Informal Economy in China

Introduction

Thirty years after Mao’s revolution to create a communist state, President Deng issued the policy “the Reform and Opening-up policy” in 1979 and China’s history stepped into a new period. Since then, China’s economy has grown rapidly; especially after 1992, the average GDP growth rate of China is over 9% (CIA, 2012). This rapid economic growth also pushes forward the process of urbanization all over the country. However, since the economic growth is uneven in different cities for different classes, it generates new inequalities both on the economic and social perspectives. Informal economy is the system of trade or economic exchange used outside state controlled or money based transactions (Business dictionary, 2012), and a byproduct of the uneven economic growth and increased inequalities is the development of a massive informal economy. This kind of unevenness works at the national and the global cities' scales.

Meanwhile, the new unevenness and inequalities also create new kinds of informal work. The informal jobs of “Nongmingong,” “Huangniu (Scalper)” and “Black Taxi drivers,” which are inevitable and necessary products of Chinese history, reflect the problems of the urbanization in China. The cities of Shenzhen and Beijing are the geographical deification of China's informal economy.

Keywords: informal economy; urban unevenness; social injustice; hukou system; informal jobs; inevitability and necessity.

Nongmingong

Nongmingong (peasant-workers) means the people who keep rural hukou but work in cities and towns; they are the special product of Chinese hukou system. In a broad sense, there are two parts of Nongmingongs: one part is the people who leave the land but not the village; the other part is the people who leave both the land and the home village (Huang, 2009). In a narrow sense, it only means the second part. According to National Bureau of Statistics of China, there were about 145 million registered Nongmingongs in China in 2009 (about 50 million unregistered), which increased 4.92 million people than 2008 (Admin, 2009). Nongmingongs live and work in the cities; they are making significant contributions to the cities’ development. However, the great numbers of these 200 million Nongmingongs cannot be treated as the people who keep official urban resident status, but to take the hardest, and lowest-paid work in the cities (Huang, 2009). The problems of Nongmingongs are becoming more and more serious with the development of urbanization; while hukou is the biggest problem, which relate to Nongmingong’s rights.

One of the biggest problems of Nongmingong is their household registration, which is called “hukou” in Chinese. Hukou system was established in the 1950s. The purpose of it is to control the population move to cities from rural areas (Zhao and Howden-Chapman, 2010). Therefore, the people who live in rural areas keep rural hukous, while people who live in cities keep urban hukous. It sounds like there was not much difference between two different hukous, but it truly divided the whole nation into two separate parts in an unfair way. When the policy was first promulgated, people who kept rural hukous were not allowed to move to the city or take any jobs in the cities (except illegal ones). After the “Reform and Open-up” policy was established, the hukou system has not been that ‘tight’, and allows rural people to immigrate and work in cities, which really sped up the urbanization process (Chan, 1994). There is a large number of people move from rural areas to cities. The number rose from 70 million to 200 million through the year of 1993 to 2008(Zhao and Howden-Chapman, 2010). However, the hukou-related social welfares are dissimilar for rural hukou and urban hukou. People who keep urban hukou have the minimum living standard guarantee system (similar to American welfare), which has explicated its guarantee objects, standards, and processes since 1997(People.com, 1997). On the other hand, people who keep rural hukou did not benefit from the minimum living standard guarantee system until 2007, and the standards are lower than urban residents (Gov.cn, 2007). This phenomenon was created by the government, which increased the social inequalities in the cities.

Today in China, people who live in cities have a similar feeling: they don’t ‘trust’ Nongmingongs. It is understandable because Nongmingongs do not have urban hukous, homes or any backgrounds in the cities. It is ironic since Nongmingongs are Chinese citizens but it is illegal for them to stay in Chinese urban areas. Therefore, the jobs Nongmingong can get are always lower-paid jobs like construction laborers, garbage collectors, street cleaners, and so on (Huang, 2009). Employers, especially the ones of private enterprises in the cities, do no provide medical insurance or any other health benefits to them; some nice employers may offer better conditions, but most employers do not because they know those Nongmingongs are temporary and no background.

