In this episode of COVIDcast, Lowy Institute senior fellow Richard McGregor sat down with Dexter Roberts to discuss his new book, The Myth of Chinese Capitalism: The Worker, The Factory and the Future of the World. Roberts was based in China for more than two decades reporting for Bloomberg Businessweek

Most of the media focus on China takes a top-down approach, looking at Xi Jinping and the superpower rivalry between China the US. The value of Roberts’s book is that it views the country from the grassroots, from the perspective of Chinese workers, in particular the migrant labourers who flocked in their millions since the early 1990s, and especially after China joined the World Trade Organization in 2001, from the countryside to coastal manufacturing centres.

Away from the glossy metropolises such as Shanghai and Guangzhou, which increasingly enjoy both incomes on a level with the most advanced countries and schools which dazzle the world with their STEM results, China’s future does not look nearly as bright.

Roberts believes one of the core issues holding China back is the hukou system, or household registration. If you have a rural hukou, you can move to a wealthy city such as Shanghai, but you do not have the right to health and social services on par with local residents, nor can your children be educated in city schools.

There are many reasons for the policy, both stated and unstated. The government does not want urban slums as in Mumbai or Manila or other cities in Asia, which it believes could cause political instability. Plus, there is old-fashioned snobbery. Wealthy city-dwellers look down on their country cousins.

Many families split as a result, with parents heading to cities to look for work, while their children are bought up by grandparents or sent to boarding school. The system also entrenches inequality by creating a rank of second-class citizens.

Chinese policymakers have long debated ways to phase out what is a policy of permanent discrimination affecting hundreds of millions of people, but so far little has changed.

Apart from its psychological impact on families, Roberts argues that the policy is keeping China back from its aim of skirting the so-called “middle-income trap” and building a more prosperous and equal economy and society. 

COVIDcast is a podcast hosted by Lowy Institute experts to discuss the implications of Covid-19 for Australia, the Asia-Pacific region and the world. Previous episodes are available on the Lowy Institute website. To stay up to date with the latest episodes of COVIDcast, subscribe to Lowy Institute Audio on Apple Podcasts, Google podcasts, Spotify or SoundCloud.