Internal migration is often differentiated from international migration by perceptions of citizens’ free mobility within the territory. However, internal migrants may still face significant barriers to inclusion due to institutional structures that exist within countries. This policy report’s aim is to examine the case of China, where the most extensive rural-to-urban migration is taking place in the world, yet which is regulated by the country’s unique household registration system (known as Hukou in the Chinese language). Designed initially as a tool to prevent the potential rural-to- urban mass influx during the Maoist era, the hukou system has generated a clear rural-urban divide and limits the access to social welfare to the region where citizens are officially registered. This policy report considers the rigid hukou system antiquated for the current Chinese social context, as it can no longer stop rural-to-urban migration and only contributes to increasing inequalities between rural migrants and the urban host population, while accentuating distinctions in social status and discrimination against rural-to-urban migrants. Furthermore, this report highlights the salient obstacles to the relaxation of hukou-based restrictions and provides some policy recommendations that could be useful to create a more inclusive society.