Shenzhen is one of the fastest developing cities in China. Many migrants moved to Shenzhen from nearby provinces such as Guangdong, Sichuan, and Jiangxi and so on. It can be seen as one of the new migrated cities in China. Since 1980s, a large number of young people moved to Shenzhen. According to China Federation of Trade Unions, the average age of Nongmingongs in Shenzhen is about 23.7; 70% of them are unmarried, and over 50% Nongmingongs are women (People.com, 2010). The typical situation of a Nongmingong in Shenzhen is: a high rate of the labor contract signed; a short and temporary labor contract; low posts and stabilities; and many health and safety risks associated with their jobs. In Shenzhen, Nongmingongs who work for manufacturing industry are over 50%, and about 35% Nongmingongs work

in retails, shops or restaurants. Therefore, it is reasonable that the average income of Nongmingong is low, which is about 1838.6 RMB ($290) in 2010 (People.com, 2010). Normally, excluding the money Nongmingongs need for their living and eating, they have to send back money to their homes in rural areas to support their families there. Hence, it is not hard to imagine the living conditions for those Nongmingons. Based on the survey from China Federation of Trade Unions, the average living space for Nongmingongs is about 3.7 meter where every dorm (usually provide by employers) will contain 6.4 people (People.com, 2010).

The average expected income for Nongmingongs in Shenzhen is about 4200 RMB, which is about 656 US dollars. The reasons why the Nongmingongs look for higher incomes are multiple. For instances, they want to save money for marriages and children’s education; they want to building a house when they go back to rural areas, or some of them want to get more education. However, there is still a big gap between the actual income and the expected income, which is about 2363RMB ($370). Shenzhen is a reprehensive city where demonstrates the problems of Nongmingongs. In fact, not only Shenzhen, but also many other big cities exist Nongmingong problems. Nongmingong problems reflect the negative impacts of hukou system and the unbalanced developments inside the cities. Meanwhile, these problems also reflect the social injustice and social polarization, which are created by urbanization.

Cities require Nongmingongs to develop, and Nonmingongs also need cities to live. Even though the structure of the mutually beneficial relationship between Nongmingongs and cities are not stable (Nongmingongs can suffer losses more), they are still interdependent. Nongmingong problems have existed in China for years, and they are becoming more serious and tougher. So far, there is no national policy to guarantee Nongmingongs’rights, but some provinces had issued the policies about protecting Nongmingong rights locally (Guojianzhen, 2007). According to China Youth Daily, the State Council has been drafting a reform to the hukou system in order to change Nongmingongs to urban industrial workers (Wangjunxiu, 2005). The social status of Nongmingongs will not be improved in a short period of time. Even so, it is necessary that the government issue a national policy to protect Nonmingongs, which will reduce the idea of Nongmingongs as second-class citizens.

Huangniu gang

“Huangniu gang” is the term for scalper in China. “Huangniu” means ox; Chinese people use oxen to describe scalpers because the scalpers are always rushing to buy tickets in groups just like oxen run with excitement. The fields where Huangnius work are various: small as a train ticket, a movie ticket or a cell phone; large as a ticket of the Opening Ceremony of the Beijing Olympics or a ticket of the World Cup. They resell tickets for admission to events; the prices of their tickets can be cheaper or more expensive; it depends on the event’s date and popularity. The ways that Huangniu

gang uses to get tickets and products are tested but done underground. They will line up for tickets in groups; they will buy a lot of tickets or limited products at one time and store them for later selling. They use their social status or beneficial relations to buy tickets and products. However, the existence of “Huangniu gang” has its inevitability and necessity. For example, due to the “Huangniu gang,” the prices of train tickets during Chinese spring festivals are always more expensive and limited. For people who have money, they pay more money than the original prices to Huangnius because they don’t want to wait. Numbers of customs who love to pay more money for exchanging more time support Huangniu gang.

