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Industrial Transformation and Population Migration in China
by WANG SHENG JIN,
Director, Jilin University, Population Research Institute/
Visiting Professor, Department of Technology, Tottori University
In this paper, the population migration among regions means both the migration between urban and rural areas, and the migration among provinces. At the present developmental stage of China, the labor force is mainly migrating from the agricultural sector to non-agricultural sectors. China's present economy has a typical "dual economic structure," thus it is necessary to understand that the migration of the labor force among various industrial sectors is very closely related with population migration between urban and rural areas. This paper describes the migration between urban and rural areas and the migration of the labor force among various industrial sectors, then touches upon the development of tertiary industries. It will finally discuss the migration among provinces as well as the economic development in various regions.
I.Migration of the labor force between urban and rural areas, and the shift of the agricultural labor force into non-agricultural industries
Like other developing countries, it should also be pointed out that in China, the migration between urban and rural areas is inseparably related to the changes in socioeconomic conditions. To understand the states of urbanization as well as the shift of the agricultural labor force to non-agricultural sectors, this paper first looks at the history of urbanization in China.
1. Migration of the labor force between urban and rural areas
The percentage of urban population increased from10.64% to 19.39% during the period from 1949, when the People's Republic of China was founded, to 1980 - the year just after the start of reforms in the country's economic system. However, an increase 8.75 percent arose in the 1950s, especially in the late 1950s (see Table 1). The population living in urban areas in China increased at an average rate of 3.3% per year from 1950 to 1980, while non-agricultural population in urban areas had a yearly increase of 2.6%. The increase rate of the urban population was far below the average population increase of 4.3% of other developing countries during the same period. According to an estimate by Victor Sit in 1985, the migration between urban and rural areas contributed to only 20% of the total increase of the population in urban areas between 1949 and 1981. During this period, migration of the labor force among industrial sectors was not remarkable.As of 1980, China's rural population accounted for more than 83% of the country's total population. It should be noted that a great difference existed in the amount of income and consumption between urban and rural areas due to the low growth rate of urban population and also the low proportion of the urban population in the total population, and that this difference emerged although there was a strong "push factor" in rural areas and a "pull factor" in urban areas.
Since the founding of its nation, as a top priority, China has realized the progress of its industries, especially heavy industries, through the system of agriculture paying the cost to help develop the industrial sectors. This method was different from that of the U.S.S.R. The U.S.S.R government levied heavy agricultural taxes, while the Chinese government transferred the surplus of the agricultural sector to the industrial sector, adopting the "Schere" (scissors) policy to raise the prices of industrial products and to lower the prices of agricultural products. For several years just after the implementation of this policy, the expanding income differential between urban and rural areas invited a great migration of farming population into urban areas, thus bringing about the sharpest rise of the proportion of urban population at that time in China. The great migration of the farming population into urban areas influenced agricultural production to a great extent. In addition, because of the setback from the "Great Leap Forward" in 1958, the Chinese government adopted a policy to strictly limit the migration to urban areas from rural areas as well as the shift of the agricultural population into the non-agricultural population. This policy lasted until the beginning period of the reform of the economic system in 1978, which led to an accumulation of a large number of the surplus labor force in rural areas.
Therefore, to study the migration of the labor force between urban and rural areas, and the shift of the labor force, both of which began in 1984, it is necessary to divide the period into two stages: before and after the 1984 urban economic reforms.
Table 1: Changes in the percentage of urban population in China (1949-1990)
2.Economic reform in the agricultural industry, and shift of the labor force
The agricultural industry in China was greatly changed by the implementation of an epoch-making contract system for farming households implemented in 1978. The yearly agricultural production increased by 9.65% on average for three years from 1979 to 1981, far exceeding the average of 3.25% from 1952 to 1978. At the same time, there emerged a problem with a surplus labor force that was latent in the agricultural sector. On the other hand, the promotion of reforms in the agricultural economy generated the factors requiring a shift in the agricultural labor force.
However, before 1984, urban economic reform had not yet begun and the migration of the rural population to urban areas was also strictly limited. At those times, under dual pressure - surplus labor force in rural areas and little opportunity for new employment in urban areas - there appeared new types of rural enterprises that are peculiar to China. Then, the surplus labor force in rural areas was limited to a shift only to the new non-agricultural industries in rural areas . Of the total labor force who changed jobs, only about 10% were able to migrate to urban areas and find new jobs there (see Table 2).
