Urban cities of course don't want to hand out urban hukou easily because they don't want an influx of migrants straining social services.
But conversely, a lot of rural hukou holders do not want to give up rural hukou because it gives retirement benefits at 55 and is a requirement in order to keep their rural landholding.
This is why you have migrants with a rural hukou working in urban China but not gaining an urban hukou.
The problem with hukou is fundamentally a social safety net problem - there is little to no social safety net in China, so the "migrant to urban area with rural hukou" is the least bad option out of multiple bad options (keep rural hukou and live in rural China barely eking a living or give up rural hukou and lose the only appreciating asset you had along with benefits at 55).
In essence, the lion's share of Chinese development is overly concentrated in a handful of urban agglomerations, and isn't spreading to rural China where 45-50% of Chinese still live to this day.
Given the collapsing demographics in China, many of those rural hukou holders are obviously not going to receive the promised retirement benefits. The surplus resources to fund those payments don't exist so either the retirement age will be raised or benefits will be cut (either officially, or unofficially by just not sending payments and ignoring any protests).
Retirement benefits are the last thing the CCP touches because tens of millions of Chinese heavily rely on it already.
China is authoritarian, but the CCP absolutely does take public sentiment into account, and policies that have the chance of causing mass protests and discontent do get rolled back.
Zero Covid is a perfect example of this, as it was hastily rolled back after the wave of protests following the apartment fire in Urumqi due to Xinjiang CCP's hard Zero Covid enforcement.
And this is why China had not raised the retirement age until in the past few weeks despite trying for decades, and anyhow kicked that can down the line to 15 years.
I understand the concern over public sentiment but where will the revenue come from to pay those benefits? The ratio of workers to retirees is inevitably going to go way down and it seems unrealistic to expect that the government can borrow its way out of the problem. The retirees will have to take a hit somehow.
> where will the revenue come from to pay those benefits
A mixture of bonds/borrowing, federal bailouts, and (painful) corporate tax reform.
This is a major reason why provincial law enforcement has recently begun cracking down on unpaid corporate back taxes recently, because social spend is largely devolved to the provincial level.
The property crisis in China is itself a result of the retirement fund issue, as until recently provincial government's only financial lever was land sales, and retirement funds are largely the domain of provinces following Deng's reforms.
Just making urban hukou easier to adopt (which is something that multiple municipalities slowly started doing in the late 2010s) isn't enough to solve the social mobility issue.
Parents won't give up rural hukou if it also means losing your landholding and early retirement stipend benefits.
If you're a migrant worker from a rural household, you are most likely an unskilled laborer and are earning around $300/month, with dad working on a construction site or Meituan and mom working in a factory doing unskilled assembly or service job.
Around $150 is spent on incidentals because living in an urban area is expensive, an additional $100 is sent back to your family (grandma, grandpa, kids because the one child policy was largely ignored in rural China) back home in your rural town, and you might have $50 left over to save for retirement, healthcare, etc.
This is not enough to buy urban property, which is the asset class that appreciated the most in China, and this means the only large asset you have is your rural landholding. Furthermore, that early retirement benefit means you're earning an additional $15-20/month while continuing to work as a laborer or a Meituan delivery driver.
Fundamentally, salaries are too low in China and the social safety net is nonexistent, and this is what is causing the issues like overproduction, deflation, and sagging consumer demand which we are seeing nowadays.
The only way to solve this problem is to either expand the welfare system dramatically (thus incentivizing the bottom half to spend more by having to save less) or increase wages (thus incentivizing the bottom half to spend more by allowing them to save at the same rate while spending more). Working on increasing the quality of life in rural China would also help dramatically.
Sadly, Chinese leadership at the top level continues to ignore social welfare spending and rural China due to financial and moral concerns.
Urban cities of course don't want to hand out urban hukou easily because they don't want an influx of migrants straining social services.
But conversely, a lot of rural hukou holders do not want to give up rural hukou because it gives retirement benefits at 55 and is a requirement in order to keep their rural landholding.
This is why you have migrants with a rural hukou working in urban China but not gaining an urban hukou.
The problem with hukou is fundamentally a social safety net problem - there is little to no social safety net in China, so the "migrant to urban area with rural hukou" is the least bad option out of multiple bad options (keep rural hukou and live in rural China barely eking a living or give up rural hukou and lose the only appreciating asset you had along with benefits at 55).
In essence, the lion's share of Chinese development is overly concentrated in a handful of urban agglomerations, and isn't spreading to rural China where 45-50% of Chinese still live to this day.