China’s Hukou Reform in 2022: Do They Mean it this Time?

By Eduardo Jaramillo

To a casual observer, recent pronouncements from the National Development and Reform Commission (NDRC) may appear to herald a sea change for China’s household registration, or hukou system. In December of 2021 an official from the NDRC, the country’s top economic policymaking body, boldly proposed allowing all rural migrants to obtain a hukou in all but a few of the country’s megacities. A few months later, the NDRC published a policy document calling on cities with populations under 3 million to get rid of hukou restrictions this year.

The hukou system codifies various social inequalities in China by dividing the population into two classes, rural and urban, to determine where citizens can receive public services. Meaningful reforms to the system would align with broader policy trends set off by President Xi Jinping; improvements to the system could be a natural component of Xi’s push for common prosperity, a campaign purportedly aimed at cracking down on China’s more egregious social inequities. However, a look at the recent history of hukou reform as well as analysis of Xi’s short term political considerations suggest that 2022 is not the year that China will pursue drastic changes to its household registration system.

Reform Around the Edges
For Chinese citizens, hukou status determines a wide range of social benefits and services: where they can receive healthcare, what kind of pension they’re entitled to, their ability to receive loans, which public schools their children are allowed to attend, and more. Activists in China have long called for abolishing the system on moral grounds. Chinese elites also recognize that doing away with the system could bring significant economic benefits, allowing China to more efficiently access untapped productive forces in the countryside. Chinese academics have argued for meaningful reforms, penning articles with titles like “The Economic Value of Freedom of Movement,” “Breaking Up the Ice of the Hukou System Will be a Breakthrough for Quickening Urbanization,” and “Hukou Reforms Won’t Harm the Interests of Local Residents.” Some have even pointed out that hukou reforms could contribute to solving the debt crisis plaguing China’s real estate sector.

In recent months, various city and provincial governments have announced reforms to their own local hukou systems. Last December, Shanghai revealed it would allow graduates of the city’s universities to acquire a coveted Shanghai hukou, and in February, China’s island province of Hainan announced it would reform household registrations into a unified system for all residents, urban and rural. Also in February, Zhejiang province’s government (the pilot province for many policies associated with Xi’s common prosperity push) also relaxed its hukou restrictions for recent graduates. In March, China’s top banking regulator encouraged banks to lend to “new urbanites” regardless of their hukou status.

These headlines are emblematic of a pattern in hukou reform that has persisted for years; incremental change around the edges of the system, but a general lack of truly radical reforms. These piecemeal efforts do little to improve the experiences of rural hukou-holders who live in China’s most attractive “tier one” megacities and make up a sizeable proportion of the country’s 375 million strong “floating population” of internal migrants.

Beijing has implemented some important reforms to the household registration system but has been unable to keep up with wave after wave of rural migrants. In 2014, China’s State Council announced its “National New-type Urbanization Plan (2014–2020),” which aimed at achieving transitions from rural to urban hukou for 100 million members of the floating population, and full access to public education for the children of all rural migrants. But steady flows of new rural migrants offset these efforts, resulting in an even larger migrant population living in China’s cities in 2020 than in 2014. The gap in access to social services and benefits in China’s cities is now wider than it was in 2014, and many children of migrants are still unable to attend public schools in the cities where they live.
Previous reforms from 2005 set the ambitious goals of eliminating hukou restrictions in many Chinese provinces, winning praise from western media outlets like the New York Times and the BBC. But the measures were not enough to effect major changes. Beijing ultimately gave local governments significant leeway in implementing the policies, and officials often opted to grant hukous to wealthy and highly skilled migrants, while refusing larger numbers of low-skilled migrants. In smaller cities that enacted major hukou reform during this period, many rural migrants did not consider the benefits of an urban hukou worth the cost of giving up rural land rights, a problem that persists today.

Even the recent NDRC announcement requiring cities with less than 3 million residents to liberalize hukou policy rings hollow given that the NDRC published the same policy in 2021 and 2020, and similar policies with lower targets in previous years going back to 2014—without major improvements to migrant experiences in China’s largest cities. For two decades, centrally directed hukou reforms have largely been watered down by local governments and offset by more migration, suggesting that recently announced hukou reforms will have little effect on the millions of rural migrants in major cities.

Stability as the Watchword
Two major themes emerged from China’s March 2022 Two Sessions, a key annual legislative session that provides policy guidance for officials across China: maintaining stability while promoting strong economic growth against considerable headwinds. These guidelines from China’s top legislature will likely undermine any efforts to make major changes to the household registration system.

As Xi gears up to break with precedent and become China’s president for a third term at the 20th National Congress later this year, he will aim to minimize any sources of instability that could enable critics to subvert him. Some observers have already pointed out that his handling of various issues may already be leading some to doubt his ability to steer China through a turbulent world. His sweeping crackdowns on tech giants and the subsequent decimation of their valuations, China’s tacit support for Russia’s invasion of Ukraine, and the recent turmoil in Shanghai during the country’s worst Covid-19 outbreak since the onset of the pandemic have caused concern in certain quarters in China, resulting in at least some form of internal criticism that threatens Xi’s carefully cultivated image as a capable leader. If top Chinese leaders wants to hit China’s official GDP growth target of 5.5 percent in 2022, the country will also have to overcome economic headwinds associated with a bearish stock market, high levels of debt, the zero Covid policy, and the war in Ukraine.

While hukou reforms offer policymakers some options for boosting the nation’s economic growth in the long term, the importance of maintaining social stability in the coming months will outweigh any such considerations. Not only could radical reforms be a potentially destabilizing force in general, but they would also specifically alienate the vested interests in maintaining current hukou policies (namely top officials and middle- and upper-class residents of China’s tier-one cities) at a time when Xi cannot afford to risk antagonizing such elites.

In 2022, efforts to maintain stability and economic growth will outweigh any push for meaningful hukou reform. Assuming Xi Jinping secures a third term later this year, his authority as a precedent-breaking core leader would likely allow him to overcome resistance in local governments that stands in the way of his common prosperity agenda and any hukou reforms it may entail, should he choose to continue pursuing such policies.

Looking beyond China’s 20th National Congress, the key obstacle to meaningful hukou reform may not be difficulty mobilizing the central government, but rather ensuring the compliance of local officials. In locations where rural migrants are already entitled to benefits and services, academics have documented cases where local governments avoid footing the bill by deflecting or outright refusing migrants’ demands for social entitlements or directing them to alternative service-providers. Ultimately, hukou reformers in China will have to grapple with the reality that Beijing may have its preferred policies, but officials lower down often have ways of getting around them.

Eduardo Jaramillo is a research intern with the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C.