China will reform its household registration system and relax restrictions on permanent residence registration, or "hukou", in towns, small and medium-sized cities, according to a government work report Premier Wen Jiabao is to deliver Friday.

Hukou has long been blamed as a source of widening gap between urban and rural residents. The system also makes it difficult for migrant workers to enjoy welfares in cities.

"We will keep to the path of urbanization with Chinese characteristics... and promote positive interaction between urbanization and the building of a new countryside," says the report distributed to the media before the opening of the Third Session of the 11th National People's Congress (NPC).

The country will solve employment and living problems rural migrant workers face in cities and towns in a "planned and step-by-step" manner, and gradually ensure that they receive the same treatment as urban residents in areas such as pay, children's education, healthcare, housing, and social security, says the report.