China has achieved remarkable progress in poverty alleviation since the start of the reforms. Calculated according to the official poverty line, rural poverty has dropped dramatically from 30.7 per cent in 1978 to 2.6 per cent in 2005. Rural–urban labour migration on an unprecedented scale played a vital role in rural income growth, poverty reduction and economic development in sending places, as numerous rural labourers responded to the rising income inequality by migrating to the cities. Empirical evidence shows that while the vast rural to urban migration does not significantly increase urban income poverty, labour market discrimination and social exclusion expose rural migrants to many risks and vulnerabilities in the cities, where the poor are becoming increasingly marginalized. Capacity-building for the poor, the adoption of an integrated labour market system that also takes account of migrants, and the creation a of rural social security system are the three important poverty alleviation options promoted by the government. Although migration in China has unique institutional characteristics owing to the existence of the hukou system (Household Registration System), the experience of China has important lessons for our understanding of the impact of migration on development and poverty reduction.