Nowadays, heath care services and good universities are

Nowadays, the problem of Hukou system
is important, because the more and more people live and work outside
their hometowns and it’s create unequal distribution of resources.

The Hukou system is a legal system,
that enables government to collect residents’ information, such as name,
parents, date of birth and so on. Also, this system serves as a tool of
regulating population distribution and rural-to-urban migration. According to
the Sheehan (2017),” The hukou system designates a
resident’s status as being either rural or urban based on their registered
birthplace”. Consequently, it means that a person from the rural area is not
able to get public services or benefits in Beijing, in spite of living and
working in the city. For example, heath care services and good universities are
available only in big cities like Shanghai or Beijing, and people who have
hukou of these cities have advantage to get access to these benefits. Obviously,
hukou in big cities is attractive and people are ready to pay high price to buy
a house to get urban hukou. For that reason prices in big cities are very high.
   

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Another possible reason for high
prices is urbanization.

Since 2009, prices for houses in
China have jumped by more than 60 percent. The high prices for houses made
housing market unaffordable for people with low and medium income. The
increasing housing prices in China is a big issue, because it can lead to
further increase in inequality. High increase in housing prices can be
explained by huge demand but limited land supply. High demand is due to rapid
urbanization over the past several years, which resulted in about 780 million
urban populations. (The World Bank)

            In
1960, urban population in China was about 19%, whereas urban population in
Japan was about 63%. (The World Bank). Therefore, low urbanization level could
lead to serious impact on driving force of Chinese economy which is
consumption. Although, Chinese economy is growing fast with stable rate of 6.8
%, the household consumption accounts for 37% of GDP, which is low in
comparison with the United States where the household consumption is about 70%
of GDP. The reason for low consumption in China is that more than 50% of the
population lives in the rural areas. Hence, to sustain stable growth of Chinese
economy, the consumption rate or the potential demand should be increased.
Urbanization can lead to the high consumption and therefore high demand by
decreasing the number of rural population. When the proportion of China’s
urban population increases by 1 percent, its direct effect can boost GDP growth
of 1.5 percent. Therefore, urbanization has become a leader in the new period
of economic growth.

            Currently,
urban population growth rate in China is 2,6% annually. According to the World
Bank, about 20 million people moving to urban areas annually and per capita
living space in China in urban areas is about 36.9 square meters, consequently
it means that annually urban housing needs are 738 million square meters.

 (Statista, 2017). 

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