Agricultural development in China since 1978 was mainly due to success in rural reform . Although there was no significant advancement or improvement in agricultural technologies, the reform of the economic system revealed the problems of the surplus labor force that had been invisible in rural areas for a long time. This necessitated the transformation of the industrial structure and the new opening of urban areas to the rural population. The reform of the urban economy initiated in 1984 dealt precisely with this necessity. In October 1984, the State Council made an announcement concerning the farming population s migration to urban areas. Since then, the number of "Zhen" (comparatively big towns) rapidly increased from 2,781 in 1983 to 7,511 in 1985. The population also increased from 62.31 million to 166.33 million(1). According to a survey on migration in Chinese urban areas conducted in 1987, the rate of migration into "Zhen" remarkably rose, exceeding the rate of migration into cities of all sizes(2). However, in many years prior to 1979, the rate of migration into "Zhen" was lower than that into cities. Table 1 shows that the in-migration of surplus labor force into urban areas has been rapidly increasing since 1984.
When the reform of urban economies had begun in 1984, the shift of the agricultural labor force into non-agricultural sectors reached its peak. However, the increase rate gradually decreased after 1986. In 1989 and 1990, about 20% of the labor force that had once migrated into non-agricultural sectors returned to the agricultural sector(3).
Many factors are found in the above phenomenon. Some scholars point out that the present economic structure is a basic factor in bringing about difficulties in the shift of the agricultural labor force since 1986. ("System, Surplus Agricultural Labor, and Urbanization of Chinese Population" by Li-da Fan and Shao-yan Sun in "Study on Population" published by the Population Research Institute of Jilin University, 1992, p. 11.) Superficially, China's economy has a typical dual structure as shown by the "Lewis" model(4). However, China does not have many modern industries but rather traditional ones, and its labor market has not yet been opened. Employment in Chinese urban areas in the past was a typical "resource constraints" type, in contrast to the labor market of a "demand constraints" type that placed restrictions on the effective demands (Kornal,1980)(5). It should also be pointed out that there existed little or no surplus labor in urban areas, excluding non-industrial sectors. But there did exist surplus labor or "jobless employment" to the extent of about 20% in the industrial sectors of the same areas.
On the other hand, China's agricultural industry has mainly produced food to support the nation's increasing population. However, the increase in population required the new cultivation of farmland as well as additional labor in agriculture. This led to the creation of a cyclical system to support the increasing population. However, mechanization and technological advancement in agricultural production and increasing rural population continued until around 1980, resulting in an accumulation of surplus labor in the agricultural sector. The agricultural labor force, already overfilled and still rapidly increasing, has a strong tendency to migrate into urban areas, while the already overflowing urban areas cannot afford to absorb such a labor force. This is a serious contradiction now facing China. It is possible to supply the labor force to industrial sectors that have very low productivity, but is very difficult to utilize such a labor force in modernized manufacturing sectors. Under these circumstances, there emerged numerous types of rural enterprises in local areas in the 1980s, which are specific experiments in China. There are some views that the new-type enterprises played a major role in shifting the agricultural labor force and solving the problems arising from urbanization. However, those holding other views insist that their low productivity and the problems of environmental pollution in their activities should be noticed, and also the important role of large cities in the process of industrialization should not be forgotten. This writer understands that the point is not the scale or structure of cities but the industrial transformation now facing China, as well as the solution of problems concerning the shifting of labor forces. It seems that the Chinese economy has been stepping in this direction through a change in enterprise managerial mechanisms since the second phase of economic reforms of 1992.
Table 2: Shift of surplus labor force in China's rural areas (1979-1988)
(Unit: 10,000 persons, %)
Source:Page 14 of "Study on Issues of Move of Surplus Labor Force in China's Rural Areas," edited by Ruo-hua Shi, published by China Review Publishing Co. in 1990.
