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6 min read

What is China’s Hukou system?

The Hukou system in China is a unique and complex population registration system that has significantly impacted the country’s social, economic, and political landscape for many years. In this comprehensive article, we will explore the Chinese Hukou system, including its historical evolution and its effects on Chinese society. Additionally, we will analyze the advantages and disadvantages of the system, as well as the recent reforms aimed at addressing its drawbacks.

Chinese Hukou
A Chinese Hukou

Introduction to the China Hukou System

The Chinese Hukou system, introduced in 1958, serves as a means of population registration, akin to a census combined with an in-country passport. Its primary functions include controlling internal migration, managing social protection, and preserving social stability.

At its core, the Hukou system categorizes individuals into urban or rural status based on their registered city or local municipality. This status determines their access to essential services like healthcare and education.

The Control of Internal Migration

One of the Hukou system’s fundamental objectives is to control internal migration. Each Chinese citizen must be registered at birth, creating a database containing crucial demographic information such as their urban or rural status, legal address, sector of activity, religion, and physical description. This registration is a geographic, economic, political, and social control tool.

Historically, China restricted migration into major cities to prevent the emergence of slums and deteriorating living conditions. This measure aimed to maintain stability during the country’s rapid economic growth. While travel within China is allowed, it is subject to strict control and conditions, making it challenging for individuals to access education, employment, healthcare, and public services without the appropriate Hukou status.

The Evolution of the China Hukou System

Over the years, the Hukou system has undergone various reforms to adapt to China’s changing economic landscape. In the 1980s, restrictions on mobility began to be enforced more rigorously. Today, individuals intending to stay more than three days in a location outside their registered city of residence must obtain a temporary residence permit.

In the early 1990s, China introduced the “blue-stamp” Hukou permit, allowing more extensive migration to larger cities, particularly Special Economic Zones. Eligibility for this permit was primarily limited to those with direct relations with local and foreign investors.

After China’s entry into the World Trade Organization in 2001, regulations surrounding work permits were relaxed to accommodate the influx of foreign competition and job loss in the agricultural sector. Additionally, changes were made in 2003 to detain and process illegal immigrants differently following a widely publicized case.

China Hukou Conversion

Recent years have seen a shift in Hukou policy reform, making it easier for migrant workers to convert their status. However, challenges remain. Many rural Hukou holders are hesitant to relinquish their rural status because of the increasing value of agricultural land. This strategic decision allows them to rent property to migrant workers or prepare to sell the land to the government in future urban expansions.

Proportions of Rural Population Willing to Return Their Land in Exchange for Urban Hukou

The Pros and Cons of the Hukou System

Pros of the Hukou System

Despite its complexities and criticisms, the Hukou system in China has had several pros that have played a significant role in shaping the country’s social and economic landscape. Here, we’ll delve deeper into these advantages and highlight the key benefits of the Hukou system:

  • Access to Essential Services: One of the primary advantages of having an urban Hukou in China is its access to essential services such as housing, food, education, and healthcare. Individuals with urban Hukou typically receive preferential treatment regarding these vital aspects of life. This has historically helped ensure a basic standard of living for urban residents.
  • Education Opportunities: Holding an urban Hukou has been synonymous with access to quality education. Urban residents, especially those in major cities, have had better opportunities to enroll their children in prestigious schools and universities. The Hukou system has acted as a mechanism to distribute educational resources.
  • Employment Benefits: Urban Hukou holders have often enjoyed advantages in the job market. Many employers have preferred hiring individuals with urban Hukou due to its social benefits, such as health insurance, retirement allowances, and unemployment insurance. This has provided job security and financial stability for urban workers.
  • Real Estate Opportunities: The urban Hukou has been a prerequisite for purchasing real estate in many urban areas. This has allowed urban residents to invest in property and benefit from appreciating real estate values. Owning property has been a common way for Chinese families to build wealth, and the Hukou system has played a role in this process.
  • Social Security: Government-issued Hukou status has come with social security benefits, including health insurance, retirement funds, and housing funds provided by employers. These benefits have served as a safety net for urban residents, ensuring their well-being in times of need.
  • Migration Control: While this might not be seen as a direct benefit for individuals, the Hukou system has helped the Chinese government control internal migration. It was originally designed to maintain social order and prevent overcrowding in major cities, thereby averting the development of slums and potential social problems.
  • Economic Growth: The Hukou system has also played a role in driving China’s economic growth. By incentivizing individuals to live and work in rural areas, the government aimed to bolster agricultural output, which was essential for the country’s development. This strategic approach allowed China to ascend as a global economic powerhouse steadily.
  • Equal Distribution of Resources: In its earlier years, the Hukou system contributed to the equal distribution of resources between urban and rural areas. By restricting the free flow of labor, the government sought to balance the development of agriculture and industry, ensuring that both sectors received the necessary attention and resources.

