China’s Urban-Rural Dualism

The TikTok Refugees

In early 2025, the threat to ban TikTok led to a flood of American TikTok users to the Chinese app Red Note (Xiaohongshu). 

The exchange unveiled an unknown side of China to the average American. One of the biggest surprises for the “TikTok refugees” was the unbelievable combination of low cost of living, wide range of consumer options, and convenient access to services and products. Having midnight cravings at 3 am on a weekend? No problem, a 5-dollar bill means a full-sized dinner, chosen from dozens of restaurants and delivered to the doorstep. Exhausted from your work? Then spend 10 dollars on a professional message in a quiet, nice room. I myself got my teeth cleaned at a dental clinic for 5 USD last year, with complimentary snacks, tea, and dental floss.

Even considering the exchange rates, the purchasing power of the average Chinese Red Note user still seems to triumph over that of many American TikTok users. Why can China, a developing country, offer such a high-quality and affordable lifestyle? There can be many factors: the undervalued currency, heavy subsidies from the intense competition in emerging platform economies, efficient and complete supply and manufacturing chains, highly educated and disciplined workers, etc. But today, I want to approach this phenomenon from a uniquely Chinese characteristic: the urban-rural dualism.

The urban-rural dualism is the key to understanding the Chinese economy and political stability. Certainly, it is common sense that there are poor and rich people, or poor and rich regions in all countries, but the division has been institutionalized in China to a degree seldom seen in any other country.

Zoning vs. Hukou

I think it will be easier to first examine a similar American issue—the connection between zoning and racism. As we know, racial differentiation is an important element of the American social structure. Even after the removal of explicit legal racism since the civil rights movement, racism still found its way to institutionalization through zoning. Zoning is not explicitly racial, but it has been demonstrated that it was, at least partially, racially motivated and had a significant impact on different racial groups. Across the country, Asians, Blacks, and other minorities were, in effect, excluded from White-dominant neighborhoods due to the incomformity of their residential and business patterns. Afterwards, the widening gap of housing prices across communities further institutionalized the connection between poverty, residence, and race. The resulting gentrification, suburbanization, and so on, have constructed the American cities today as we know them.

Coming back to the Chinese urban-rural dualism, at its core, the urban-rural dualism is institutionalized through the Hukou (household registration) system. Every Chinese person is born with their specified household region, which legally ties their access to social securities, medical insurance, public education, land usages, and gaokao (college entrance) scores. Only with substantial endeavours can one change their Hukou to one of the prosperous cities. It is sometimes claimed that the Hukou system makes it harder for some Chinese citizens to work and live in another city than it is for an EU resident to relocate to another EU nation. Some will go further to label the Hukou system as a form of segregation or caste. For example, from 2018 to 2024, China officially set up a 50% high school entrance target, meaning that only half of the grade 9 (junior high school) graduates can go to academic senior high schools, while the rest have to go to the supposedly inferior vocational schools. But it was the poor provinces like Henan that strictly upheld this target, while over 70% of the children in Beijing and Shanghai still went to academic high schools.

Although the Hukou system is much more institutionalized and explicit as a policy, it has notable similarities to zoning in its effects. To name a few: (1) it discourages free population movements, especially by the unit of families, due to the higher cost of living in richer regions; (2) it ties educational access and upward mobilities to residential regions or place of births; (3) it can be altered through personal endeavours; (4) it indirectly influences regional price levels and employment patterns through manipulating distribution of labour supply.

The Mass Migration and Free Riding

However, the Hukou system exhibits two significant and unique consequences. Firstly, by tying social welfare provision to the registered Hukou regions while allowing for cross-region employment, the Hukou system resulted in gigantic influxes of migrant workers, also known as peasant workers in China, from less developed rural regions to better developed cities. The resulting rural-urban dualism exhibits a level of ingeniousness that will put the capitalists to shame: the major cities have the best of two worlds. On the one hand, they enjoy subsistence-farmers-turned-labourers who are willing to work for low pay. On the other hand, they do not need to, at least not now, pay for their social insurance and welfare, as that is within the jurisdiction of the local governments at the workers’ hometowns, where their registered Hukou is. The massive “brawn drain” was the indispensable reason for cheap labour in both manufacturing and service industries in coastal cities. A migrant worker working as an average server in a coastal city earns somewhere between 400 to 600 USD per month by working 8 to 12 hours per day and having 4 days off per month. In first-tier cities like Beijing and Shanghai, roughly 40% of the residents are migrant workers whose Hukou is registered at a different place. Low-paying migrant workers are an indispensable force of economic growth and stability of China. On the one hand, it lowers production costs and enables the use of a larger share of profits on investing and expanding. On the other hand, it offers the urban middle class a high standard of living with affordable costs, which makes the new middle class—— the supposedly “impetus of democratic change”—— satisfied with the current arrangement.

