China´s Arrival Cities May Stop Growing

Over the last 30 years, China has witnessed the largest migration in history. According to China´s 2010 Census, almost 1/4 trn  migrants had worked away from home for more than six month that year. Preparing a longer China mission for GIZ, the German development agency, I just stumbled over a great info video put up by The Economist that displays the volume, benefits and costs of China´s internal migration masterfully:

http://www.economist.com/blogs/freeexchange/2012/02/china?bclid=0&bctid=1475649563001

Do try it out!

There is little doubt the beneficial impact that China´s internal mass migration has produced, despite the increase in interregional and interpersonal inequality it has brought along - a  temporarily rising inequality if we trust Kuznets (1955)[1] . Sustained growth and poverty reduction, especially in poor dual-economy countries, usually requires a shift of resources from low productivity to higher productivity activities, from raw materials to manufactures, from rural to urban areas. Rodrik (2011, p. 156)[2] has summarized that modern history of development experiences strongly:

 “You become what you produce. That is the inevitable fate of nations”.

Increasingly, manufactured stuff is being produced increasingly to the West of the Eastern coastline. Chengdu and other inland towns are booming, and the officials who in the past were happy to send young people East are now desperate to keep them close to home. The most important explanation is probably that China has moved beyond the Lewis Turning Point, as rural subsistence labor has been absorbed.

A fairly immediate impact that the redirection of internal migration might have is that China´s Gini coefficient of inequality will start to drop as the regional component of inequality will start to shrink.

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[1] Kuznets, S. (1955), “Economic Growth and Income Inequality”, American Economic Review, Vol. 45,No. 1, pp. 1-28.

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[2] Rodrik, D (2011), The Globalization Paradox: Democracy and the Future of the World Economy, W.W.Norton & Co, New York/London.