3.Shifting of the labor force due to development of tertiary industries
Until 1980, China's political system emphasized the importance of manufacturing functions of secondary industries in urban areas, while regarding tertiary industries as old-fashioned and unproductive. Tertiary industries prospered somewhat in the late 1950s when there was a free migration of population to a considerable extent. After that, it began to stagnate. Even at present, tertiary industries employ a low portion of the labor force (see Table 3). Since 1978, especially after the reform of urban economies in 1984, its has come to be recognized that the lagging of tertiary industries brings about difficulties in people's lives and affects the productive activities of enterprises. Based on a policy of promoting tertiary industries, the percentage of employment by these industries rose from 13.4% in 1982 to 16.7% in 1985. But after that, the speed of development slowed down. China encountered an imbalanced situation between tertiary and secondary industries in which tertiary industries lag greatly behind the current level of economic development, including that of secondary industries. It also reflects the substantialy low level of the people's consumption . An important factor in this contradiction is attributed to the redistribution structure of the national income. In China, the national government holds the major part of the national income, while the portion held by private enterprises and individuals is quite limited ("China: Problems in Long-term Development, and Countermeasures" by World Bank, 1984, page 192). These circumstances allow both enterprises and individuals to consume at a low level so that the national government must entirely support such services as the provision of urban infrastructure, traffic facilities, posts and telecommunications and education. This consumption pattern peculiar to China formed an economic structure under which urban inhabitants relied on the services provided by the government, and the farming population relied only on self-sufficient agriculture. This is a main reason for the lagging tertiary industries in China. Although data for 1990 and after is not available, these situations are being changed by various economic reforms concerning investment, finance and state-owned enterprises that have been made in 1992. This development will be expected to promote the rapid growth of tertiary industries in China.
II.Migration among Provinces and the Development of Local Economies
Until the end of the 1980s, it was very difficult to research the migration among provinces. The necessary data for study of migration among provinces became available only after official publications were made on the results of the 1987 population research based on a one-percent sampling survey, as well as the fourth census in 1990. Therefore, materials for comparison of data on a "time-series" basis are greatly limited. Based on the materials available, a study was made on the outline of migration among provinces before the early 1980s. The results are discussed below.
1. Quantitative estimation of migration
Since the founding of the nation in 1949, the government often changed its policy on domestic migration according to the changes in socioeconomic conditions in the country.
The greatest leap in migration occurred during 1949 to 1960, when the government also adopted a considerably generous policy for migration. In those years, with an aim of changing the country s industrial distribution, the government transferred the factories and enterprises along the coastal areas into inland and remote regions. A large population followed the factories and enterprises. The urban areas absorbed a large number of the farming population. At the same time, for land cultivation, about tens of millions of the farming population in the inland provinces and populous areas of the eastern regions migrated to the northwestern, Inner Mongolian and northwestern regions. Every year since 1954, the number of migrants reached 22 million. In 1960, it reached 33 million, recording the greatest migration since the founding of the nation(6).
Between 1961 and 1976, migration was at a low level because it was strictly limited, especially between rural and urban areas. In those years, government policy forcibly sent a great number of urban workers to rural areas, and a great number of intellectual youths to rural areas, including those in remote regions (Rustication Movement). In addition, natural disasters and economic difficulties induced a continuous migration of the farming population of inland regions into remote regions. Nevertheless, during these years the migration decreased, with the highest number recorded at 19 million in 1961, and the lowest at 10 million to 12 million from 1967 to 1969.
The government relaxed the migration restrictions of farming population in 1978, and the reform of the agricultural economic system and abolishment of the People s Communes were made. These factors resulted in an increase in migration among rural areas. At the same time, a great number of cadres and intellectual youths who had been rusticated to agricultural and remote regions during the period of the "Cultural Great Revolution" (1966-1976) began returning to urban areas, which boosted the migration to as much as 14 million to 23 million from 1977 to 1984(7).
2.Migration among provinces due to the reform of the economic system
Migration among regions was further activated since 1980 due to economic reforms and the subsequent transformation of the industrial structure, especially by the emergence of surplus labor in the agricultural sector. According to the results of a one-percent sampling survey in 1987, the gross migration rate among most provinces greatly increased in the period1986-1987, compared with 1982 to 1987. On the other hand, there was a drop in the rate of migration due to government instructions that included the transfer and relocation of workers, as well as the migration of their family members. However, there was a significant increase in the rate of spontaneous migration, including seasonal worker, trading, learning, and dependence on relatives and friends(8).
