Urbanization/Hukou reform

Why this is important

Chinese Premier Li Keqiang has repeatedly called for urbanization, saying at a news conference of the National People's Congress that it's an inevitable trend. Therefore policies to step up the process are highly expected to be announced at the upcoming Party meeting in November.

However, who will benefit from urbanization rests on the reform of hukou, or the household registration system, which is the cornerstone of the urban-rural "two-layer class system." Hukou identified many migrant workers as outsiders in the cities where they contributed with hard work, thereby depriving them of many benefits that the permanent urban residents are entitled to.

What to expect

It's easier to say than to do. The reform of hukou would touch the nerve of vested interests and might be the last straw for local governments, who are already struggling with their balance sheets and can hardly afford the expenditures the reform would generate.

The financial conundrum for local governments is intertwined with tax policies and land sales. This leads to the next two areas where public expectation is high - land policy reform and fiscal reform.