated with the household registry system. Household registry reform, Wang has said, involves gradually de-linking social benefits from a person's hukou booklet. Zhang Zhanxin of CASS, told POLOFF the hukou system will always exist, but eventually it will become merely a registration/census tool and Chinese will someday be able to move their hukou at will. ¶7. (U) According to numerous press reports, the MPS in early 2007 submitted a document to the State Council outlining recommended changes to the hukou system. The State Council will likely incorporate these recommendations into the new Household Registry Law it is reportedly drafting. Details of the recommendations have not been made public but, according to a November 22 report in the Guangzhou- based newspaper Xinkuai Bao (New Express Daily),the recommendations seem to embrace an incremental approach. The paper, citing sources inside the MPS, reported that the recommendations include establishing eliminating restrictions on the ability of urban residents to bring their migrant spouses and elderly parents under their hukou and to grant urban hukou to anyone with a "permanent legal residence" in a city. Some Progress in 2007 -------------- ¶8. (SBU) Even as the government continues to work on the draft Household Registry Law, provincial and local authorities are taking slow, measured steps to reduce the significance of hukou in Chinese society. Some notable examples include: --Lifting arbitrary employment restrictions: In September, China Southern Airlines for the first time allowed applicants with rural household registry to apply for jobs as flight attendants. Previously such jobs were restricted to those with urban hukou. --Ending disparity in wrongful death compensation: A Beijing intermediate court ruled in October that the family of Tao Hongquan, a migrant who lived in Beijing for over a decade before being killed in a 2006 traffic accident, was entitled to compensation based on the standards applied to official Beijing residents. The decision overturned a lower court ruling that Tao should be considered a rural resident for purposes of calculating damages. Tao's family was thus entitled to RMB 170,000 (USD 23,000) in compensation rather than just RMB 70,000 (USD 9,400). --Unifying urban and rural hukou documents: In October, Yunnan Province became the latest to announce it would eliminate the legal distinction between rural and urban hukou and give all residents a uniform provincial hukou document (ref D). A dozen other provinces previously announced similar changes (ref B). Such policies do not actually make it easier for farmers to change their hukou to a city address (which generally requires the purchase of a home),but Zhang told POLOFF the elimination of "rural hukou" has symbolic importance and should be viewed as the beginning, not the end, of reform efforts. "From Second Class to Third" -------------- ¶9. (C) While more and more provinces, most notably Zhejiang, are allowing some migrants to move permanently to cities and enjoy the same benefits as native residents, such programs typically have education, skills and/or income and home purchase requirements. Qin Hui noted these schemes primarily benefit city-to-city migrants as only a small fraction of rural migrants can afford to purchase property in cities. Wang Taiyuan, in an interview in the December 10 edition of Zhongguo Xinwen Zhoukan (China Newsweek),similarly criticized these programs as creating a new divide in the migrant population, between those with enough education and money to take advantage of these local reforms and a new "third class" of migrants who still have no hope of gaining equal treatment. ¶10. (U) Even modest, localized hukou reforms often run into problems. In perhaps the best known example, the city of Zhengzhou in Henan Province, lifted hukou restrictions in 2001 only to reinstate them in 2004 after newly-arrived migrant children overwhelmed the school system. In September this year, the government of Ningbo, Zhejiang Province, stopped its program of giving local hukou to homebuyers in an effort to slow its overheating real estate market. Hukou Goes to the Best and Brightest (and Richest) -------------- -------------- ¶11. (SBU) Even as provincial cities relax hukou restrictions, Beijing and Shanghai, most of our contacts said, will continue to maintain tight controls due to their much higher standard of living. Currently only university graduates, children of Beijing natives, and the very rich have opportunities to obtain Beijing hukou. Beijing-based companies are allocated limited hukou slots every year (with preference given to state-owned and high-tech enterprises) which allow them to attract top talent from across China. Returning graduates of universities overseas also have preferential access to Beijing hukou. Finally, owners of businesses that create 100 jobs and at least RMB 800,000 (USD 108,000) per year in tax revenue can apply for local hukou. (These investment/tax requirements are lower for those seeking to settle in one of Beijing's satellite cities.) "...I Just Don't Want Them in My Kid's School" -------------- - ¶12. (C) Education, our contacts note, remains the primary reason why Beijing and other wealthy cities set the bar for local hukou so high. Zhengzhou stands as a cautionary tale of the dangers sudden reform can pose to local schools. Victor Yuan (protect), President of the public polling company Horizon, told PolOff that in 2004 his company surveyed parents at three Beijing public schools about their attitudes toward migrants. The polls suggested Beijing parents will begin to pull their children out of a school if migrant children exceed 15 percent of the student body. Wang Dequan (protect),a native Beijinger who works for the Beijing Municipal Bureau of Press and Publication, told POLOFF that in the 1990s he placed his son in a private high school for this very reason. Wang, reflecting common attitudes among native Beijingers, told POLOFF that migrant children, who come to Beijing having received little education in their home villages, inevitably drag down the academic standards of any school they are allowed to attend. Qin Hui, however, said lingering prejudice against peasants, rather than education resources, is the real reason Beijing authorities are unwilling to relax hukou requirements. Qin argued that, given the low birth rates among Beijing natives due to the one-child policy, Beijing schools have more space for migrants than popularly believed. Comment -------------- ¶13. (C) All of our contacts condemn the hukou system as one of the main contributors to inequality in China yet few, with the exception of Qin Hui, endorse radical reform. Rather, our interlocutors generally expressed optimism that the modest reforms underway in the provinces will continue to expand and gradually cause hukou to fade in significance. A key indicator of the Communist Party's determination to reform the hukou system will be whether the government can pass the new Household Registration Law during the five- year term of the next National People's Congress. Such a law has been in discussion since the 1980s. Regardless of the legislation's progress, eliminating deep-rooted hukou-related inequalities will take at least a decade, probably longer. In the meantime, the permanent underclass that resides in cities, but is legally barred from receiving most benefits and services, will continue to exist as a potential source of social instability. RANDT