The surge of rural–urban migration is the most important change in China's labour market in the 1990s. After 40 years of segregation, the rural and urban economies began to be linked by massive labour mobility. Hundreds of thousands of rural workers, attracted by higher urban incomes, moved to the cities. The economic implications of this continuing exodus from the countryside to the cities are enormous.

The unique features of rural–urban migration in China

The features of China's rural–urban migration can be looked at in two different, overlapping, ways. The first relates to distortions caused by the segregation of the urban residents and rural migrants labour markets. The household registration system that has been in place in the cities for the past half-century has provided urban residents with generous subsidies and benefits that are not available to rural residents. Rural migrants cannot gain urban residency status by moving to the cities; they are thus ineligible for subsidies or benefits and not allowed to obtain permanent positions even if they are employed in the state-owned sector. Moreover, while urban residents are mainly employed under inflexible labour arrangements (chapters 2, 6, 7), wages for migrants are determined in the market and employment is mainly on the basis of either oral or written contracts.

The second feature of Chinese rural–urban migration arises from the various formal and informal restrictions that still hinder it.