System Shift: Countryside to Cityscape

China will remove all limits on household registration, or hukou, in cities with under 3 million residents and ease the limits in cities with populations between 3 million and 5 million, according to a five-year action plan issued by the Central Government on July 31. This means that more than 90 percent of Chinese cities will lift or ease hukou restrictions.

The plan, which aims to accelerate the process of granting urban hukou to former rural residents who have moved to cities, came shortly after the conclusion of the Third Plenary Session of the 20th Communist Party of China Central Committee. A resolution adopted at the session called for improving institutions and mechanisms for advancing new urbanization.

The goal is to ensure that eligible individuals who have moved from rural areas to cities enjoy the same rights as registered local residents, including social insurance, housing support, and access to compulsory education for their children living with them.

China has a dual hukou system, which categorizes household registration types into two categories: agricultural and non-agricultural. This system was originally implemented to ensure social stability and facilitate the restoration of production and business activities in the world’s largest agricultural country following the founding of the People’s Republic of China in 1949.

However, as China’s reform and opening up have progressed since first getting underway in 1978, and the demand for free movement of the population has increased, the dual household registration system is no longer in line with the country’s economic and social development. In response, China has begun to relax the management of non-agricultural household registration, allowing eligible members of agricultural populations working in urban areas to transition to said registration.

This initiative aims to advance the urbanization process.

From 2012 to 2023, China’s urbanization rate, which refers to the proportion of the permanent urban population among the total population, increased from 53.1 percent to 66.16 percent.

According to the newly issued action plan, the country aims to raise the rate to nearly 70 percent within five years.

The adjustments of the dual household registration system will mark an unprecedented change in China, one that not only aims to advance urbanization and provide equal rights and public services to all residents but also intends to expand domestic demand and influence the future of the real estate sector.

As more former rural residents are granted urban hukou, the number of urban industrial workers will stabilize, which in turn will help expand the country’s middle-income group and support medium-to-high-speed economic growth.

Granting urban hukou to former rural residents will stimulate demand for housing, education, healthcare and entertainment, and increase investment in urban infrastructure and public services.

Among the measures to ensure equal access to basic public services for former rural residents who have moved to cities, the most attractive is ensuring that they enjoy the same rights as registered residents in terms of housing and access to compulsory education for their children living with them. This is also a major incentive for the rural population to become urban residents.

However, some challenges will need to be addressed in the process of granting urban hukou to former rural residents.

For example, some rural residents working in cities are reluctant to settle permanently in their places of work due to their interests associated with farmland and homesteads in their hometowns.

Therefore, more targeted and appropriate policies are needed to increase the appeal of urban hukou, considering they have already been living as urban residents in the cities.