Spring Festival Rush and Migrant Workers: Understanding Chinese Urbanization Through Land Finance

The largest human migration in the world takes place every Spring Festival in China. Many people set off before the official start of the holiday to traverse thousands of miles from megacities on the Eastern coast to rural areas in Central and Western China.

What drives the Spring Festival Travel Rush? (Reuters)

In a way, the Spring Festival travel rush encapsulates many uniquely Chinese characteristics — culturally, it reflects the wish to spend the festive season with family; socio-economically, it highlights the vast diasporas of migrant workers that have formed in Chinese cities. These communities remain detached from the urban fabric. Unable to secure stable housing or government services like education, healthcare, and pensions for their family members, migrant workers often venture to cities alone. This explains many other social phenomena, like left-behind children and China’s hollowing-out villages.

Are there underlying explanations for the plight of migrant workers in China? Recently, I’ve been reading the book《置身事内》(Skin in the Game) by Fudan University Researcher Lan Xiaohuan — his analysis of local government finance in China provided an interesting political perspective. Lan describes the key issue behind China’s urbanization as one of misplaced priorities — instead of being driven by “people,” it is motivated by land.

The government enjoys a near-monopoly over the sale of land under China’s unique land system. In 1994, reforms transferred many tax revenue streams from local governments to the central government. As other revenue streams thinned, land-related taxes became the backbone of local government revenue.

Land is not valuable per se — it derives its value from how it is utilized. Thus, local governments began transferring land to industries at low costs, eyeing the potential tax revenue on industrial production. Less land was allocated to residential and commercial uses, as these produced less revenue than industrial investment. Over time, this created a significant imbalance in the supply and demand of residential land, leading to the rise of property prices and the formation of a housing bubble.

Land finance incentivized local governments to place disproportionate emphasis on land-related revenue instead of zoning to meet the demands of public services like healthcare and education. Public expenditure for social welfare and pensions also fell behind. This explains why megacities place stringent restrictions on access to housing and social services — demand significantly exceeds government supply. Inevitably, migrant workers become the victims of these artificially imposed barriers.

In today’s world, the clustering effect of high-tech industries is only growing stronger. It seems imprudent to limit labor mobility by marginalizing them from municipal services, which essentially bars migrant workers from settling permanently in cities. After reading Lan’s book, I’ve realized that reforms to protect the interests of migrant workers would be futile without addressing the root issue — the land finance of local governments.

A recent proposal by the Politburo suggested creating a nationwide market for land. This could allow megacities in the East to purchase construction quotas from Western regions, balancing out residential supply across China by ensuring that the growth in urban land-use area is proportional to population influx. Expanding the land market to include collectively owned land in rural areas presents a way to reduce the local government’s monopoly over land sales; under this reformed system, farmers would be able to lease their land directly to developers without needing to have the land appropriated by the government.

Urban politics is a fascinating topic that deserves more attention. It maps out how urban areas will evolve, the opportunities they can seize, and the issues they must tackle. Reading Lan’s book has left me with an appreciation for the crucial role “land” plays in all of these discussions — it is both the perpetrator and solution policymakers are looking for.

Bibliography

‘How China’s Lunar New Year Travel Rush Is World’s Biggest Annual Migration’. Reuters, 14 Jan. 2025. www.reuters.com, https://www.reuters.com/world/china/chinas-lunar-new-year-travel-rush-worlds-biggest-annual-migration-2025-01-14/. 

Lan, Xiaohuan. 置身事内. Shanghai, Shanghai People’s Publishing House, Aug. 2021.