According to the 1990 census (see Table 4), out of 11 provinces on the east coast, nine provinces showed positive figures in the net migration rate, with a significantly large net in-migration in the most advanced provinces such as Beijing, Tianjin, Shanghai, Liaoning, Jiangsu and Guangdong. On the other hand, most of the provinces in the central and western regions showed negative figures in the net migration rate. Although some provinces in the central and western provinces showed positive figures in the net migration rate, their absolute values were very low.
The significant characteristic of migration in China in the late 1980s was the pattern of people migrating from the less-advanced central and western regions to the populous, economically advanced eastern regions. This kind of migration strengthened the tendency toward polarization of the population's distribution. The 1990 population census shows that there was a considerable increase in the migration of people older than 15 years of age with a higher educational background. There were only six provinces that had positive figures in the net migrants having higher education level with higer than senior high school: five in eastern regions of Beijing, Tianjin, Shanghai, Guangdong and Shandong; and one in the central region, Shanxi. The total population of the above-mentioned five provinces, which had positive figures in in-migration of highly educated people, accounted for only 15.9% of the nation s total population. This shows that the net migration's distribution of people with a high educational background concentrated in particular regions. The above facts make it clear that during 1985 to 1990, the population migrated from the central and western regions to eastern regions, and that people with a high educational background showed a strong tendency to migrate, especially to the eastern regions that had mostly advanced economic conditions.
Table 3: Changes in the portion of employment
by tertiary industries in China
Source:"Chinese Statistics Yearbook 1991" published by the National Statistics Bureau of the Chinese government.
Table 4: Migration among provinces of China
from July 1, 1985 to June 30, 1990
(Unit: 10,000 persons)
Source:"Materials prepared from the results of a 10 percent tabulation of the 1990 census by the Census Office of the Chinese State Council and the Population Statistic Division of the National Statistics Bureau of the Chinese government, 1991, PP.484-675.
1) These figures are based on data taken from the results of a 10% tabulation of the 1990 census.
2) Research on migration was not conducted in Tibet. However, the figures of immigration to the above-mentioned provinces include the immigration of 7,600 persons from Tibet, Hong Kong, Macao and Taiwan.
3.Correlation between local development and migration among provinces
A great number of people migrated from the less advanced central and western regions to the advanced eastern regions, with a stronger concentration in the populous districts in the eastern regions. This resulted in polarization of the population's distribution in the country. People with a high educational background, who migrated into the eastern regions, became potential factors advantageous to the development of these regions. On the other hand, the out-migration of highly educated people was disadvantageous to the central and western regions because the out-migration meant the loss of human resources necessary for the development of these regions. Economically, this is a polarization of developmental distribution.
Lipshits insisted that the migration among provinces in China during 1985 to 1990 must be defined as the "polarization of population" and "polarization of developmental distribution."(9).
According to an analysis by Kuznets (1964)(10), economic growth is correlated with population redistribution. The change in economic environments is one of the main factors deciding population redistribution. At the same time, population redistribution also affects economic growth. Therefore, population redistribution can be regarded as a factor that adjusts opportunities for economic activities. Regions with high economic growth can promote the development of new industries, which also demand an additional labor force, especially one with a high educational background. This is how population redistribution acts, reflecting the changes in the demand for a labor force. From Table 5 describing the correlation between net migration and local development, it can be understood that four factors -- total migration, working population, population aged over 15, and net migration of people with an educational background higher than high-school level -- have a comparatively strong, positive correlation with income, consumption, proportion of urban population, educational level, proportion of income and labor force in non-agricultural sectors, investment in fixed assets, investment of foreign capital, and total labor productivity of industrial enterprises. Under this analysis of correlation, the migrants among provinces in China during 1985 to 1990 flowed into the highly populous and urbanized regions that have high-level incomes and consumption, a well-advanced industrial structure, and the largest amount of investment.
At present, China is in the early stage of industrialization. At this stage, as the cumulative effect of economic activities plays a leading priority, there unavoidably arises unbalanced economic development among many regions. Therefore, the migration -- between rural and urban areas, as well as from less advanced regions to advanced regions -- becomes the major stream in the process of the population redistribution. It is impossible to realize rapid economic development in the coastal regions without in-migration of a large population from inland regions, especially a labor force with a high educational background or high skill level. The income of migrants themselves also increased in the progress of population redistribution. In addition, most migrants have succeeded in finding jobs in which they can make full use of their abilities. This clearly acts as an advantageous factor to the economic development of the whole nation.
