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China going nowhere on hukou reform

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Migrant workers stand in front of a building at the construction site of Changxiang Gardens development complex in Fengrun District, Tangshan City, Hebei province, China, 28 January 2016. (Photo: Reuters/Damir Sagolj).

In Brief

China’s hukou (household registration) system is often criticised for hindering the free movement of labour and creating inequality. In recent years the hukou system has undergone considerable reform. But is this enough to turn around the trends in China’s regional inequality?


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In essence, hukou is a population recording system that the government uses to budget for social provisions. The differential treatment associated with different hukou statuses has implications for public finance and social insurance. Funding sources are organised locally by provinces or by cities depending on the type of services or benefits.

In 2003, China ended the practice of evicting migrants not registered with the proper hukou status by force. But since then, the social welfare benefits given to hukou migrants have been gradually reduced.

Before 2014, most social security coverage was linked to one’s hukou status, which meant that even if migrant workers had paid taxes in cities, they were not able to gain access to public services and welfare coverage there. For the labour exporting provinces — which are often less developed — migrant workers did not pay tax locally, but came back to access social welfare coverage. In this sense, not only did the poorer parts of the country suffer from brain drain, they also subsidised the richer regions by paying for the welfare and social services of the migrant labour force.

For years, governments in the underdeveloped areas complained about this unfair treatment and called for ‘top-level design’, by which they meant introducing a unified social insurance system nationwide. But this is easier said than done.

Income and living costs vary greatly across different regions. The gap can be big even between urban centres and peri-urban areas, not to mention between richer cities and poorer rural areas nationwide. In China, it is technically impossible to design a universal pension system with the same level of benefits throughout the nation. As a compromise, some large cities such as Shanghai and Guangzhou introduced layered social security contribution and entitlement systems, through which migrants holding rural household registration can contribute less and claim less.

Under the 2014 reform these options do not have to be defined according to hukou status and all residents can choose from different social security packages. Across provincial boundaries there is a growing understanding that there is no need to develop a single nationwide social insurance scheme. A portable welfare contribution record and an entitlement arrangement across regions, which does not trap the hard-earned money of migrants, are more realistic.

The pre-2014 hukou system merely reinforced policy biases in favour of cities against villages, coastal areas against inland areas, and larger cities against smaller cities. Social services such as education and medical care have become concentrated in larger urban centres. Rural and remote areas and even smaller urban centres do not have all the basic social services that people in large cities would expect.

Such gaps make large cities attractive to migrants who want to get the same opportunities for themselves or for their children. Fast increases in population has driven up house prices across cities in China. But people’s impression is that it is a lot easier to accumulate wealth in larger cities. As a result, more people want to move into these large cities in the hope that they can benefit from the better lifestyle, accumulate wealth quickly and create a better life for their children.

Right now, cities such as Beijing and Shanghai already have populations rivalling that of Australia. These cities, even with tight population control, find themselves facing some of the biggest governance challenges in the world.

Confronted with this situation, the Chinese government has tried to stop or even reverse the trend of population concentration in the largest cities. The approaches that have been tried to achieve this include tightly controlling migration into these cities. The 2014 hukou reform was partially designed to achieve this, which has so far been successful in Shanghai and Beijing but not in Guangzhou and Shenzhen. The government has also focused on developing new large cities that are equally or even more attractive than current cities, as well as satellite cities that are well serviced and adjacent to existing large cities.

At the beginning of the 13th Five Year Plan in 2015, achieving ‘real urbanisation’ was high on the government agenda. There were high hopes for hukou reform, but the actual policies implemented so far have turned out to be less progressive. In the largest cities such as Beijing and Shanghai, gaining hukou status has become even more difficult.

The government hopes that by improving services and prospects in other cities, tight hukou control can be more easily phased out. But successful ‘real urbanisation’ policies are nowhere in sight.

Bingqin Li is Associate Professor and Director of the Chinese Social Policy Program at the Social Policy Research Centre, University of New South Wales.

2 responses to “China going nowhere on hukou reform”

  1. It is likely to be one of the most difficult reform tasks in China to reform its Hukou system, given the fragmented nature of government services responsibilities including school education and some other social security as mentioned by the author.
    Acknowledging the difficulties, what does the author see is the most practical way or ways to undertake Hokou reforms?
    Arguably, a top-level design should have a well considered and thought-through framework and practical ideas to go forward.
    It may be helpful to have a coordination and adjustment program by the central government to facilitate the expansion and provision of services such as school education, in addition to the portable social security provisions. It may involve some additional funding from the central government, although a substantial part of that funding could come from those regions where there are net negative population migration, that is people/students are moving away to other regions.

    • You are spot on. It is ultimately not about Hukou, it is about social services, public goods and opportunities. People move out of their hometown for these reasons rather than just for Hukou. Moving funding away from a population losing region can be tricky as the cycle of migration may reverse. China tried this in the education sector by closing down schools in rural areas because of emigration in the 1980s. This resulted in worse education in rural areas and probably more migration.

      There are two lines of solutions: how to cope with migration and how to slow down migration.

      Several practical solutions are being tried to cope with migration. 1)Severing Hukou from social service entitlement. The current attempt to link it to the place of residence rather than the place of birth is a better way forward. 2) Coping with population flow. The reform of transferability of social insurance account can be somewhat helpful. But the implementation is far from coordinated.

      There are also attempts to reduce the attractiveness of the most developed cities by narrowing the gaps. 1) Improving services and infrastructures in poorer regions. This is happening for a while. 2) Improving the opportunities for people living in less developed regions. This is also happening partly attribute to the faster economic growth in the western and central provinces.

      For the future, a more in-depth and dynamic understanding of the causes of migration is needed. For example, opportunities associated with education, life quality associated with cultural infrastructure, old age care, social protection, local governance style in the population losing regions are still far from being solved. Some of these can be centrally coordinated, but some may not.

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