China’s property crisis forces local hukou reform, laying groundwork for national change

Local governments in China are experimenting with changes to their household registration system, leading some to wonder if national policy is forthcoming

China property

Mandy Zuoin Shanghai

Published: 9:30am, 2 Jul 2024

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A slump in China’s property market has helped remove some of the restrictions of its rigid household registration system, paving the way for a possible relaxation on labour migration at a major economic conclave.

More than 20 cities have allowed people from any region of the mainland to change their official residency under a scheme known as the hukou.

In China, household registration is tied to social benefits, and migrants can change their status in these localities as long as they buy a home in the city.

The new policy is one incentive some areas are trying to destock their cluttered housing inventory, according to property researcher the China Real Estate Index System (CREIS).

Rules for hukou registration – which restricts population mobility and is widely believed to be responsible for China’s wide gap between urban areas and the countryside – have been relaxed for home purchasers in these cities, including those deemed as emerging centres like Hangzhou and Nanjing, CREIS said in a report last week, citing recent policy changes.

Breaking down barriers formed by the system has been an unsolved issue in China’s decades-long process of reform, and has gained renewed attention as the Communist Party’s Central Committee prepares for its economic-focused third plenum in two weeks.

Once the market goes down again, purchase restrictions will be further relaxed and there will be bolder policies in household registration

Zhang Dawei, Centaline Property

Free migration accelerates urbanisation, improves efficiency in agriculture, narrows gaps between regions and helps China move closer to its goal of “common prosperity”, said Zhou Tianyong, a professor with the Dongbei University of Finance and Economics and a former senior researcher with the Central Party School in Beijing.

“Obstructing population migration and accumulating too many underemployed and low-income people in rural areas and the agriculture sector are hidden dangers that can lead to social instability and unrest,” he wrote on his social media account last month.

Governments at the local level are testing a variety of methods to lure potential homebuyers with offers of simple re-registration, which would provide access to urban education, healthcare and other services – all of which tend to be more comprehensive than those provided by rural regions.

Except for Hainan province and five major cities – Beijing, Shanghai, Shenzhen, Guangzhou and Tianjin – all other population centres on the mainland have experimented with similar incentives.

Zhang Dawei, a Beijing-based market analyst with Centaline Property, said first-tier cities – the “core” of the national sector – may follow suit if current policies fail to give their own real estate markets a lift.

“In the short term, as long as the market is active, no more policies will be introduced. But once the market goes down again, purchase restrictions will be further relaxed and there will be bolder policies in household registration,” he said in an article on WeChat last week.

Previously, to curb the expansion of the local population, it was common practice for major Chinese cities to adopt point-based systems where governments grant local status by grading applicants on a variety of criteria, from length of stay in the city to educational background.

Most cities have since abandoned this practice, as competition for talent intensifies and birth rates drop.

The grading systems in Beijing and Shanghai, however, remain strict.

Over 66 per cent of the Chinese population lived in urban areas as of last year, but less than 50 per cent were registered there, according to data from the National Bureau of Statistics.

There are still 297 million migrant workers in cities who have yet to gain urban residency, the bureau’s deputy director Sheng Laiyun said in an April press conference.