At present, it is not yet possible to logically and substantially survey how this affects the central and western regions where their population out-migrates. However, there must be disadvantages. The great out-migration of a population has a negative affect on the potential for economic development in regions that have out-migrants, because the education level of such out-migrants is higher than the average level of people in the concerned regions. At the same time, it is possible to assume an advantageous point: In the regions that suffer from population pressures on environment and also from lack of employment opportunity, the out-migration of a population works advantageously to the concerned regions. Furthermore, in case any regions cannot utilize, fully or at all, the human resources with a high educational or skill level, the out-migration of such a labor force would not be a vital influence to the concerned regions. However, this point needs further detailed analysis.
The migration that began in the late 1980s was fundamentally a spontaneous one. In such a case, when people decide to migrate, they consider not only the difference in income between the two regions, but also traveling expenses, expenditures before they could find a new job, and the necessary efforts to overcome mental troubles and to adapt to a new environment. Generally speaking, they will not decide to migrate until they can find more benefits than costs. Therefore, in case of spontaneous migration, the migration must be beneficial to the migrants themselves, or the migrants must have the possibility of obtaining a higher income and a job that allows them to make full use of their abilities. This is entirely different from the migration that occurred before the late 1970s. In the 1960s more than 50 million urban residents were sent to rural areas, and during the period of the "Great Cultural Revolution" a great number of intellectual people and youths were rusticated to rural and remote regions. That was a kind of forced migration, which was disadvantageous to economic development. Although people with a high educational background were sent to the less-advanced regions, their abilities were not effectively utilized in the concerned regions, or they were forced to take a job not related to their knowledge or skills. This kind of migration becomes a loss to the regions that had out-migrants, and also becomes a burden to some extent to the regions that received them. Therefore, the effects of migration of people with high educational background to the less-advanced regions depends on whether their abilities can be utilized in regions that receive the migrants. It is still difficult to properly survey the influence of out-migration from the central and western regions. However, it can be said that economic differentials among regions have not expanded as much since the 1980s as was thought by many people. The differentials are slowly but steadily being eliminated. According to a study by Li-da Fan on the income differentials in China since its national founding, it continued to rise until 1978. This regional differential has been dropping at a stable pace, after the flow of both human and material resources was freed by economic reforms in 1978(11). According to calculations by Hou-kai Wei, income differentials among eastern, central and western regions have been reduced since 1988(12).
Table 5:Analysis of correlation between local development and net migration among provinces in China during 1985 and 1990
1) "Transformation of industrial structure in China, and migration of the labor force" by Sheng-jin Wang and Li-da Fan, published by the Population Research Institute of Jilin University in March 1993.
2) Data on migration is based on the results of a 10% tabulation of the 1990 fourth population census in China . Other variables data are based on "Chinese Statistics Yearbook 1991" published in Beijing by the National Statistics Bureau of the Chinese government.
N: The proportion of net migration to the population of concerned provinces in mid-1990. LN: The proportion of the working population (aged 15 to 64) to the population of concerned provinces in mid-1990.
NE4: The proportion of the net migration of the population aged over 15 with an educational background higher than high-school level to the population of concerned provinces in mid-1990.
NE5: The proportion of net migration of population aged over 15 with an educational background higher than college and university level to the population of concerned provinces in mid-1990.
INCOMEpc: Per-capita income.
CONSUMPTIONpc: Per-capita consumption level.
DENSITY: Population density.
URBAN SHARE: Portion of urban population.
EDUCATION: Educational level.
NAGINCpc: Per-capita total investment in fixed assets.
WHOLESALEpc: Per-capita amount in wholesale.
NALS: Proportion of labor force in non-agricultural industries.
FIpc: Per-capita investment of foreign money.
LP: Total labor productivity of industrial enterprises.
