Inclusion without abolition in China’s hukou system

China’s State Council, on May 22, issued guidelines to ‘promote basic public services at people’s place of residence,’ regardless of hukou, or residence registration status. These guidelines direct local governments — more specifically, megacity administrations — to improve and enhance their delivery measures in the domains of education, public rental housing, social and medical insurance, and a range of social assistance measures for the entire resident population within their administrative jurisdictions. The aim is to resolve the ‘last mile’ problem in fully integrating rural migrants into megacities.

Hukou reforms since 2014

Hukou is an instrument of social control by the ruling party-state, originating in the 1950s, that distinguishes people as belonging to rural and urban areas based on the official registration of their place of residence. In the Mao era, the system was intended to limit internal migration and manage resource allocation under the prioritisation of rural development. The economic reforms after 1978 loosened restrictions to allow labour mobility to industrial regions and urban centres, while retaining the institution of Hukou. It functions as an internal passport, as access to social services and government provisions is tied to residential registration. From 2014 onwards, the government has been pushing incremental reforms to the system to align with national urbanisation plans and gradually equalise social benefits for migrants and locals, beginning with the conversion of rural to urban hukous in smaller cities. While nationwide implementation has progressed gradually, with relatively well-off provinces like Zhejiang joining in the last two to three years, megacities have remained outside the purview until now.

The May 22 guidelines build on the decisions of the Third Plenum of the 20th Central Committee of the Communist Party of China (CPC) in 2024, which directed the removal of restrictions on access to social insurance at the place of employment. This was further reiterated in a five-year people-centered urbanisation action plan instituted by the State Council in July 2024 to raise the permanent urban residents from 66.16% (932.67 million) in 2023 to nearly 70% (estimated around 987 million) by 2029.

According to China’s National Bureau of Statistics, at the end of 2025, the country’s ‘floating population’ (liudong renkou) or rural migrants, stood at around 358 million, making up 25% of the population. Along with demographic concerns, the Central government is also guided by the economic imperative of increasing domestic consumption and hastening efforts to create a national unified market with the free flow of capital and talent. This also intersects with efforts to incentivise the mobility of young talent into frontier regions such as Xinjiang to support regional development.

The party-state, over the last three years, has widely promoted the concept of ‘investing in people’. Now included in the new 15th Five-Year Plan, the concept is a new development orientation to raise knowledge and skills to transform ‘human resources into human capital’ and move from ‘a demographic dividend’ to a ‘talent dividend’. People-centred urbanisation, through the inclusion of long-term residents by relaxing household registration rules, is a critical component of this framework.

Another driver is the growth of flexible and new forms of employment — shorthand for gig and platform workers — who are over 200 million, out of the country’s total 740 million workforce. Rural migrants are absorbed into this burgeoning sector, though labour conditions remain precarious.

Following the COVID-19 pandemic, the Central government, in conjunction with the official trade union, has sought to create a comprehensive national policy framework covering labour protection and political supervision. Taken together with frequent cases of labour discontent, the party-state views gig and platform workers as a key labour constituency that needs to be regulated and politically incorporated.

Persisting structural issues

Interestingly, the word hukou itself is only mentioned once in the latest guidelines. Since 2014, with the onset of reforms, efforts have been made to replace it with concepts like “permanent resident population” (changzhu renkou) and “place of actual residence” (changzhu di) to build inclusivity. However, structural constraints continue to constrain the reform measures.

Local governments bear responsibility for delivering welfare and public services, with financing largely dependent on fiscal transfers from the Central government. The real estate sector, a key source of local finances, remains unstable, thus affecting city governments’ budgets. While the Central government has indicated resource transfers and compensations to migrant-receiving cities, there are no commitments to new spending. The guidelines do not address or show a clear intent to resolve structural gaps. For instance, differing social insurance standards between well-off coastal cities and inland provinces (migrant-sending regions) mean that migrant workers’ monthly contributions are at higher rates, but they receive lower benefits. Similarly, migrants who receive medical treatment in major cities but are enrolled in poorer regions will still receive lower reimbursements and face lower coverage limits. Further, the guidelines do not compel employers in the gig economy to strictly enroll workers in welfare schemes. In all, much room is left for the use of discretion by local administrations.

This recalibration only goes to show that the hukou system continues to remain in place and that there are no significant changes to the status quo for migrant labour.

(Anand P. Krishnan is a Fellow at the Centre of Excellence for Himalayan Studies, Shiv Nadar Institution of Eminence, Delhi NCR, and Assistant Editor of the journal, China Report)