Most Huangnius are unemployed or low incomers. On the one hand, they have to face the unsatisfied attitude from the public; on the other hand, they make much less money than white collars, civil servants or bank staff. The worse thing is that the government will use all sorts of reasons and legal actions to penalize or make them lose jobs. No one knows how many Huangnius China has; probably the number is already over million. It is impossible to calculate because as I mentioned, no matter a person has a job or not, he can be a Huangniu. Each year’s Chinese Spring Festival is the busiest time for Huangnius because millions of people need to buy tickets to go back home (especially Nongminggongs). They may conspire with conductors secretly to save some tickets for them in advance; when the Festival starts, they will increase the prices to sell, and they will share the benefits with the conductors after. In this case, can we say that the conductors are also Huangnius?

The most notorious event about Huangniu gang would be the iPhone 4S event, which happned in Beijing (Ford, 2012). During the night of January 12, 2012, outside Beijing Sanlitun’s Apple store, thousands people were waiting for buying iPhone 4S. One day before iPhone 4S started to sell, there were already two coaches parked there. People who came with the coaches were wearing yellow armbands and preparing for lining up. Yes, they are the part of Huangniu gang (JinghuaNewspaper, 2012). The similar phenomenon also happened outside the other Apple store called Xidan Apple store in Beijing (which is also one of the largest Apple store in Beijing) (JinghuaNewspaper, 2012).

Huangnius become the main actor of iPhone 4S’s sale instead of Apple; they were well prepared, organized and united. All the Huangnius were separated into different arrays; inside the arrays, they had smaller teams or larger teams, and every team had a leader to command. The organizing ability and executive capacity of Huangnius could compare to an army’s. When iPhone4S were started to sell at 7 am (opened one hour early), thousands of people ran into the store and all the iPhone4S were sold out in an hour. At 8am, the Apple store in Xidan posted the notification that iPhone4S were momentarily out of stock; the shop assistants said they would not sell iPhone4S anymore on that day, plus they did not know when they would sell them again. After all the iPhone4S were sold out across town, Apple made the statement that, “The iPhone will not available in our retail stores in Beijing and Shanghai for the time

Beijing” (Ford, 2012).

Meanwhile, the news was also reported by the Western countries’ Media. For instance, Los Angles Times on January 13, 2012, posted the article in the title of “Apple halts iPhone 4S release in event China stores after near riot” (Kaiman and Lee, 2012). It reported that a man pelted a Beijing Apple store with eggs since he had waited overnight, but employees refused to open the store as scheduled for safety reasons (Kaiman and Lee, 2012). The similar report was appeared on BBC news as well. On January13, 2012, an article named “Apple ends China iPhone store sales after scuffles” was published. The article described the crowded scene outside the Apple stores and all the iPhones were sold out even included the models (BBC, 2012). Therefore, it is not hard to know the actual strength of Huangnius and why they can always win in the market.

Conversely, as I mentioned earlier, the existence of “Huangniu gang” has its

inevitability and necessity. Today，Huangnius exist wherever a music concert, a

sport game, or other event is held. Why? It is because the market needs them for several reasons. First, the prices of some events are quite high and numbers are limited, as long as Huangnius can get the tickets, no matter they rise or decrease the prices, they will get benefits anyway. Second, for some significant events and performances, there are usually free tickets for high officials and people with significant amounts money (VIPS), but most of the VIPS don’t show up at all. Huangnius then can exploit an opportunity to buy these thickets and sell them. Last but not least, there are always some people who buy the tickets but cannot come, so these people just sell the tickets to Huangnius in lower prices. When Huangnius resell those tickets, the prices are usually lower than original prices (Zhangwuchang, 2009). Most people want to pay less money for the same ticket, even though they know it is wrong. As a result, customs and Huangnius form some invisible and mutually beneficial relationships; whereas the relationships disturb the marketing orders, and seriously affect the benefits of formal sellers. Other than that, the relationships are hard to break since the majority of people stay at the bottom of the society, and these invisible relationships make them satisfied. .

