Economy fears as Chinese migration to the cities slows down

China’s “urbanisation drive”, its plan to move almost 1.4 billion people or 60% of the population to cities by 2020 is faltering, as the struggle to find work and a lack of access to social services or hukou - health care and free schooling for children - forces many internal immigrants to return home. The country’s stockpile of unsold homes rose by 4.5% up to April, while the number of migrants looking for work in new cities fell by 1.5% - the first decrease in six years. Wang Jun, from a Beijing-based think tank said: “Urbanisation should be based around human beings, and not just driven by man-made cities”.

Residential buildings are seen in Wenzhou Thomson Reuters

WENZHOU, China/HONG KONG (Reuters) - After two decades trying to make a life in China's entrepreneurial city of Wenzhou, Ji Shouquan and his brother Shoufang are ready to head home.

They say they have no hope of stepping onto the city's housing ladder and it is getting more difficult to earn a decent wage.

China is relying on millions of internal migrants taking up jobs in cities to boost the urban population and consumption. It hopes this will fuel more sustainable long-term economic growth and reduce the country's reliance on big industry and exports that powered the country's rise in the last three decades.

But migration is slowing down and workers are more reluctant to travel across the country to find jobs, trends that could undermine these efforts.

"It's really tough to make money," said Shouquan, who earns about 5,000 yuan ($767) a month as a sound technician in a karaoke lounge. "Of the six or seven friends who used to work at the KTV, only two of us are still holding on. Most have gone home."

His taxi-driver brother, Shoufang, said that's what they'll probably end up doing too.

Both have scrimped enough to buy property in their home town of Fuyang in the largely agricultural province of Anhui in eastern China, where home prices are about a fifth of the cost of Wenzhou, which is in the neighboring province of Zhejiang.

"It's unrealistic for migrant workers like us to buy in Wenzhou, unless you've got your own business," Shoufang said.

Government data shows that the number of migrant workers in 2015 reached close to 169 million. But that was up just 0.4 percent from 2014 - the weakest rise since the global financial crisis in 2009. The number of migrants searching for jobs outside of their home province dropped 1.5 percent – the first decline in six years.

The government wants 60 percent of its population of almost 1.4 billion to be urban residents by 2020, up from 56.1 percent in 2015.

Analysts say China's massive stock of unsold homes is evidence that the urbanization drive is faltering as migrants struggle to build a future away from their villages or towns. Despite some signs that house prices are recovering from a downturn, official data shows that the inventory of unsold homes in China rose in the year to April by 4.5 percent to 450 million sq meters.

Tourists visit the Tiananmen Gate and the Forbidden City. Workers who migrated from the country to the city, confined to their own living quarters, live in a different world. Reuters/Stringer

The National Development and Reform Commission, the state planning agency, did not immediately respond to a request for comment.

Housing built in many third-and fourth-tier cities was initially designed to absorb demand from the government's urbanization drive. But a lack of job prospects and access to social services has meant migrants continue to take their chances in China's biggest and most expensive urban centers — or head back home.

"Urbanization should be based around human beings, and not just driven by man-made cities," said Wang Jun, a senior economist at China Centre for International Economic Exchanges, a Beijing-based think-tank.

However, some industry watchers said the main impediment to migrants buying homes and settling in other cities is a lack of access to local services, such as free schooling for their children and healthcare.

Under China's system of internal passports, or hukou, migrants in search of better jobs in urban areas leave behind the public services they are entitled to as residents of their home towns and villages. Losing such privileges discourages many from leaving in the first place.

"If China's urbanization was growing at its planned rate there would not be any (housing) oversupply. The main bottleneck for China's urbanization is the issue of hukou," said Alan Chiang, managing director of Shenzhen-based real estate consultancy DTZ.

Newcomers to a city are less likely to spend money if they do not have the social safety net that hukou brings, such as providing access to medical insurance and basic education, analysts say. On a more practical level, hukou is needed if a person wishes to marry or open a bank account.

While Beijing is encouraging cities to provide more hukou, local governments place a cap on them to avoid a drain on local resources.

Economists estimate China can meet its migration goals, but they say cities are falling behind in providing hukou to migrants. By 2020, China wants 45 percent of the people living in an urban setting to have hukou, compared with 36 percent in 2013.

"Hukou and high property prices are two overlapping issues; hukou is actually the first hurdle. You want to have a hukou, but in order to get a hukou, you have to have a substantial investment in a certain place," said Siah Hwee Ang, who covers China affairs as a professor of the School of Marketing & International Business at Victoria University of Wellington.

"But it's not as if a lot of money will solve your problems. So housing is actually the second problem, rather than the first."

(Reporting by Brenda Goh in Wenzhou and Clare Jim in Hong Kong; Additional reporting by Kevin Yao in Beijing, Pete Sweeney in Shanghai, Stella Tsang in Hong Kong, Beijing and Shanghai Newsrooms; Editing by Anne Marie Roantree and Neil Fullick)