China's economic slowdown has been exacerbated by Beijing's resistance to meaningful reform. However, officials have recently taken a step in the right direction by relaxing the hukou system of residence registration.
Under the new rules, workers who have moved to urban areas from the countryside will be able to enroll their children in schools near their new homes and gain access to government-funded healthcare.
This is a significant move towards liberalizing the hukou system, which has been in place since the 1950s to keep rural workers in place and prevent cities from being flooded by poor rural migrants.
Despite the system's failure to achieve its intended goal, it has created an underclass of around 200-357 million workers who face obstacles in putting down official roots in the cities where they live.
The economic effects of hukou reform are difficult to parse, but some economists argue that it could increase domestic consumption and help China transition from an export-dependent growth model.
However, others argue that the real constraint on Chinese growth is chronic malinvestment of the country's savings, which are diverted towards export-manufacturing industries and low-productivity state-owned enterprises.
The hukou reform may be a social or political reform rather than an economic measure, aimed at addressing the anxiety of Beijing's slow-growth economy and its potential political consequences.