Black taxis

There are about 70,000 legitimate taxis in Beijing; however, there are up to 20,000 taxis are illegal (Beijing Taxi, 2012). These illegal taxis are known as ‘black cars’. ‘Black cars’ are common to see in different cities in China particular in the larger cities. They are the ones have no qualification to operate, and there is no security for the passengers to take. Black cars impact the social order and the traffic order directly. Especially with the developments of the cities, the number of ‘black cars’ is spreading simultaneously. The ‘black car’ problem can be one part of the informal economy in China. Even though there has been established certain policies

for ruling those ‘black cars’, while the government did not really make effort on controlling and restraining.

‘Black cars’ strongly affect the formal taxis’ benefits, since they only charge half price of the formal taxis, many passengers prefer to choose them first. We may do a math problem to see Black Taxis’ destructiveness. Several companies own formal taxis in Beijing. These companies are examined and approved by Road Transport Bureau. The policies of these formal taxis are: if a taxi charges 1.2 RMB ($0.1875) each kilometer, they have to pay the managerial fee to their companies about 2500 RMB ($390) each month; if a taxi charges 1.5 RMB ($0.234) each kilometer, they have to pay the pay managerial fee to their companies about 3000RMB ($468.75). If a taxi has a car accident, its company will pay 80% of the damage fee, the left money has to be paid by the taxi driver himself. Moreover, the taxi drivers have to pay refueling fees, tolls, and maintenance costs and so on all by themselves. If a taxi works both day and night, which means two and three taxi drivers drive the same taxi in turns, then the money they have to pay their companies will increase to 5000 RMB ($781.25). However, to black taxi drivers, they don’t need to pay any managerial money since they don’t have a company. They even don’t need to pay any taxes. Beside the money they have to pay for refueling, toll and maintenance costs (about 2000RMB), they can earn 3000RMB ($468.75) more than a formal taxi driver (XinlangCulture, 2005).

Furthermore, Black taxis impacted passengers’ rights and benefits. Overloading, over speeding and charging arbitrary fees are common problems caused by Black taxis. I had a thrilling experience on taking a Black taxi. Once I took a taxi from home to Airport, I had an experience, which I would never forget. I didn’t know it was know it was a black taxi until I got on. There was no difference on the surface except that a formal taxi has a taximeter inside while an informal taxi does not. I decided to take that taxi since I was already a little bit late for my fight. It was my first time to take a Black taxi, and I promised it would be my last time. After I got on, the driver asked more money than the normal price supposes to be. Then, on the way to the airport, he stopped at least three times to ask the people who were stranded on roadsides if they needed a ride. Interestingly, two people got the taxi after his asks even though they already saw me sitting inside of the car. Usually it takes about 40 minutes from my home to the airport. Although he had stopped the car at least three times, the driver spent less than 30 minutes to drop me off at the airport. His over-speeding made me feel quite nervous and I had to hold the handle all the way to the airport with my sweaty hand.

For ruling Black taxis, there are several main challenges. For examples, they are hard to distinguish, hard to obtain evidences and hard to punish (Zeng and Jiang, 2003). On the one hand, the Black taxis that wait at stations and wharfs are normally low-grade cars, and their customers are the people who get off the coaches, trains or ships; normally they are strangers. On the other hand, there are Black taxis which

work for hotels, restaurants and wedding design companies. In China, most of these places do not provide transportation services, which provide the opportunities to the Black taxi drivers. They cooperate with hotels, restaurants and wedding design companies to make money; whenever a costumer needs a ride, these places’ service desks will give a call to the Black taxi driver, and the driver will come immediately to pick up the passenger. Sometimes, those Black taxi drivers even ‘act’ as a tour guide, and take strangers to different scenic spots to travel (XinlangCulture, 2005). Unfortunately, people who lose out are those formal taxi drivers. Sometimes, they may wait outside a hotel without taking one passenger all day.

