The segregation of China's rural and urban economies was in place for almost 40 years; it was not until the late 1980s that the restrictions on rural–urban migration were gradually eased. Economic reforms have released millions of rural labourers from agricultural production, who were originally absorbed by the TVP sector since migration was tightly controlled until the mid-1980s. However, the demand for rural labour in urban areas continued to increase during this period, partly in response to the rapid development of the special economic zones (SEZs), and partly owing to the demand for service providers in the cities.

The government has never made formal announcements about the relaxation of these restrictions. In practice, however, the controls were eased gradually in that rural residents were allowed to come to the city to work in some occupations. By the end of the 1980s and early 1990s the number of rural migrants working in the cities started to increase dramatically. In 1988, about 25 million migrants were working in the urban areas; this figure increased to 64 million in 1994 and to 80 million in 1995 (Centre for Rural Economic Research in the Ministry of Agriculture [CRER] 1996), which accounted for about 18 per cent of the total rural labour force or 34 per cent of the total urban labour force, respectively. This massive movement of labour which brought cheap rural labour to urban China, has had, and continues to have, a tremendous impact on the Chinese economy.