Expanded infrastructure investment: Improved connectivity and job creation for the poor

Although a powerful force in boosting living standards of the rural poor, migration also had some negative social consequences, potentially widening inequalities. As China becomes more and more urbanized, overcoming these inequalities will be a key challenge for future social policies. First, many rural migrants work in low-wage sectors, often in informal jobs that leave them vulnerable to shocks. Moreover, Guo, Tan, and Qu (2018) find that although income poverty of migrant workers was low, their consumption poverty was significant, given that many saved part of their incomes to send to their families in rural areas. Indeed, former migrant workers that have permanently settled in cities consume up to 30 percent more than those without urban hukou (Molnar, Chalaux, and Ren 2017). Migrant workers in urban areas also suffered from poor housing conditions (particularly sanitation) and lack of access to health care (Guo, Tan, and Qu 2018). These are challenges migrant and informal workers share with their peers in many other developing countries (World Bank and DRC 2014).32 They are outweighed in China’s case by the substantial income gains migrant workers experienced (CIKD, forthcoming). But they set a new agenda for China’s social policies going forward.

Second, even after the relaxation of hukou rules, migrants did not gain full access to urban social services (for example, urban education and health care) and social benefits (such as housing subsidies, unemployment benefits, disability benefits, and various old-age benefits). Not until 2014 was a single national resident registration system set up.33 This reform differentiated between large and small-to-medium-sized cities and encouraged rural migrants to settle down in small and medium-sized cities, giving them full access to services and social rights. Implementation of this reform is incomplete, because local governments often lack the resources to grant migrant workers full residency rights, and urban enterprises are reluctant to shoulder the additional costs that would come with granting migrants formal urban employment status. As documented in Giles et al. (2021) using the Rural-Urban Migration in China longitudinal survey,34 in 2016, 68 percent of migrants were still employed in the informal sector, and fewer than 20 percent were enrolled in urban health and social security schemes.35 Of those migrants employed as formal sector workers, on the other hand, over 80 percent were covered by urban pension and health insurance.

Finally, some studies have identified a positive relationship between parental migration and child health and learning outcomes, likely reflecting the income effects of migration.36 In contrast, studies that focus on children’s mental health, behavioral issues, and delinquency consistently conclude that the impact of parental out-migration is unambiguously negative (Guang et al. 2017; Tang et al. 2018).37 The negative impact suggests that decline in time with parents dominates the income effect. These studies conclude that reduced parental supervision and protection and weakened parent-child bonding and communication resulting from parental migration cannot be compensated for through increased economic resources gained by migrant employment.38 A similar mixed pattern is seen for the welfare of left-behind elderly.39 With rising income levels, the nonmaterial dimensions of deprivation tend to take a greater role in influencing overall perceptions of well-being.

At the onset of reforms, China’s initial conditions for infrastructure, especially transport infrastructure, suggested a significant disadvantage.40,41 Sustained public investment in infrastructure was thus an important factor in China’s economic growth and poverty reduction story (Chatterjee 2005; Straub 2008). Arguably, it was particularly important as a catalyst for China’s domestic market integration, providing the poor with improved access to markets to sell their produce and for their own consumption needs, and allowing the gains from China’s export-led development and managed urbanization to be shared with the interior provinces and with rural areas.