Securing employment in non-agricultural sectors within urban environments plays an important role in increasing the income of rural labourers. But research indicates the institutional contradiction of transferring employment without transferring population is harmful to China's development.

Currently there are about 90 million rural migrants working in non-agricultural industries in towns and cities. Some 40 million are working outside their home provinces. About 60 per cent comes from the provinces of Sichuan, Anhui, Hunan, Jiangxi, Henan and Hubei, where the numbers were 6.95 million, 4.32 million, 4.32 million, 3.69 million, 3.05 million and 2.79 million, according to the Fifth National Census in 2000. And the provinces of Guangdong, Zhejiang, Jiangsu and Fujian, and Shanghai and Beijing account for 70 per cent of that total.

A study of migrant workers' contributions to the growth of gross domestic product (GDP) indicates they have played an important role in promoting the economic development of China's coastal regions.

Finding out a region's total GDP and the number of labourers directly contributing to that figure, as well as the number of migrant labourers employed in the region, could help determine the proportion of GDP produced by migrant workers.

In 2000, for example, migrant workers created 79.643 billion yuan (US$9.595 billion) of GDP in Beijing, accounting for 32.13 per cent of the local total GDP; 143.25 billion yuan (US$17.259 billion) in Shanghai, 31.48 per cent of the local total; 296.663 billion yuan (US$35.742 billion) in Guangdong, accounting for 30.07 per cent of the region's total GDP. And the number for Jiangsu, Zhejiang and Fujian provinces were 90.609 billion (US$10.916 billion), 101.466 billion (US$12.225 billion) and 68.387 billion (US$8.239 billion) respectively, accounting for 10.56, 16.81 and 17.45 per cent of the total local GDP.

In a word, migrant workers create much of the social wealth in these regions.

Working in urban areas also highlights increases in rural labourers' incomes. The amount of cash earned by migrant workers is already close to or even surpasses government revenue in their home provinces. In Anhui, for example, income earned through working in cities accounts for more than 70 per cent of rural labourers' income increase.

But an undeniable fact is that the mere export of labour cannot help bridge the gap of economic development between the regions or the income disparity. On the contrary, those gaps are widening.

The GDP per capita in central areas accounted for 67 per cent of that of eastern regions in 1978 while the proportion was 55 per cent in 1998. In 1980, the average annual income of rural population in Anhui Province was 184.83 yuan (US$22), which accounted for 60 per cent of that of Beijing or 107.6 per cent of that of Fujian Province. The number increased to 1934 yuan in 2000, but the proportion dropped to 41.3 per cent compared with Beijing or 59.9 per cent compared with Fujian. Thus the effect of labour exporting on central and western regions is worth watching.

Similarly, according to the average GDP per capita of the six major labour importing coastal provinces and the numbers of rural labourers exported from the six major home provinces, we find the losses of GDP by the six home provinces are extraordinarily large.

If the average GDP created by each migrant labourer is estimated at 20,000 yuan (US$2,409) annually, the total GDP lost by Sichuan Province would be 139.138 billion yuan (US$16.763 billion). And the losses for Anhui, Hunan, Jiangxi, Henan and Hubei would be 86.536 billion (US$10.426 billion), 86.536 billion (US$10.426 billion), 73.81 billion (US$8.892 billion), 61.084 billion (US$7.359 billion) and 55.994 billion (US$6.746 billion) respectively.

What's more, the impact of labour exporting can be reflected in many other aspects.

First, the home provinces pay for the education and training of these labourers but receive no return from their work in other provinces. Local governments are the major investor of education and training. County-level and township-level governments usually spend 60 to 70 per cent of their revenue on education, plus expenses on other social welfare their home provinces have shouldered but for which they receive little in return.

Second, migration of labourers has reduced the consumption market in their home provinces or even the consumption demand of the entire nation. The migrant workers spend their living expenses mostly in the regions where they work. Besides increasing the consumption market, every 10 migrant workers adds one job to the places they work.

However, since they are working away from their homes, the consumption needs of their families have been reduced, too. And sample research shows the income level of migrant workers is higher than farmers but their consumption tendency is lower. Thus, the national consumption demand has been decreased.

We should not deny the positive side of rural labourers from central and western areas earning their wages in coastal regions.

But the practice of shifting employment destination without transferring population is showing more and more contradictions. The economic development of different regions is unbalanced. The country's urbanization process and consumption needs are negatively affected. The migration of labour could gradually become a restriction to economic growth.

Although the government has emphasized transfer payments to central and western regions and taken other administrative as well as market measures to promote their development, regional differences have not been reduced. We need to find solutions.

Compared with the traditional planning economic system, allowing migrant labourers to work in cities is a historic improvement. It promotes economic development and also contributes to the increase of the rural population's incomes. But the institutional arrangement of disallowing the transferring of their household registration is far from rational.

If migrant workers and their families were permitted to relocate to the places they work and they were regarded as local residents, the gap between regions would be narrowed. Then these regions would not only enjoy the fruit of their labours, but shoulder the responsibilities of supporting and developing the labour resources.

Thus, institutional reforms allowing migrant workers to become residents of the places where they work is crucial to changing the irrational situation in the long run.

At present, we should make it fairer through providing national treatment for migrant workers, as well as making more transfer payments to support the development of central and western regions.

The author is a researcher with the Anhui Academy of Social Sciences.