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In China, social insurance costs are shared among employers, employees, and the government, depending on the coverage type.

In the past, many employees could not qualify for social insurance programmes and their benefits – such as pensions and medical coverage – because their household was registered in another jurisdiction.

Peng Peng, executive chairman of the Guangdong Society of Reform think tank, said the nationwide change would have widespread effects, from promoting urbanisation and the real estate market, to helping establish a national market and even releasing some consumer spending power.

“This policy will further reduce the significance of household registration [hukou] and adapt to the larger pattern of population mobility,” Peng said, adding that it dovetailed with the direction of national development.

Xu Tianchen, a senior analyst at the Economist Intelligence Unit, said that broadening social security coverage was “probably the most important reform”.

“Think about migrant workers: they earn a decent income but they spend very little, and part of the reason is the low level of social security involvement,” Xu said.

“Historically the government largely ignored the issue. But a lot of workers themselves also preferred short-term financial gains to long-term protection, and many opted out of social security.

“Both need to change.”

Over the decades, the hukou system locked migrant workers out of vital public services – such as healthcare and public education – in the places where they lived and worked. In recent years, however, these rigid restrictions have been progressively relaxed.

The new system is known as “non-local social security”, and emerged in areas such as the Pearl River Delta and the Yangtze River Delta as more people began working away from their hometowns, according to Peng.

At the same time, China’s jobs landscape has changed dramatically in recent years, with a rapid rise in flexible employment and new forms of work tied to the booming digital economy.

This has compounded the pressure on Beijing to provide equal access to social welfare benefits for all workers.

Peng said that for the growing number of flexible workers and those in new forms of employment, the State Council’s decision was an important macro element of social security coverage, and therefore would benefit the real estate market, consumer spending and the reform of the employment system.

In the near term, Peng said, this new approach could help improve the social security system and strengthen the willingness of migrant workers to sign up for social insurance.

It might also increase the desire of rural-to-urban migrant workers to settle down and “establish roots in cities”, he said.

“In the long run, this measure will make the social security system more comprehensive, human-centred and rational,” he added.

“In particular, it will help ensure a more sustainable social security fund pool and make the system more adaptable to the advent of AI+ work styles and lifestyles.”

Xu, at the Economist Intelligence Unit, said that while the new policy could create short-term costs by increasing the burden of social security contributions, it would bring long-term benefits to society.

“This also aligns with Beijing’s new policy theme of ‘investing in people,’” he added.