Cons of the Hukou System

While offering advantages to urban residents, the Hukou system in China presents a range of significant disadvantages, particularly for those living in rural areas. Here are the key cons of the Hukou system:

  • Discrimination and Marginalization: One of the most significant drawbacks of the Hukou system is that it perpetuates discrimination against rural residents. Those with rural Hukou face lower access to education, healthcare, and a lower standard of living than their urban counterparts. This inequality creates a caste-like system within Chinese society, where rural citizens are marginalized and have fewer opportunities for social and economic advancement.
  • Rising Inequalities: The Hukou system contributes to rising inequalities across China. It restricts access to education, certain job opportunities, and unemployment benefits for individuals without urban Hukou. This discrimination based on Hukou status has resulted in disparities in public spending, access to goods and services, and the quality of life between urban and rural areas.
  • Limited Mobility: The lack of mobility for rural migrant workers significantly hinders China’s economic development. These workers often face challenges in accessing social payments, including support for their children’s education and medical assistance. The Hukou system effectively forces many rural migrant workers to return periodically to their rural homes to maintain access to social protection, which can disrupt their work and agricultural productivity.
  • An obstacle to Economic Transition: The registration system has become a major obstacle to China’s economic transition, particularly regarding the government’s goals to increase domestic consumption and reduce inequality. The disparities in social protections and access to resources between Hukou holders and non-holders create economic imbalances that hinder progress toward a more consumption-driven economy.
  • Lack of Long-Term Planning: The Hukou system’s restrictions can limit the mobility of China’s future leaders and workforce. This limitation is a potential threat to the country’s economic stability and growth in the long term. As many major cities face an aging population, preventing young talent from accessing urban opportunities may adversely affect economic vitality and innovation.

Impact on China’s Economy

China’s efforts to reform the Hukou system are driven by the need to address demographic challenges and stimulate economic growth. The country’s workforce has been shrinking since 2011, leading to increased labor costs and economic strain. Reforming the Hukou system aims to boost domestic consumption, attract talented professionals, and address labor market challenges.

As China transitions its economy towards the services industry and domestic consumption, minimizing restrictions on labor mobility and improving social services through the Hukou system is crucial for sustained economic growth.

Impact on Employees Working in China

The Hukou system also affects local and foreign employees working in China. Employers often assist employees in obtaining an urban Hukou, as it provides access to social welfare benefits. This assistance may include legal support, Hukou fee conversion payment, and indirect benefits like housing funds, health insurance, and transportation subsidies.

Local governments and companies offer incentives to attract talented professionals, particularly in large cities. Different cities have varying criteria for Hukou eligibility, and understanding these policies is essential for businesses expanding in China.

The China Hukou System Today

China has been gradually reforming the Hukou system to create more equality between different Hukou holders and promote labor market mobility. The central government aims to grant urban Hukou to 100 million immigrants by 2020. This reform is expected to stimulate consumption and improve the economic situation for migrant communities.

However, the government’s focus on attracting highly skilled residents to larger cities while stimulating smaller economies has created variations in Hukou policies across regions. Despite the benefits, the lack of mobility challenges China’s economic development.

Impact of COVID-19 on the China Hukou System

The COVID-19 pandemic has accelerated Hukou reforms as China seeks to stimulate the economy and alleviate issues related to migrant workers’ mobility. Reforming the Hukou system is a way to boost residential consumption and aid economic recovery.


The primary purpose of the Hukou system is to control internal migration, manage social protection, and preserve social stability in China.

Rural residents often face limited access to education, healthcare, and social services due to the Hukou system, economic disparities, and higher taxes compared to urban dwellers.

Urban Hukou holders in China enjoy advantages such as access to better education, healthcare, employment opportunities, and various social security benefits.

The Hukou system restricts labor mobility, making it challenging for migrant workers to move to urban areas and access social protections.

The Hukou system influences China's economic growth by shaping urbanization trends, labor mobility, and demographic challenges, but it also poses obstacles to economic transition.


China’s Hukou system, while complex and evolving, plays a crucial role in shaping the country’s social and economic landscape. As China continues to address the challenges and limitations of the system through reforms, the impact on its society and economy remains a topic of significant interest. Balancing economic growth with social equity is a delicate challenge, and the Hukou system’s evolution will continue to be closely monitored.

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.