(1) From the late 1950s to 1978, government policy strictly controlled the migration between urban and rural areas, and also the shifting of the farming population into non-agricultural sectors. This control is attributed to a policy under which agriculture at that time had to bear the expenses of industrial development. Since the reform of the agricultural economy in 1978, surplus labor in rural areas became an open issue. The surplus labor began to migrate to cities, mainly to "Zhen," after economic reforms in 1984. During this period, urbanization also progressed at a considerably rapid rate.
Until the early 1990s, there were regulations on the occupational changes in the farming population. Although it was necessary for urban enterprises to absorb surplus labor in the agricultural sector, the urban enterprises, already overflowing, were unable to receive such surplus labor due to an employment system based on "resource constraints." It is expected that the urbanization and the shifting of the labor force will be promoted in the very near future through enterprise reform in the managerial system, including adoption of a share-holding system and recognition of proprietary rights, based on the second economic reforms that began in 1992.
(2) The country's political system has long kept China's tertiary industries lagging behind other industries. Although the reform of urban economies in 1984 once brought about a boom to tertiary industries, its development was limited to a great extent due to restrictions on consumption in the country. However, along with the further progress of reforms of urban economies in the 1990s, tertiary industries are expected to make new headway.
(3) The migration among provinces before 1978 was almost under the government s control and regulations based on its migration policy. On the other hand, because of economic difficulties, the farming population in the populous central and eastern regions spontaneously migrated to the sparsely populated northeastern and northwestern regions. This spontaneous migration became active after 1978. Following the implementation of a policy to open coastal areas in 1980s, the population, especially those people with a higher educational background in the central and western regions, migrated to the populous eastern regions that had the developed economic conditions and new industries. Conclusively, this kind of migration can be characterized as the "polarization of population distribution" and "polarization of developmental distribution." Since the 1980s, due to differences in both economic developments and changes in industrial structures among various regions, there occurred a migration of the population among regions, which led to an adjustment of unbalanced demands for labor among regions. It is expected that the trend of migration will continue for a certain period. Migration is closely related to China s future steps in its economic development. Economic development in coastal regions will spread into inland regions, and on the other hand, diseconomy of scale in coastal regions will appear sooner or later. The population will begin to migrate in the opposite direction only when this phenomenon appears.
1) "Chinese Statistics Yearbooks" 1984, 1985, 1986 and 1991 published by National Statistics Bureau of the Chinese government.
2) Xia Ma and Zhi-xiong Wang (1989) Report on the Survey of Migration in Chinese Cities ("Study on China's Population and Urbanization" edited by the Population Research Institute of the Social Sciences Council, published by Beijing Economic College Publishing Co. pages 1-22).
3) Jun-yu Zhou (1991) "Characteristics of Transference of Surplus Labor in China's Agricultural Industry, and Countermeasures" ("Observation of Population and Comments on It," 1st Period).
4) W.A. Lewis (1954) "Economic Development with Unlimited Supplies of Labour," Manchester School of Economics and Social Science, 22 (May) pp. 139-91.
5) Janos Kornal (1980) "Economics of Shortage," North-Holland Publishing Company, Amsterdam, New York, Oxford.
6) and 7) Xia Ma (1989) "Process, Characteristics and Prospect in Domestic Migration in China" ("New Survey on Migration in China" edited by Fang Tian and Dong-liang Zhang, published by Intellect Publishing Co. pages 1-19).
8) Jin-sheng Wei (1991) "Migration among Provinces in China since the Early 1980" (Population Yearbook of China, pages 110-127).
9) G. Lipshitz (1991) "Immigration and Internal Migration as a Mechanism of Polarization and Dispersion of Population and Development: The Israeli Case, Economic Development and Cultural Change." vol. 39, pp. 391-408.
10) S. Kuznets (1964) "Introduction: Population Redistribution, Migration, and Economic Growth," in Eldridge and Thomas: Population Redistribution and Economic Growth, United States, 1870-1950, vol. 3, Philadelphia: American Philosophical Society.
11) Li-da Fan (1992) "Migration among Districts and Economic Development in China in the 1980s" ("Study on Population," 5th Period, pages 1-6).
12) Hou-kai Wei (1992) "Changes in Income Differentials among Districts in China" ("Economic Study," 4th Period, pages 61-63).
13) Sheng-jin Wang "The Sociology of Population" published in 1988 by Jilin University Publishing Co. page 194.