The employment pattern under rural-urban dualism is too evident to ignore: to a certain degree, they constitute the Chinese equivalent of racial differences. In southern coastal cities full of migrant workers, like mine, it’s common to tell by accents or physical characteristics that many servers, masseuses, and peddlers are from less developed regions in northern China. Such a visible employment pattern is not unlike the “black nannies” in post-war America.

In contrast to the Western history of primitive accumulation of capital through external exploitation from slavery and colonialism, some argue that China’s rapid primitive accumulation was achieved through internal exploitation from the rural-urban dualism. Capitalists and bureaucrats in both scenarios readily extract the economic and productive values of labourers while denying their reproductive needs from social safety nets to domestic care. For example, some employers would underpay workers, knowing that their families could rely on subsistence farming back in their villages.

Reinforcing Stability: The Hometown and the Safety Net

Although the rural-urban dualism brings political stability through economic growth, some critics also point out that its creation of secondary classes of citizens is a catalyst for instability as well. We must ask, why don’t the migrant workers rebel? Here, we come to the second characteristic of the rural-urban dualism: the migrant workers’ unequal treatment can also be interpreted as an endowment rather than exploitation. Because the design of rural-urban dualism sets rural life as the benchmark for comparison that migrant workers identify with. 

We know the benchmark is important; there is an abundance of subjective deprivation/abundance theory that explains satisfaction or unrest. Some political scientists will even explain tendencies of political ideologies by subjective comparison—those who perceive themselves as relatively affluent tend to be leftist and pro-establishment, and vice versa.

The rural-urban dualism fosters subjective and relative affluence by restricting the degree of mobility and integration for peasants-turned urban dwellers. On the eve of reform and opening up, China was still a largely agricultural country, with more than 80% of its population living in rural areas. Since the reform, more than 200 million rural residents have migrated to cities. Deng Xiaoping’s “letting a small portion of people get rich first” was evident in the Hukou system’s restriction of mobility. China’s promulgation of the constitution in 1975 removed “freedom of movement” from the body, which was never reinstated despite multiple future revisions that brought back other rights. In this way, the opportunity to work in cities is, since the very beginning, framed as a privilege or opportunity rather than a right. In the initial days of reform and opening up, strict controls were implemented to monitor and restrict migrants. Outsiders needed to obtain permits to work in economic special zones. Those without proper IDs could be detained in legally ambiguous detention centers. One college student from a foreign province was beaten to death in Guangzhou, causing an internet sensation at the time.

Under tight surveillance and differentiated rights, the cities never quite felt like home. People speak different dialects, employers discriminate against them in the workplace, and it’s hard to make new friends in the cities. But it’s alright, because they always have their villages to fall back on. Their friends and family members, especially the kids, are always waiting for them in their most familiar hometowns. Their rural hometowns, not social welfare, serve as their social safety net. If they are injured or unemployed, they could go home and go back to subsistence farming. Unlike the West, this backup plan is institutionalized—not only by restricting migrants’ rights in the cities, but by guaranteeing their rural way of life. For example, most rural residents are entitled to agricultural land, which is, in theory, public property and cannot be sold. This protects them from the “enclosure,” the primitive capitalist accumulation that drove peasants out of their land and forced them to become “free labourers” that can be cheaply employed in the cities. This protection, along with urban restriction, is why China has very few slums and homeless urban dwellers, in contrast to other developing countries and even the developed ones. The flexibility between rural identity and urban identity enhanced political stability because migrant workers cannot possibly lose everything.

But there are two sides to the same coin. From a rights-based perspective familiar to Westerners, the so-called protection is simply a violation of rights: why can the urban residents sell their lands and properties at will while the rural residents cannot profit on their inherited lands by sale? In effect, the inability to sell their farmland and homestead blocked a way of upward mobility by moving into the cities with their sale revenue. See, they could have traded their old farmland and house for a small house or a grocery store in the city. But the issue of rights aside, by eliminating this high-risk option, the planners balance between urban demand of labour supply and the potential double strike by unemployment and dispossession. Therefore, the rural migrants can sell their labour in the cities, but the villages are the home that cannot be given up.

