Hukou System Reform and Unification of Rural-urban Social Welfare

Using a political economy analytical framework, the present paper examines the hukou system reform in China. The potential unification of the social welfare system of rural and urban areas is discussed. The paper reviews the progress of hukou system reform since 2004. It is suggested that since China met its Lewis turning point in about 2004, and a labor shortage became a limiting factor in production, there has been stronger demand for hukou system reform. In the meantime, various levels of government have a point where incentives are compatibile for carrying out reforms. The paper also explores some limitations of the currently implemented reform in certain regions and puts forward relevant policy suggestions.