Shanghai Residency Rules: Ban on Overseas Residency Suspended

Shanghai has backtracked on plans to implement a controversial rule that would require Chinese citizens who have settled abroad to renounce their Shanghai residency.

On March 13, the Shanghai government announced that it would enforce The Shanghai Permanent Residency Management Rule (the Residency Rule) starting from May 1, 2018. The Residency Rule has existed since 2003, but had not been consistently implemented in practice.

Following public outcry, however, Shanghai authorities said that they would not implement the rule for the time being, citing the rule’s vague definition of “settling abroad”.

The Residency Rule would have required Shanghai residents with the right to permanent residence in a foreign country or who had acquired a foreign nationality to cancel their hukou (戶口). If they did not voluntarily report to the police within a month, local authorities could terminate the hukou unilaterally.

A hukou is a domestic household registration permit for Chinese citizens that allows holders to access residence rights such as education, healthcare, and social insurance within a given city or region.

According to the Residency Rule, those who gave up their Shanghai hukou could reacquire it once they returned to Shanghai permanently. In practice, however, the process to reacquire a hukou is notoriously difficult.

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Analysts attribute the now-overturned decision to implement the Residency Rule to the central government’s aim to limit the outflow of capital and control the population of major cities.

Over the past 10 years, about US$3.8 trillion of Chinese capital outflowed to foreign countries like Australia, Canada, the UK, and the US. Part of this outflow has been attributed to Chinese citizens who purchase foreign property and subsequently gain overseas residence rights.

Shanghai is also under pressure to limit the size of its population, which has been capped at 25 million by 2035. Shanghai’s population is officially 24.18 million, but some estimates put it closer to 30 million.

The Residency Rule, if implemented, would seem to contradict recent incentives designed to attract domestic and foreign talent and damage Shanghai’s reputation as China’s most international city.

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