China: Future Migration Hotspot?

China is still a sending state, more migrants leave than come in. According to the World Bank, about 1.5 million people emigrated from China in 2012, on net. I am not sure how much of that includes emigration to Hong Kong and Macau. Still, compared to the United States, which received, on net, 5 million immigrants, China does not seem like a major attraction to migrants. But, will China always be a sending state, or will it soon begin to receive net immigration? Immigration is already an important facet of the Chinese economy, and there is reason to suspect that China, like Western Europe and the United States, will, down the road, become a receiving state.

Historically, China has always been a sending state. The World Bank measures net migration as the number of immigrants minus the number of emigrants. China has had a negative figure since 1962, which is when the data I have starts at. But, net emigration does not imply no immigration, and, as their economy continues to grow, with a growing demand for labor, immigrants have turned into vital means for growing productivity. While the amount of net emigration remains significant — although, the data includes emigration to Hong Kong and Macau (two important net recipients of Chinese migrants) —, the number has been steadily decreasing since the early 2000s: from 2.2 million immigrants, on net, to 1.5 million.

The country, however, is going through a structural change. It is going through a process similar to that of the U.S., between 1820–1910. Industrialization has brought with it one of the largest internal migrations in the world, as large amounts of people move between provinces. This includes movements from rural areas to the cities, and movement from poorer (typically, rural and agricultural) to wealthier regions. While there are not always known opportunities for higher paying jobs in the cities — migrants are often displaced by a falling demand for labor in the rural areas —, it is true that Chinese industry is a sponge, in need of a growing labor supply.

Domestic labor is not always enough, especially given China’s low population growth rate (0.5 percent, in 2012). If the demand for labor increases, and the labor supply is more-or-less stable, we should expect higher wages. According to the “neoclassical” theory of migration, where changes in relative wages cause migration between countries, we expect rising Chinese wages to attract migrants. This does not necessarily mean, though, that immigration will occur up until wage rates between countries are equalized — in fact, emigration to China may push wages up, inviting even more immigration.

If there are economies of scale, larger populations mean higher real wageMonopolistically Competitive Markets. As population grows, all else equal, so does output. This lowers the average cost and price, raising the real wage. Larger population also means a larger amount of firms, greater product diversity, and the accompanying welfare gains to the consumer. This result was formalized by Paul Krugman, in his work on trade theory.

Trade, or the movement of goods and capital, creates the same effect as an increase in population: an increase in the division-of-labor. But, if trade is restricted, or if bad policies elsewhere leads to low growth and high unemployment, the movement of labor may replace the movement of goods. Consider some of the “stylized facts” of sending states: history of low growth, extractive political institutions, and relatively low wages. Sending states each have a division-of-labor which is significantly isolated from the world’s. While China’s political climate may still be unattractive to many, the economic factors may grow in relevance. The country is surrounded by many others which are worse-off, and growing Chinese wage rates will become increasingly attractive.

Other factors, besides relative wages, that determines migration are “linkages.” Think of a linkage as a shared history. For example, many Indians migrated to the United Kingdom, because India is a former colony. Similarly, Spain attracts a disproportionate amount of South American migrants, because of their shared history. Countries with linkages are more likely to be involved in a migration pattern than countries without them, all else equal. China has shared histories with not only its neighbors (many of which, however, are also growing and/or prosperous), but also with populations one might at first suspect. The Chinese have invested heavily throughout Africa, and many Africans have migrated to do business in China. As African networks in China grow, this might attract larger flows in the future.

Growth, however, does not always mean less emigration. The evidence shows that growth may actually lead to increasing emigration rates, below a certain threshold per capita income,

Emigration Flow to GDPPC

In early stages of development, other factors may dominate the marginal increase in relative wage. Since the poor are typically credit constrained, rising incomes will help them finance migration decisions. Networks in other countries may also attract large emigration flows. If early flows were restricted by asymmetric information, where potential migrants were simply unaware of the opportunity, growing networks in receiving states will correct this asymmetry and increase the flow of migration. Changes in relative income are important to consider, too. If early growth raises certain incomes disproportionately, the relative wage rates between countries for the non-affected income groups remain the same. Maybe this explains, in part, why China attracts high-skilled labor from South Korea and Japan, but exports low-skilled labor.

But, China’s GDPPC (GDP per capita) is just about at the threshold in the data. According to the World Bank, China’s 2012 GDPPC, in current U.S. dollars, was about $6,000. Net emigration has fallen since the early 2000s, and real wages in China continue to grow. Is China poised to become an important receiving state in the future? This will bring with it interesting problems. An immigration shock provokes hostility amongst a homogenous local population, leading to civil rights issues — issues the Chinese government will have to deal with. It will also have a significant effect on the global economy. The U.S. became a major industrial power in large part thanks to immigration. But, the U.S. started out with a relatively small population. China is already the largest country on Earth and there is still a growing demand for labor, despite the already large labor force. How will the Chinese government approach the “immigration problem?” How will this affect the United States and Western Europe? By 2070, or sooner, we might see large communities of American workers in Beijing!

One thought on “China: Future Migration Hotspot?

  1. Xerographica

    In the 50s here in the US…unions were at the height of their power….and the top income tax rate was 92 percent. A tipping point was reached for manufacturers…and more and more jobs left what is now the rust belt. They moved to the sunbelt and didn’t stop there.

    According to Ha-Joon Chang

    “People outside of China mostly don’t know that every year there are hundreds of thousands of local riots, industrial strikes, and demonstrations.”

    Will history repeat itself? Will China cave to its workers and inadvertently send jobs to Africa? Will it increase its minimum wage and give workers more collective bargaining power? Will it start imposing higher taxes and more regulations?

    Right now China is more attractive than Africa. But China can certainly make itself less and less attractive…and in doing so…make Africa more and more attractive. And what if some African countries are smart enough to create SEZs like Deng Xiaoping did?

    The difference between the US then…and China now…is that China isn’t a democracy. Workers can’t vote the bums out for failing to provide free lunches.

    Personally, I’m a fan of jobs being given to the poorest people in the world. So if China called me and asked for my advice…I’d encourage them to make themselves less attractive to business owners. And then I’d call Africa and tell them to set up plenty of SEZs.


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