Written by Dongyu Sun.  Edited by Susan Finder and Changhao Wei.

This post also appears on the NPC Observer.

On December 15, 2005, a loaded truck rolled over on a mountain road in Chongqing, crushing a trishaw carrying He Yuan and her two friends to school. All three perished in the accident. What thrust this tragedy into the national spotlight, however, was the drastically different amounts of compensation their families received. The trucker’s employer settled with the families of Yuan’s friends for over 200,000 RMB each, but was willing to pay hers only 80,000 RMB—because she, unlike her classmates, had a rural hukou (or household registration).[1] The company cited a 2003 Supreme People’s Court (SPC) interpretation on the application of law in personal injury cases (2003 Interpretation), which created two separate standards for compensating the deaths of urban and rural residents.

As a result of this effectively hukou-based rule, countless victims’ families have found themselves in the same position as Yuan’s. The Chinese public has dubbed this phenomenon “same life, different values” [同命不同价] and has persistently criticized the 2003 Interpretation. Some citizens have requested that the NPC Standing Committee (NPCSC) conduct a constitutional review of the Interpretation.

It was not until 2020 that the NPCSC’s Legislative Affairs Commission publicly addressed these requests in its annual report on “recording and review” (R&R) [备案审查]. This report’s timing and content are significant. Below, we will first take a closer look at the 2003 Interpretation and the controversy surrounding hukou-based compensation standards, before returning to the Commission’s report.

The SPC’s 2003 Interpretation

Under article 15 of the 2003 Interpretation, in a civil case where the deceased victim was an urban resident, the defendant must generally pay twenty times the previous year’s per capita disposable income of urban residents of the relevant province for the victim’s death. For a victim who was a rural resident, the previous year’s per capita disposable income of rural residents[2] is used as the base instead. The urban per capita disposable income is consistently several times higher than its rural counterpart across China. In practice, courts mainly used the victim’s hukou to determine the applicable standard. Article 12 of the 2003 Interpretation contains similar residence- (hence hukou-) based compensation standards when the victim has been permanently disabled. At the time, the standards in the 2003 Interpretation were considered appropriate for China and in line with official policy that made distinctions based on hukou.

Within a few years, the SPC publicly acknowledged that the dual standards created inequities between urban and rural victims. Then-SPC President Xiao Yang told media in 2007 that the SPC had already formed “a preliminary view” on “same life, different values,” and would issue new rules after that year’s NPC session. But in 2008, an SPC vice president disclosed that it was not possible for the SPC to reach a consensus on a replacement standard.[3] Instead, the SPC issued measures in 2006 and 2011 directing the lower courts to consider factors in addition to hukou (such as a victim’s “habitual residence”) in applying the 2003 compensation standards. Basic level courts encountered many difficulties in implementing this guidance, however, so hukou largely remained the determining factor.

The issue of the dual compensation standards arose during the drafting of China’s Tort Liability Law [侵权责任法].[4] One draft would have set a uniform national standard for death compensations, based on the average annual salaries of urban employees nationwide, while another would have provided an individual-based rule.[5] The NPCSC in the end did not adopt either provision and left the rules in the 2003 Interpretation intact. The Tort Liability Law did make one limited change in response to cases like He Yuan’s: under article 17 (now codified as article 1180 of the Civil Code [民法典]), if multiple people died because of the same tort, a court could award their families the same amount of death compensation without regard to their individual circumstances.

From these developments, it is clear that the authorities considered that the hukou-based rules fit the reality of unequal development of China’s urban and rural regions.[6] They thought that an individual-based rule would give judges too much discretion, but that uniform rules would either create too much burden for rural tortfeasors (if based on urban income level), or be unfair to urban victims (if tied to rural income level). So the 2003 Interpretation, plus the SPC’s flexible measures, were considered the least worst.

Fang Shimin’s Request for Review

Over the years, Chinese citizens have requested the NPCSC to review the validity of the 2003 Interpretation through its R&R process, explained here in more detail. In sum, that process is an oversight tool that empowers the NPCSC Legislative Affairs Commission (LAC) to reject a sub-statutory legal document if it deems the document unconstitutional, unlawful, contrary to the Communist Party’s major policies, or otherwise “clearly inappropriate.”

The Southern Metropolis in January 2021 reported on such a citizen request and the LAC’s reply. Mr. Fang Shimin, a retired manager of an Anhui mine company with an interest in the law, wrote to the LAC in mid-2018, arguing that the 2003 Interpretation’s hukou-based rules violated the guarantee in Article 33 of the Constitution that all citizens are “equal before the law.”

The LAC (specifically, its Office for Recording and Reviewing Regulations) disagreed with Mr. Fang. It responded to him in December 2018, after having consulted with the SPC and its own Office for Civil Law. The LAC explained that the differential compensations were constitutional because they did not in fact make up for the victims’ disabilities or lost lives, but were instead economic relief to the victims or their families. The LAC’s reply did also acknowledge that there were some issues with the 2003 Interpretation that need to be “studied and resolved,” including how to define the compensation more reasonably so that “most citizens would accept them.”

Recent Policy Change & Reform Pilots

The turning point for the hukou-based compensation rules came in late 2013, when the Communist Party decided to “accelerate” hukou reform. A few months later, the State Council issued a major policy document that called for abolishing the distinction between urban and rural hukou and replacing both with “resident hukou” [居民户口]. By February 2017, all mainland provinces had implemented this reform. The State Council also ordered companion reforms to other institutions (e.g., social welfare programs) consistent with the uniform “resident hukou” system, but one government researcher said at the time that there would be “a long way to go” before the urban-rural disparity in social benefits disappears.

