China has experienced a huge economic transformation due to economic reform.
First, was the ownership transformation. In the process of China’s economic
transformation from planned economy to market economy, the state-owned
enterprises (SOEs) became more and more incompetent and weak, decreased in
size and were replaced by other sectors, such as Joint Ventures, wholly Foreignowned
enterprises, private companies, and TVEs (Towns and Village Enterprises).
Second, was economic structure transformation from agriculturally dominated
economy to an industrial and service one. During this process, there was a huge
labor migration, especially rural laborers moved into cities. It was estimated that
there were more than 80 million rural populations on the move, among which 20-30%
lived in 25 cities with population over 1 million.
The report has 5 parts. The first part is a macro economic analysis of rural
migrants’ background. The second part presents the cause of rural migrants. The
third and fourth parts are the effects of rural migrants on rural and urban economy
respectively. The final part shows a brief conclusion and the effects of rural migrants
on the China’s economy.
In our paper, we concluded the relationship between rural labor migration and
economic transformation in China, the consumption level of rural migrants, as well as,
the effects of rural migrants on rural and urban economy.
First, rural migrants formation was a coincidence with China’s major economic
transformation, such as industrial structure transition and ownership structure
transition. Thus the non-government sectors and the tertiary industry became the
main absorption of laborers, including rural migrants absorption. Rural migrants were
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also the result of push-pull factors from rural and urban areas, mainly due to the large
income gap between rural and urban areas.
Second, rural migrants contributed a lot of remittance to their rural households,
which increased the incomes of rural households. According to our survey, there was
obvious difference in income and operation between rural households with and
without rural migrants, between relatively developed rural areas and less developed
areas.
Third, rural migrants lowered labor cost in urban cities. They normally worked in
traditional service sectors (informal sector) such as construction, peddlers, daily fast
food and household service s etc. Various researches suggested that the urban labor
market was divided by the formal labor market and informal labor market. Instead of
competing the same jobs with urban local labor forces, rural migrants tended to be
employed in different types of employment. Even if the rural labors were employed by
SOEs and COEs, they would not be treated the same as the local employees. Their
wages were relatively lower than that of local employees. They also would not enjoy
any benefits as local employees do. Therefor, low cost of rural migrants and human
capital inflow are treasures for the city. Our research mainly focused on urban areas
where rural migrants were concentrated. We did a comparative study that compared
the incomes of rural migrants with local employees’ and urban residence, their
expenses and potential consumption level.
Fourth, rural migrants had positive effects on urban as well as the national
economy. Some experts argued that rural migrants made the unemployment worse
in the urban areas; however, we believe that unemployment happened in both rural
and urban areas, but it caused by different reasons. Urban unemployment became
serious after state-owned enterprises reformed its system. It was a systematic
structural phenomenon, rather than caused by rural migrants. Urban and rural areas
also need different labor pool with different skills. In other words, there was no strong
evidence that rural migrant made urban unemployment worse.
Finally, rural migrants are capital outflow and re-concentration of assets for urban
areas, but it is an economic loss for rural areas. On the other hand, they made
people’s life in their native rural areas better by bringing money back (remittance).
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They injected necessary capital back rural areas, along with their new ideas, which
helped to develop their hometown. It should be mentioned that there were also a lot
of rural migrants in TVEs, especially in coastal areas where second industry were
developed fast. Most of rural migrants are beneficiary of urbanization of rural
industrialization. Rural migrants’ income increased quite a bit when comparing with
native farmers. Their consumption patterns were different from those native farmers
either. They became large consumption group with high potential consumption level.
In the process of reform, the income gap between rural and urban areas in China
was actually large. It would be much larger if there were no rural migrants. In the
sense of China’s market potential, we must keep in mind that most of the population
in China is low-income living in rural areas. Their migration made some, and will
make more people enjoy higher income potentially resulting in higher spending which
is a very important part of China’s market.