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to region. The hukou system, which has persisted for forty-four years, isbeing gradually reformed as overall economic reform progresses and it isexpected to undergo further adjustment as the market system matures.In the long run, rural–urban migrants will be the main source of laborfor industry in China, helping to maintain its low-cost advantage.The implementation of a family planning program and the effects ofsocioeconomic growth have combined to alter China’s demographictrends and change the age structure of the population. China will reach itspopulation peak of 1.44 billion in 2030. The increase in the working-agepopulation will slow down by 2011 and will begin to decrease by 2021.In fact, the growth rate of the working-age population has already beendecreasing in recent years (Cai 2005b). As a result of this demographictransition, if labor transfers from rural areas to urban areas fail to speedup in the next decade or so, there will be a labor shortage in China’s urbansectors that would cause a slowdown in economic growth.Having set the specific development goal of building up a well-off(xiaokang) society, China’s per capita GDP is planned to reach USD3,000 in2020. At that time, China will join the middle-income group of countries interms of purchasing power parity. Among countries in this group, the ruralpopulation averages 23 percent of the total and China is expected to followthe same pattern and transfer hundreds of thousands of rural residents tourban areas. This transfer will play a significant role in China’s economicgrowth in the next ten to twenty years. Therefore, further reform should beimplemented to abolish the various institutional obstacles that hinder thedevelopment of labor markets and labor migration, including better socialsecurity coverage, which would in turn cultivate the conditions for furtherhukou system reform.267