All people of rural origin now living in the city's satellite towns may also apply for such an identity change if they have a stable job and fixed residence.

Becoming an urban resident means the loss of the plot of land one is assigned and a site for the construction of a private house - the standard benefits for all rural residents and their families. But the price is worth it for many because an urban identity still makes a difference when looking for a school and job in Beijing.

The current household administration system was established in 1958 under the planned economic system. It divided the nation into rural and urban people. Such a system made the free flow of residents impossible.

The country's transition to a market economy, starting in the late 1970s, created opportunities for farmers to do odd jobs or self-employed work in cities. The strict household-registration system, however, has been causing them headaches since they were still excluded from social welfare benefits.

The most severe headache was their children's education since ordinary urban schools denied the children access or charged hefty admission fees.

The country's economic take-off has been accompanied by accelerating urbanization. Large-scale migration of the rural population has, no doubt, constituted a serious challenge to the old household-registration system and propelled sweeping reform nationwide.

As the line between rural and urban residents gets blurred in many small and medium-sized cities, especially in the economically better-off south and east of China, major cities such as Beijing have retained strict residence controls to offset the pressure of overpopulation.

The country aims to build an all-round well-off society within the next two decades and this will require a higher level of industrialization and urbanization.

By 2020, the population engaged in agricultural production is expected to be reduced to between 30 and 35 per cent of the total population from some 50 per cent in 2000.

That means waves of rural people will continue to flow to cities and towns. This situation is sure to further challenge the household-registration system and the cities' ability to create more jobs to accommodate the influx of labourers. Reform in this area still has a long way to go.