China to Remove Residency Restrictions in Some Smaller Cities
China has decided to scrap residency restrictions in some smaller cities to encourage urbanization and social mobility, in a move that analysts said will bolster parts of the housing market.
According to a policy guidelines issued Wednesday by the Central Committee of the Communist Party and the State Council, all restrictions on household registration will be removed in cities with an urban residential population of less than 3 million. Meanwhile, residency limits will be relaxed in larger cities with populations between 3 million and 5 million.
For megacities with more than 5 million residents, household registration policies will be streamlined and public services systems will be improved to ensure equal access to all residents, the guidelines said.
The policy is part of China’s reform efforts to improve the social mobility of the labor force, in a bid to support sustained economic growth, the guidelines said. It also represents the first central government policy document to set clear requirements on China’s long-debated reform in its household registration system.
Known as “hukou,” China’s household registration is primarily based on a person’s birthplace and entitles residents access to public services such as medical care and education. In recent years, it has also been connected to the right to buy a home in many cities.
The policy will encourage social mobility and thus boost demand for homes in some cities, said Yan Yuejing, research head at the Shanghai E-House Real Estate Research Institute. That will help reduce any surplus of unsold property in small cities and bolster the property market in 2020.
Chinese cities are facing mounting pressures from unsold properties as stringent housing market controls have dampened sales. By the end of November, a total of 473.6 million square meters (5.09 billion square feet) of residential property are in stock in 100 cities, 5.7% higher than a year earlier, according to Shanghai E-House. The size of inventories has grown for 12 straight months.
In the past in China, easing residency restricts has often led to spikes in property sales. For instance, the city of Xi’an in the northwestern province of Shaanxi has since 2017 made several adjustments to its residency policies to attract more people, which has contributed to 39 straight months of rising residential property prices in the city.
According to Caixin calculations, only four remote cities with fewer than 3 million urban residents currently meet the requirementd to fully scrap residency restrictions. They are Lhasa, Tibet; Xining in the northwestern province of Qinghai; Haikou on southern island province of Hainan; and Yinchuan in Northwest China’s Ningxia Hui autonomous region.
But amid Beijing’s reform push, a number of cities have already taken measures to relax residency restrictions this year by granting preferential policies to select professionals. In December, three cities rolled out measures to make it easier for qualified people to get local residency and qualify for preferential policies for buying a home.
Chinese authorities have repeatedly vowed to reform the residency system as the country pushes ahead with urbanization. In March, the National Development and Reform Commission, China’s top economic planning body, pledged to encourage more rural people to migrate to cities by easing residency restrictions. In 2016, the State Council set a target to grant urban residency to 100 million rural migrants by 2020, about one-sixth of the total rural population, which would push up the country’s urbanization ratio by 1%.
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