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Restrictions on who can apply for permanent residency in cities are to be relaxed for selected workers, including those from the countryside, to encourage a new form of urbanization, the State Council said over the weekend.

In a statement released after a meeting on Friday, the nation's highest executive body said revisions to the registration system, known as hukou, would further encourage the integration of migrant workers in cities, as well as drive investment and domestic consumption.

The State Council said it will relax the rules on permanent residency in most cities for university graduates, skilled technicians and those returning after receiving an education overseas, as well as the restrictions on rural workers.

The executive body also called on provincial authorities to fully implement a new residency permit that became available on Jan 1. The permit, which runs alongside hukou, entitles holders to free education, healthcare, employment and legal services in the city in which they live.

In addition, the government will provide more policy support for improving shantytown dwellings and dangerous homes, and expand policy coverage to more townships, the statement said.

The State Council also encouraged the investment of more social capital into constructing city facilities, such as underground pipelines, and for urban areas to adopt the national Internet Plus strategy to build smart cities.

Trials for new urbanization practices will be expanded to more cities, while the government will also improve land and housing policies, and encourage local authorities to set up urbanization development funds with social and financial capital, the statement said.

During the meeting, officials also stressed the State Council's goal in tackling overcapacity in the iron, steel and coal industries. China plans to cut 100 million to 150 million metric tons of crude steel production and has said it will strictly control new industrial capacity.

Xu Hongcai, director of economic research at the China Center for International Economic Exchanges, said the measures announced over the weekend will help stimulate effective investment of social capital in cities.

"This new type of urbanization put the focus on the people instead of industrialization or real estate investment. Encouraging a larger migrant population to settle in cities will be a driving force for economic development, as it will encourage more social capital in public services and infrastructure," he said, adding that it will also encourage domestic consumption.