In the paper we analyze the development of the Chinese household registration system, the hukou system, since its establishment in the 1950s until today and its influence on the economic development of the PRC. Surplus labour force was released from agriculture when the household responsibility system was introduced. Its allocation into more productive sectors of the economy was conditioned by the reform of the hukou system, which served to prevent the migration of rural population to cities. The hukou system is discriminatory for rural-urban migrants and currently hinders the effective utilization of labour. Furthermore, the relaxing of the system would most likely lead to an increase in consumption levels among Chinese households.
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