Remittances and Migration in China’s Growth

Migration and remittances have long been integral to the economy and social transformation of China. Over the years, millions of migrant workers have moved from rural villages to urban centers in search of better job opportunities, a figure that keeps growing. At the same time, the money they send back home has become an economic lifeline for their families.

Understanding the dynamics of migration and remittances and their benefits is critical to comprehending the forces that have shaped modern China. Together, they serve as vital drivers of economic progress, cultural exchange, and social change, all of which are still ongoing.

Understanding Remittances in China: Statistics and Data

China’s economy is one of the biggest in the world, trumped only by that of the United States. As such, the remittance industry plays a key role in the Chinese economy. Many workers, some foreign and mostly domestic, use the funds they earn to support their families in rural areas or abroad, who often have fewer economic opportunities and are constantly in search of a better quality of life.

Though there is no official, up-to-date data on internal remittances sent in China to rural areas, a 2005 study estimated that there were $30bn worth of remittances sent internally in the country, which is as much as some countries send externally.

By 2022, there were over 295 million internal migrant workers in China, which dwarfs the number of workers who leave their country in search of a better life — estimated to be in the range of 184 million people — with current figures calculating internal remittances number in the $60-100bn range.

On the international stage, there are over 10 million Chinese people living abroad, according to the 2020 United Nation figures, which constitutes the fourth biggest migrant stock in the world, beaten only by India, Mexico and Russia. This number increases to over 60 million when descendants are included.

According to this statistical yearbook, the main overseas destination for Chinese people is Indonesia (11.15m), Thailand (7m) and Malaysia (6.89m).

In 2023, some $49.5bn of remittances were sent to China from abroad, making it the third biggest recipient in the world. Coupled with international money transfers, Chinese migrant workers help support the livelihoods of their families and develop the local economy.

But China also sees a significant remittance outflow from the 1.4 million migrants living in the mainland, Hong Kong, Macao and Taiwan. Together, these foreign workers sent over $20bn in remittances in 2023, a number that shouldn’t be overlooked.

The relationship between incoming (to China) and outgoing (from China) reflects China’s evolving role in the global economy, balancing its historical position as a remittance-receiving nation with its current status as a global financial figure.

Migration in China: Historical Context and Current Trends

Migration has played a critical role in shaping China’s social, economic, and political landscape. Historically, the country’s migration policies and patterns have changed dramatically.

Internal migration – or rural-urban migration – is where China really stands out among most other countries. During the Mao era, the government implemented strict controls on internal migration, including the establishment of the so-called hukou system which was the household registration policy.

The hukou restricted the movement of people from rural areas to urban centers and categorized them as either rural or urban residents, which in turn created significant barriers for rural residents seeking better opportunities in cities by restricting their mobility.

However, following the death of Mao in 1976, China embarked on a journey of huge economic reforms.

By 1979, a whole host of changes were taking place, including the end of the commune system or the legalization of informal markets, according to the IMF. But above all, the restrictions on geographical labor mobilization— which were a big part of the rigid labor market— were gradually loosened thanks to temporary residency permits.

These permits allowed rural residents to provide services in urban areas, triggering a massive wave of urban migration and helping to create one of the world’s biggest workforces.

In a paper that examines the working conditions of rural migrant workers in China, Li Shi explains that during the 1990s and early 2000s, rural workers quickly became the backbone of the Chinese economy, with a large proportion of them making up the manufacturing and construction industries.

Li Shi details that, according to the 2000 census data, rural migrant workers carried out 68% of jobs in manufacturing, 80% in construction, and 52% in the service sector.

Today, migrants are drawn to urban centers by the promise of higher wages and improved living conditions. Wages have seen a steady rise in the last ten years, with the average salary in 2022 standing at $665, an 4.1% increase from 2021. But despite being paid a better wage, many have limited access to social services, education, healthcare or housing.

Social and Cultural Effects: Family Ties, Cultural Exchange, and Integration

In China, the impact of remittances extends beyond the economic benefits that help reduce poverty and improve living standards. Given the vast urbanization over the decades, remittances are crucial for sustaining and improving family ties between those staying in rural areas and those working in cities.

A paper published in the Chinese Sociological Review explains that in China, family members in households with emigrants tend to earn more money than those in households without emigrants. The paper suggests that migrant households use the money they receive from family members abroad to pursue better economic opportunities. Not only do they improve their own financial well-being, but also create new opportunities at home. That same urban migration has also aided with cultural diversity and integration, but it does comes with its own set of challenges.

For example, this migration can result in left-behind children, kids who remain under the care of relatives while their parents are working in urban areas. These children are often more vulnerable and more likely to suffer from developmental issues compared to city kids.

To address these difficulties, policies promoting social integration and cultural exchange are essential, Dan Qin explains. Efforts to bridge cultural distances, such as language education and community engagement programs, can facilitate smoother integration and foster a more inclusive society.

Migration also fosters cultural exchange. When rural migrants move to cities and can deal with these challenges, they enrich the cultural diversity of urban areas. Similarly, when they return to their hometowns, they take with them with new ideas, skills, and perspectives, contributing to the modernization and development of their rural communities, bridging the gap to urban China.

Future of Remittances and Migration: Trends, Policies, and Scenarios

As China continues to evolve, migration and remittances will remain crucial to its development. Internal Chinese migrants’ pursuit of better employment opportunities will be a trend that will continue going forward, albeit at a slower pace.

Migrant workers from China contribute substantially to the economies of their home regions, particularly in rural areas. However, the impact of these remittances isn’t always well balanced, with some regions experiencing more pronounced benefits than others, according to the IOM.

Financial inclusion and access to better financial services could be a strategy to be considered when it comes to enhancing the positive effects of remittances. Not only would improving access to banking services for migrant workers facilitate safer and more efficient remittance transfers, but it would also encourage more participation in formal financial systems, such as banks.

Moreover, providing education and vocational training for migrant workers enhances their skills, improving employment prospects, earnings, and remittance potential to support their families. Together with financial literacy programs, these remittances can be channeled into productive investments, fostering local economic development.

In August 2024 the Chinese government laid out a new, five-year plan that will aim to increase the urban population to 70% and overhaul the hukou system, which would improve rural migrants’ access to urban public services, such as education or healthcare.

The reforms have made progress, with 165 million migrants obtaining permanent residency in their adopted cities in the past decade. Chinese authorities also plan to simplify residency requirements in smaller cities while easing restrictions in larger ones.

From 2021 to 2023, over 40 million rural migrants have obtained permanent residency in their new cities, thanks in part to migrants now only needing to live and work in a city under 3 million inhabitants for six months.

Domestic consumption is also on the cards thanks to the reforms, with every 1% increase in urbanization potentially adding over $27.8bn to the economy, all the while promoting stability, investment in infrastructure and improving living standards.

Empowering Families through Remittances

Migration and remittances have been vital to improving rural migrants’ livelihoods and driving national growth in China. While these financial flows uplift families and communities, challenges like the hukou system, limited social services, and financial exclusion remain, though recent strides towards overhauling the system are being made.

Other policy reforms, such as urbanization efforts and further hukou adjustments, are helping address these issues. By improving financial access, remittances can better support economic stability and development.

In this evolving landscape, Ria provides secure, cost-effective remittance and money transfer solutions thanks to our recent partnership with WeChat, empowering families to maximize their earnings and build a better future.

Send Money To China Using Ria

Have you got family, friends or loved ones currently living in China? Download the Ria app or use the Ria website to ensure that they get their money delivered quickly and safely. You can also send money to a WeChat Pay Mobile Wallet in China – here’s how to do it.