Shanghai is canceling its agriculture hukou to establish a unified permanent residence system for both urban and rural areas, becoming the first Mainland region to do so. 

The city was home to more than 1.3 million people with agricultural permanent residence permits last year, accounting for nearly 10 percent of the permanent residents in town. Chen Guozheng of the Shanghai Academy of Social Sciences says urban and rural residents already enjoy the same pension, unemployment and medical insurance systems, but the reform will give farmers more confidence in their rights.

"Next in line will be education, health and family planning, employment, social security, land and housing. But it will be a long process, as Shanghai still faces a shortage of high quality resources in education and health care. Another question is whether professionals are willing to go to suburban areas," said Chen Guozheng from Inst. of Economics of Shanghai Academy of Social Sciences.

The city government said it will promote reform of the property rights system in the countryside to allow rural residents to rent out or subcontract the agricultural land they do not use to others, or exchange their land on a legal and voluntary basis.

"Now the high housing prices in Shanghai are one of the reasons professionals don't want to stay in the city. If agriculture land can be put into market circulation, university graduates from outside Shanghai are expected to be able to rent or buy cheaper houses. We still expect more detailed policies on that," said Chen.

The city government says the reform will help keep Shanghai's registered population under 25 million by 2020, while attracting the professionals the city needs and improving its population structure.