China’s recent “new normal” growth and ongoing economic reform is destined to hurt the interests of rural migrant workers. In response to that, what Chinese government proposes is to let them go home and become self-employed without fully understanding the difficulties for them to start up businesses.

Time to go home

China’s economy had retained two decades of red-hot double-digit growth before losing steam in recent years. A huge exodus of rural population seeking urban employment in Chinese coastal cities underpinned such spectacular growth. Over the past 20 years, rural migrant workers despite attaining low education had been working diligently to power China as the world’s manufacturing powerhouse; they also contributed to China’s urbanization process, mainly by ceding their rights to the use of their farmland to the government and building the country’s new highways, shopping malls and railways. However, their quest for becoming urban residents has never been justified by China’s Hukou (housing registration) system, and most recently, hit further by the country’s economic slowdown.

As China’s economy slows and government tries to steer away from the old growth pattern, many factories that employ migrant workers have been forced to shut down or relocate. Nevertheless, those people that stay are making meager profits. Seeking for urban employment, therefore, has become less attractive for rural population. Official data published by National Bureau of Statistics shows growth rate for the number of new rural migrant workers has decreased steadily since 2010. Some are mulling over going back home, as their earnings cannot catch up with the rising living costs in cities.

“I left (Shenzhen) in 2014. They (foremen) did not pay me a salary for three consecutive months ” said PANG Xiaofeng, who worked as a construction worker for more than 8 years in Guangdong province before returning home. To certain degree, Xiaofeng’s experience said something about China’s overheated real estate sector: that is, no matter how frequently Chinese government implements supportive policy to encourage people to buy houses, something has gone wrong on the supply side.

But Xiaofeng was not very sad that he lost jobs in the cities. He felt the current system (Hukou, social securities and healthcare) still distinguished people like him from urban residents. “I cannot properly blend in with the city life. They (urban residents) treat me very differently,” he said. “I guess I just belong to the countryside, and it is actually not that bad to be here compared to 1 or 2 decades ago.”

More or less, Xiaofeng’ attitude represents a changing mindset of rural people towards urban life. They are no longer that eager to become urban residents after years of attempt and disappointment.

“Don’t you (urban people) like to come to the countryside now?” Xiaofeng joked at me, referring to a recent trend that urban residents like to visit the countryside during holidays as a means of relaxing and escaping from busy work, heavy air pollution and food safety concern in cities.

Entrepreneurship for returned rural migrant workers

China is likely to embrace a large wave of return migration in the next couple of years as its manufacturing output has recently shrunken to the weakest pace since 2008. Deeper analysis shows such trend has already begun since the global economic crisis, with 20 million migrant workers leaving the export-rich Pearl River Delta. The impact of a large-scale withdrawal of rural migrant workers from cities is uncertain, but Chinese government has already pointed out the solution to accommodate this labor force: encourage and help rural migrant workers start up their own businesses in their hometowns.

Early in 2009, the central government started speaking up entrepreneurship for rural migrant workers. They guided the local government to provide entrepreneurship training and offer financial incentives for rural starters. In Chongqing, China’s leading source of rural migrant labor, government provides returning labor who establishes their own businesses with no more than 150,000 yuan (approximately $23,024) of guaranteed loans. In Jiaxin city, rural starters enjoy 30 percent off the benchmark lending rate to borrow money from banks. Last year, Beijing issues a document to promote the development of rural e-commerce, including calling for China’s e-commerce giants like Alibaba and JD.com to offer preferential policy to rural starters.

These strategies seem to work. Government website suggests approximately 2 million rural migrants have returned home in order to start businesses. Chongqing reports they have attracted 480,000 returned migrants to start their businesses over the past seven years.

Encouraging returned migrant workers to engage in entrepreneurial activities sounds like a plan to solve their unemployment problem and avoid social unrest. Academic research even suggests that it is a more effective way to alleviate poverty and benefits the rural area in the long term. If migrant workers only send back remittance to support their families, it is never a sustainable circle to reduce poverty. Once they return, they can help revitalize rural economies by applying their skills and knowledge learned from cities.

Reality is gloomy

By calling upon returned migrant workers to be entrepreneurs, Chinese government appears to forget that entrepreneurship is not for every one. There are always more tears than smiles.

“The rate of failure of start-up businesses is higher than 95 percent in rural areas,” said Jiang Xiaojuan, an account manager at i20 Youth Development Platform in Shanghai, who helps rural entrepreneurs establish their own businesses.

Jiang’s work is to provide training and support to people from rural areas who plan to start up businesses. However, she said she did not feel too much direct government support; the current policy at most provokes people’s initiatives to go back home and to be entrepreneurs.

Xiao Yiming, a former marketing assistant at Social Enterprise Research Center in Shanghai, also said most rural entrepreneurs he dealt with were tight with money.

China’s rural entrepreneurs are currently keen on starting up businesses in two areas: online shops to sell agricultural products grown by their families, and rural tourism. But they are hardly successful in either of them when competing with their urban peers.

“There are really many great stuffs in the country side, but rural entrepreneurs lack commercial acumen to promote their products to the market,” Xiao told me. Xiao said that there was once a group of rural entrepreneurs coming to the Center to seek for business advice. They make brown sugar with a secret recipe passing on from Qing Dynasty, making it stand out among other producers. But they had never really communicated that message to the customers. What they did was to force down price to compete with others, therefore, losing money.

The end

For most rural migrant workers, going home seems to be an inevitable trend amid the current flagging economy. But training them to be entrepreneurs is also a farfetched solution to solve their problem.

Xiaofeng who left Shenzhen in 2014 now owns a restaurant in Xushe County, Jiangsu Province. His earnings are enough to cover his living costs in the countryside, but way below the wages he earned in Guangdong during the heyday of Chinese economy.