In many cities, they have cloned taxis, which mean the Black taxi drivers use formal taxis’ license plates to drive. Those Black taxis look exactly the same with the formal taxis, and polices cannot identify which are fake. Those wicked Black taxi drivers mix the fake with the genuine, grab the formal taxi drivers’ businesses and destroy the social orders (XinlangCulture, 2005). Since Black taxi drivers’ inspected ability improve a lot, the Black taxis’ invisibilities become stronger as well. Transportation inspection is becoming harder and harder. As a result, it is essential to change the traditional ways and approaches of inspecting, and adopting more advanced technologies and tools to inspect (XinlangCulture, 2005). Only increasing penalties cannot solve the Black taxi problem. It requires a new kind of method to think about this problem: on the one hand, the government has to improve relevant laws and regulations, which can solve the problem completely without any trace; on the other hand, by using more advanced technologies and scientific administrations to control Black taxis in more effectively.

Conclusion

Informal economy is still a new concept to China. Even though there are already over 200 million informal workers in China and the informal industry has developed since 1980s (Huang, 2009), most people still don’t know the real meaning of informal economy. To hundreds and thousands of informal workers, they believe what they are doing, is the work they are supposed to do. To the government, the fact that the informal economy occupies a large percent of the market is not only a current national condition, but also a tough problem that requires rational and effective methods.

As Dr. Huang explains in his article “China’s Neglected Informal Economy: Reality and Theory,” the Chinese government has been ignoring the informal problem for years. Even though they have started to put attention on serious research and investigations, what they have done was limited and rare. One study, which is worth looking at, is the report by Hu Angang and Zhao Li (Hu and Zhao2006), which lays out the broad outlines of the available statistical data. The report mentions The Chinese Ministry of Labor and Social security, which was founded in 1998 and “took the first steps by convening an ILO conference in 2002” (Hu and Zhao, 2006). The government has been working on updating workers’ education level in the informal

economy and helping them to find jobs in the formal economy. However, informal workers are still perceived as lower than people who keep urban hukous (Huang, 2009).

In truth, the new unevenness and inequalities caused by urbanization are not built in one day, and the three informal jobs above are definitely not enough to represent the informal economy in the national and the global city scales. Within the current situation, overpopulation is still the biggest problem of China’s development. Therefore, from my personal opinion, although hukou system has made Nongmingongs lose some basic rights and caused social inequalities and polarizations inside the cities; while in the short period of time, based on the current Chinese situation, hukou system is sill the most effective way to both balance the rate between rural population and urban population, and control the overpopulation in cites. Moreover, it is necessary to maintain the control of population growth. If so, not only will the GDP rates grow fast, but also the GDP per capita. It’s time for Chinese government to take the informal economy seriously: making practical and rational policies which neither influences the cities’ developments or loses low-incomers’ basic rights.

Turning to the other side, informal economy has its inevitability and necessity in Chinese urbanization. Everything has two sides; we cannot say that the informal economy is all negative, but we can define that its negative impacts are larger than the advantages it brings to the society. No one would deny that because of informal economy, jobs like Nongmingong, Huangniu and Black taxi drivers are produced. To some extent, the informal economy provides thousands of jobs in China, which increases peoples’ incomes, and improves lower incomers’ qualities of their lives. For that reason, the existence of the informal economy in China helps the Chinese government to solve a part of sustainability problems. So the conclusion is that, when we argue the problems of informal economy in China, we have to integrate different angles of perspectives, combine the current situations, and make the conclusions

objectively. Mao said, “don’t kill a person by one blow” (一棒子打死). It is used to

describe that when people do something, it is important to hear from others’ suggestions and other objective factors. Don’t maintain one’s personal perspective all the time; because it will not solve the problem, but will make it worse or make new challenges.

Reference:

China’s Neglected Informal Economy. Huang, Philip C.C. Modern China; Jul2009, Vol. 35 Issue 4, P405-438, 34P. Reserved April 9, 2012.

