The segregation of the rural and urban economies in China was one of the most distinctive features of the Chinese economy in the pre-reform era. This feature did not change at the beginning of economic reform. Up until the late 1980s, rural–urban migration was still rigidly controlled. While nation-wide data on rural–urban migration in the 1980s are not available, limited rural–urban migration can be demonstrated using data from a nation-wide survey of 222 villages called the Hundred Villages Labour Survey Data (HVLD).

The HVLD data show that permanent migration of farmers to urban areas accounted for only 1.75 per cent of the total labour force in the 222 villages surveyed in 1986. This was the situation after a decade of reform. However, by the beginning of the 1990s, encouraged by the high demand for rural labour in the urban areas, rural–urban migration had become uncontrollable, presenting new challenges for labour market reform.

Owing to the volatile nature of China's labour markets in the reform period, this book first studies rural and urban labour markets separately.