March 19, 2011

A Market for Hukou

Amid the soaring housing prices in numerous major cities in China, some local governments have proposed contractionary housing market policies to cool down the fervency, including limiting the purchase of additional new housing and that by nonlocal residents. In Beijing, temporary residents without a Beijing hukou are now forbidden to purchase residential housing until they have been working and paying taxes in the municipality for five years. Some netizens even suggest that Beijing residents (hukou holders) make money by faking marriage with nonlocals who have the intention of buying a house in Beijing, and divorcing afterward.

The ill-justified hukou system has been a long-time issue, constantly debated among Chinese intellectuals. While seriously doubting the equity, efficiency and validity of this current housing purchase limitation policy, I cannot stop thinking about allowing people to trade their hukou under the existing system, so that people (like me) may get some extra cash by leasing out their little used Beijingese ID. If the government established the system only to limit the number of residents in urban areas to avoid congestion, then exactly who live there should not be an issue.

This cap-and-trade system can potentially make a huge market and a partially efficient solution, if the trading cost and barrier could be lowered to ground.

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