The World Factbook, Central Intelligence Agency, April 12, 2012. Reserved 2012-04-29.

https://www.cia.gov/library/publications/the-world-factbook/geos/ch.htm

Social inequalities in mobility: the impact of the hukou system on migrants’ job accessibility and commuting costs in Bejing. Pengjun Zhao. International Development Planning Review; 2010, Vol. 32 Issue 3/4 , p363-384, 22p. Reversed 2012-04-09.

chan, k. (1994), Cities with Invisible Wall, Hong Kong, Oxford University Press.

国务院关于在全国建立城市居民最低生活保障制度的通知 . People.com,

1997/09/02. Reserved 2012-04-10. http://news.xinhuanet.com/ziliao/2002-03/03/content_2644220.htm

国务院关于在全国建立农村最低生活保障制度的通知 . The Central People’s

Government of the People’s Republic of China. 2007/08/14. Reserved 2012-04-10. http://www.gov.cn/zwgk/2007-08/14/content_716621.htm

The national report of Nongmin gong, 2009 (2009年农民工监测调查报告). Admin.

National Bureau of Statistics of China. 2010-03-22. http://www.tjcn.org/jjfx/201003/10426.html

Shenzhen Xinshengdai Nongmingong Shengcun Zhuangkuang Investigation Report

（深圳新生代农民工生存状况调查报告 ). China Federation of Trade Union.

Acftu.people.com. 2010-07-15. http://acftu.people.com.cn/GB/67583/1215529 6 .html

Guojianzhen. 山西：我国首部保护农民工权益法规将实施 . Law-star.com.

2007/06/07. Reserved 2012-04-12. http://www.law-star.com/cac/40009342.htm

Wangjunxiu. China Youth Daily. 2005/01/27. Reserved 2012-04-12. http://www.china.com.cn/chinese/difang/770407.htm

Scalp the iPhone 4S in China? No phone for you, says Apple. Ford Peter. Christian Science Monitor; 1.31.2012, pN. PAG, 1p. Reserved 2012-04-09. http://ehis.ebscohost.com/ehost/detail?sid=4891c2b4-4e85-4eab-a6ba-2647da6b4848%40sessionmgr111&vid=4&hid=124&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=a9h&AN=70302024

调查显示北京9成排队抢购iPhone4S者系黄牛党.Jianghua Newspaper. 2012/01/15.

Reserved 2012/4/12. http://finance.huanqiu.com/data/2012-01/2357680_3.html

Scalpers Rip off Travelers. Beijing Review; 12//25/2008, Vol. 51 Issue 52, p4-4, 1/6p. Reserved 2012-04-09. http://ehis.ebscohost.com/ehost/detail?sid=f611b414-78c6-4b5d-bd3d-6e5bbfef1a04%40sessionmgr115 & vid=1 & hid=124 & bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d %3d#db=a9h & AN=36126500

Apple halts iPhone 4S release in China Stores after near-riot. Jonathan Kaiman and John Lee. Los Angels Times. January 13, 2012. Reserved 2012/4/12.

Apple ends China iPhone store sales after scuffles. BBC.co,uk. 13January, 2012. Reserved 2012/4/12.

http://www.bbc.co.uk/news/business-16540681

Zhangwuchang. Huangniu fang and Economy. 2009-12-01. Reserved 2012/4/12. http://wenku.baidu.com/view/592ea281e53a580216fcfe31.html

Anexplanation of the Regulation Failure in the taxicab Industry-Tested on the Case of the Taxi Regulation in Beijing. Shui Xiao-Shan. Management Science and Engineering , 2006. P2203-2208 . Reserved 2012-04-09.

http://ieeexplore.ieee.org/xpls/abs_all.jsp?arnumber=4105261 & tag=1

XinlangCulture. 中国黑车调查. 2005/08/17. Reserved 2012-04-12.

http://www.xyjt.js.cn/jtdt/wddt/2005-8-17/20058172020148901.htm

Zengxiangui and Jiangsiqing. 谈政治“黑车”经营 . CityBuildingOrganization.

2003/08/29. Reserved 2012/4/13. http://www. xf.gov.cn/contents/2254