After a few years of development, in April 2019, the Party Central Committee and the State Council issued a joint policy document to further hukou reform and to promote integrated development of urban and rural areas. The document specifically requires “reforming the personal injury compensation system and equalizing compensation standards for urban and rural residents.”

To implement this directive, the SPC soon required provincial-level courts to initiate pilot programs to equalize compensation standards. According to our research, almost all courts have decided to conduct the pilots within the whole province, while a few limited their scope to a few designated cities. The majority of provinces are experimenting with uniform compensation standards in all civil cases involving personal injury, but a few are testing them in only a subset of tort cases, for instance, those arising from traffic accidents. As for the new compensation standards, most provinces are now applying the urban standards under the 2003 Interpretation to all victims, whereas some are trying out new formulae, such as the per capita disposable income of all residents of a province.

The pilots are still underway as of this writing. The SPC has not indicated when they would end.

The LAC’s Report

It was against this backdrop that the LAC again responded to citizens’ requests to review the SPC’s 2003 Interpretation. According to its 2020 R&R report, some citizens (like Mr. Fang before them) argued that “the inequalities in judicial trial practices that have resulted from the [2003 Interpretation’s] different calculation standards were inconsistent with the relevant constitutional spirit”—namely, the equality principle.

The LAC responded:

After review, we think that as the society develops and makes progress, the State has proposed the integrated development of urban and rural areas, and the gaps between urban and rural development and the residents’ living standards will gradually narrow, so the differences between standards for calculating compensations for personal injury to urban and rural residents should accordingly be abolished.

我们审查认为，随着社会发展进步，国家提出城乡融合发展，城乡发展差距和居民生活水平差距将逐步缩小，城乡居民人身损害赔偿计算标准的差异也应当随之取消。

The LAC then mentioned the ongoing pilot programs to equalize the compensation standards as authorized by the SPC and reported that it had “advised” the SPC to “timely” amend its 2003 Interpretation after “summarizing lessons learned from the pilots.”

It thus appears that the LAC dodged the constitutional question raised by the citizens’ requests. Instead, it relied on two other grounds under the R&R’s governing rules—new state policies and changed realities—to disapprove the hukou-based rules in the 2003 Interpretation. Yet, curiously, Liang Ying, head of the LAC’s Office for Recording and Reviewing Regulations, affirmed the constitutional nature of the LAC’s review of the 2003 Interpretation in an interview with the Legal Daily. If so, then why did the LAC was not more forthcoming about its true reasoning in its official report?

It might have concerns for the ramifications of using the Constitution to invalidate the SPC’s hukou-based standards. Although the post-2014 hukou reforms have removed the urban-rural classification, they have neither ended the hukou system nor instantly improved the urban-rural inequality created by the prior classification. Most citizens continue to obtain critical social services and benefits—compulsory education, healthcare, affordable housing, unemployment benefits, pension, veterans’ benefits, among many others—from the local government at the place of their hukou. (Rural migrants may access urban benefits, but only if they meet the often-stringent residency requirements, especially in megacities.[7]) Except under a few now-integrated welfare programs, rural residents in general still receive social entitlements of inferior quality. For instance, the State Council maintains separate rules for the urban and rural subsistence allowance programs. And by end of 2020, only 7 of 31 mainland provinces had achieved (rough) parity of subsistence allowances between urban and rural residents; in all other provinces, eligible urban residents received at least 20 percent (and up to 130 percent) more allowances than rural residents.

Were the LAC to reject officially the 2003 Interpretation’s dual compensation standards on constitutional grounds, it would render other hukou-based rules—rules that disfavor rural residents—susceptible to the same constitutional challenge. By contrast, relying on policy and societal changes that are specific to personal injury compensation would give the LAC more leeway to turn away constitutional attacks on other hukou-based rules. By framing the controversy over the 2003 Interpretation as one of policy, therefore, the LAC can signal that other hukou-based rules are open to change, but also make clear that the changes will come only at the authorities’ discretion.

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SUN Dongyu graduated from the School of Transnational Law of Peking University in 2018, with a Juris Doctor degree in American law and a Juris Master degree in Chinese law. He was recently awarded a German Chancellor Fellowship by the Alexander von Humboldt Foundation in Germany for the year 2021–22. He currently works as a research assistant to Professor Susan Finder. 

Changhao Wei is a Postdoctoral Fellow at Yale Law School’s Paul Tsai China Center, where he focuses on China’s legislative process and constitutional enforcement mechanisms. He is the founder, manager, and editor of NPC Observer, a website that covers China’s national legislature, the National People’s Congress.

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[1] Rural hukou was officially “agricultural hukou” [农业户口], and urban hukou “non-agricultural hukou” [非农业户口].

[2] The Interpretation uses the term “per capita net income of rural residents” [农村居民人均纯收入], but the National Bureau of Statistics has stopped using that metric since 2016 and has replaced it with the “per capita disposable income of rural residents” [农村居民人均可支配收入].

[3] See Zhang Xudong [张旭东], The Theoretical Paths to Solving the Conundrum of “Same Life, Different Values” [破解“同命不同价” 难题的理论路径], Mod. L. Sci. [现代法学], no. 6, 2008, at 97, 98.

[4] See Zhang Xinbao [张新宝], An Interpretation of the Death Compensation System in the Tort Liability Law [《侵权责任法》死亡赔偿制度解读], China Legal Sci. [中国法学], no. 3, 2010, at 22, 23.

[5] Id.

[6] Zhang, supra note 4, at 98.

[7] See, e.g., Kam Wing Chan, China’s Hukou System at 60: Continuity and Reform, in Handbook on Urban Development in China 59, 73–74 (Ray Yep et al. eds., 2019).