Surplus rural labor force facilitated reform

Urbanization with Chinese characteristics has three key words: exit, mobility and entrance. These three words determine the process of resource redistribution centered on the workforce, the process of urbanization as well as the source of reform and opening-up.

First is the "exit" of the workforce from rural areas because of rural reform. The changed incentive mechanism in the countryside has remarkably increased agricultural labor productivity and freed the surplus labor force. It is generally supposed that one-third of the agricultural labor force was surplus in the early 1980s. The release of surplus labor force signals the start of a new distribution process. The abolition of communes, for example, enabled farmers to freely use their production factors even in cities. The resultant increase in urbanization also increased labor productivity, although the ratio and size of the agricultural labor force declined.

Second is the mobility of the labor force. Following Deng Xiaoping's speech on his southern inspection tour in 1992, labor-intensive industries in the coastal regions created a huge number of jobs not only in the major cities, but also in some coastal towns, which helped release the large-scale transfer of the surplus labor force in agriculture. During this period, the number of migrant workers increased rapidly. And due to the expansion of employment opportunities and increase in the labor participation rate, the incomes of farmers increased remarkably.

Third is the entrance of the migrant population. Reform aimed at eliminating institutional obstacles that impede the migration of laborers is a crucial step in the urbanization process. In the past years, several progressive reforms have been implemented. Although the hukou (permanent household registration) system still exists, many systems such as those for food distribution have been abolished. People can compete for jobs fairly, and rural residents can work and live in the cities without limitations. Besides, the hukou system is being gradually reformed.

These are some of our experiences of reform and opening-up.