Stimulating Growth: The Resevoir

The previous paragraphs emphasized stability and steadiness, but growth comes from change. China’s economic growth is centered around educated and cheap rural labourers who the cities free-ride on. China can foster stability by slowing its pace of growth and having the migrant workers fall back to the villages, but this is, by the necessity of logic, an inhibition of economic growth centered around export-oriented industries in coastal cities. To unleash the full potential of the 1.4 billion people, migration cannot be stopped. But for every one peasant worker (migrant worker) that moved to the city, there is one more mouth to feed in the city and one fewer unit of rural potential to utilize.

This is why the “reservoir” is the perfect analogy. A reservoir has two sides: one of absorption and one of stimulation. If the village is the reservoir, then the peasants are the water it contains. Facing economic or social shocks, the water flows back to the reservoir to avoid and absorb the shocks. For example, many migrant workers returned to their hometowns during the pandemic for both economic and public health reasons. When the coastal cities are thriving, the water or the peasants flow outward towards these employment opportunities.

Despite the various restrictions and negligence of migrant workers, the cities sooner or later need to accommodate them, particularly their children. The previous depiction of migrant workers focused on middle-aged peasants-turned-workers who are employed in low-skilled industries in the cities. But their children received mandatory public education and were likely to secure a place at a national or regional university. These people, born after the 1980s, have vastly different identities and conceptions of rights. Their education featured a nationalized China—as opposed to a regionally fragmented one. They perhaps identified more with the “China” that is overrepresented by the thriving coastal cities rather than their backward hometowns. Having acquired quality education and skills, they also think they deserve a place at the cities.

These young college graduates from humble backgrounds called themselves “the ant tribe.” It is analytically important to distinguish the ant tribe from the migrant workers. The ant tribe has the skills that China needs for global technological rivals, but they are also a source of instability. They see themselves as ants in the cities, as they face obstacles in employment and connections when competing with the urban families. But one thing that they know for sure is that they want to stay in the cities, and returning to their rural hometown is a sign of defeat and shame.

Luckily, as China’s economy expanded with remarkable speed, they were mostly accommodated by the cities—securing a job, starting a family, and obtaining an urban Hukou, while the term ant tribe is becoming obsolete. In this sense, they jumped out of the rural-urban dualism—or, they become the urbaners that now can profit off the cheap migrant workers their parents used to be. This identity switch marks China’s continued urbanization and modernization, but it also means that there is less water in the reservoir and there are more urban demands to meet. If you have played some of the urban planning simulation games, you will know that middle-class families have more discerning tastes and higher standards. They want more freedom, equality, and a larger share of the pie.

Growth vs. Stability

Some political scientists saw these as a sign and impetus for democratic transformation. I don’t think they are wrong, but the reality did not play out according to their projection. One reason is the maintenance of urban-rural dualism, backed by the state’s construction of employment, education, and welfare. Relying on cheap labour and products produced by rural people, the urban middle class easily enjoy living standards that are on par with, or I would even argue, superior to the Western lower-middle class (granted that the Chinese middle class are much more fragile, and their jobs much more demanding). Other factors, such as the blatant and constitution-breaching discriminatory access to education based on hukou, or massive public employment that are paid by local governments, are additional reasons for the middle class’ conservative attitude. A new middle class will only push for nationwide democracy if they identify with the rest of the population in interests and identities, but this is frustrated by the dualism. This is not a uniquely Chinese experience; we see similar outcomes in South America and Southeast Asia, but China is unique in achieving such gorgeous economic advancement while still maintaining a middle class that defends the current situation. We must ask, which will continue? The economic growth or political stability?

We all learned about the core-periphery theory, where the core countries exploit or benefit from the periphery countries by utilizing their cheap resources while selling them expensive final goods. If such a description is accurate, then it is clear it maintains existing global economic order by impoverishing the global south and eliminating potential competition, at the cost of spreading and building global economic prosperity.

It is misguided to treat China as a single unified economy simply because of its political sovereignty. People forget about its diversity, but it has more population than the entire Europe (or even “the West”). There is too much tension within and between all the regions and provinces. The urban-rural dualism is part of the masterplan by Deng that balances between growth and stability. It has been successful, but it seems like it is reaching its limit. The good news is it is breaking down, at least in all but the few biggest cities. But what will be the next stage? How will China’s still export-oriented economy respond to raising labour costs? Will the middle class expand and produce enough internal demand in replacement? Will China, like the US, becomes a consumerist country and find its own producers?  China can feeds itself and a whole America, but who can feed China? And most importantly, what will the breaking down of urban-rural dualism mean in terms of political stability?There is a lot of uncertainties, but it will certainly be an interesting story to tell.

—-Atlas, 2025.05.23