Will China further ease stringent regulations to boost its real estate sector?
China's property downturn could lead to a more flexible approach to labor migration by loosening some of its rigid hukou system. More than 20 cities now allow people from anywhere in mainland China to change their official residency status under a system known as “hukou.”
In China, hukou is linked to social security, and migrants can transfer their urban status by purchasing a home in the city.
What is a family register?
Hukou refers to China's household registration system, which officially identifies and records the whereabouts of Chinese citizens, linking individuals to a specific geographic location, usually their place of birth or where their family is registered. Hukou registration is essential for accessing social services such as education, healthcare, and employment opportunities within China. It has historically been used to control migration and population distribution within China.
Since its establishment in 1958, China's household registration system has classified every citizen into “agricultural” or “non-agricultural” household statuses that are tied to a specific location. Over time, the system has become increasingly complex. Since the 1980s, China has decentralized household registration administration and related policymaking, transferring authority from the central government to local governments at the municipal level.
Rules on household registration, which have historically restricted population movement and are often cited as contributing to China's urban-rural gap, have been relaxed for homebuyers in emerging cities such as Hangzhou and Nanjing, the South China Morning Post reported, citing a study by real estate research firm China Property Index System.
Addressing the barriers created by the system has remained a persistent challenge throughout China's decades-long reform process and is receiving renewed attention ahead of the Communist Party Central Committee's economy-focused third plenary session scheduled for two weeks.
Local governments are experimenting with different approaches to attract potential homebuyers, such as simplified re-registration procedures that grant access to comprehensive urban services such as education and healthcare that exceed those typically available in rural areas.
Similar incentives are being trialed in most populated areas of mainland China, except for Hainan province and five major cities: Beijing, Shanghai, Shenzhen, Guangzhou and Tianjin, the South China Morning Post reported.
More than 66 percent of China's population lived in cities last year, but less than 50 percent were officially registered as urban residents, according to data from the National Bureau of Statistics.
Family register and its shortcomings
China's household registration system has several serious shortcomings.
First, urban-rural disparities are pronounced as urban hukou holders have better access to social services, education and health care than rural hukou holders. This disparity perpetuates social inequality and limits opportunities for rural residents to improve their economic and social status. Second, the hukou system imposes severe migration restrictions, particularly disadvantaged rural residents who wish to migrate to cities in search of better employment prospects. Migrant workers often face discrimination, lack of social security and uncertainty about their legal status, further exacerbating their sense of marginalization.
Furthermore, the hukou system can lead to family separations when families migrate to urban areas but are unable to change their hukou status, making it difficult for children to access basic services and education. Economically, the hukou system can impede labor mobility and the efficient allocation of human resources, affecting overall economic growth. Moreover, critics argue that the hukou system violates the right to freedom of movement and residence within the country, raising human rights concerns. Despite recent reforms aimed at easing some of the restrictions, the ingrained nature of the hukou system poses a challenge to any meaningful reform efforts and remains a subject of debate and scrutiny.
In an article published in Science Direct titled “What should economists know about China's current hukou system?”, author Yang Song argues that China's current hukou system has negative effects on rural-urban migration, economic efficiency, and equality by reducing the expected benefits from migration.
In his article China's Hukou System and Urban-Rural Inequality, Max Masuda-Farkas features economists Holger Sieg (University of Pennsylvania), Chamna Yoon (Korea Advanced Institute of Science and Technology) and Zhipeng Zhang (Southwestern University of Finance and Economics), who highlight that migrants from poor rural areas face significant barriers to obtaining permanent hukou registration in big cities, hindering their access to economic opportunities and educational advancement.
As a result, most rural migrants are only given temporary or provisional hukou status, which gives them fewer rights than permanent residents and limits their access to basic public services such as health care, unemployment insurance, and housing funds. Local governments have erected numerous obstacles for migrant children, barring them from a quality public education and, in some areas, preventing them from taking university entrance exams.
The future of family registers
China's recent adjustments to its household registration system mark an important step toward closing long-standing gaps in urban-rural opportunity. The reforms aim to increase labor mobility, stimulate the housing market, and reduce social inequality by relaxing residency restrictions in certain cities and promoting real estate incentives. However, challenges remain to ensure equal access to social services and economic opportunities for all residents, highlighting the ongoing need for China's continued reform efforts and careful management of urbanization trends.