China has revealed a range of substantial reforms that will affect tens of millions of people, including loosening its one-child policy and abolishing its controversial labour camps.

Chinese state media revealed the reforms on Friday night in a 22,000-word report detailing the results of the third plenum, a closed-door annual meeting of about 400 top party leaders, that has historically been used as a launching pad for substantial reforms. Plenums in 1978 and 1993 laid the foundations for China's current economic model, a combination of market capitalism and tight political control.

Couples in which one member is an only child will be allowed to have two children, China's state newswire Xinhua reported , citing the results of the plenumwhich ended in Beijing on Tuesday. While most people in China are still only allowed to have one child, some groups, including ethnic minorities, disabled people, and couples in which both members are only children, are allowed to have two.

According to the document, the Communist party also plans to scrap its extrajudicial "re-education through labour" detention system, improve social welfare programs, and ease migration restrictions for the tens of millions of rural residents attempting to put down roots in cities. Details of the reforms and timelines for their implementation are still unclear.

The party established its re-education through labour system in 1957 at the height of Maoist fervour to expediently dispatch "counter-revolutionaries". More recently, local authorities have used it to clear their streets of petty criminals, such as thieves and prostitutes, without the burden of due process. Other common targets include political dissidents and members of banned religious groups.

Sentences may last up to four years, and conditions in prison are often described as brutal – prisoners are crammed into tiny cells, deprived of adequate sustenance, and sometimes tortured. Despite an absence of official statistics, human rights groups say that the number of detainees could range from nearly 200,000 to millions.

"Because re-education through labour was so closely associated with political persecution, because conditions in the camps are so horrific, and because there have been decades of pressure for China to abandon this system, we should take this as a positive step," said Nicholas Bequelin, a Hong Kong-based senior researcher for Human Rights Watch.

Children at a dance class in Huoqiu, Anhui Province. Some observers are secptical whether the reforms will necessarily mean a population boom as many families cannot afford more than one child. Photograph: Chen Li/Xinhua Press/Corbis

"But I think the caveat is that we don't know whether or not China intends to establish a new system of administrative detention – that is, a system of deprivation of liberty without the benefits of a trial."

The report also pledged to "accelerate" reform of the hukou system, essentially a bureaucratic knot tying hundreds of millions of migrant workers to their rural hometowns. "The country will relax overall control over farmers settling in towns and small cities, and relax restrictions on settling in medium-sized cities in an orderly manner," Xinhua reported.

Critics have called the controversial one-child policy, introduced in 1979 to keep population growth in check, outdated and cruel. In the cities, it has created a demographic crunch, catching second-generation only-children in a financial bind as they struggle to support two parents and four grandparents. In the countryside, it has fuelled a rise in sex-selective abortions, as many rural families prefer boys to girls, and a host of human rights violations – abductions, forced abortions, extralegal detentions – as family planning authorities use extreme measures to keep birth rates low.

Steve Tsang, professor of contemporary Chinese studies at the University of Nottingham, said that the government's unwillingness to abolish the policy altogether suggests that it is most concerned with its economic costs. "Until now, the growth of the Chinese economy has been propelled by a demographic surplus, and that has been turning into a demographic deficit," he said. "The only way you can address the human rights abuses is to end the system entirely."

"I think this is good news – one child is too lonely. I have a brother and I was happy as a little girl even though our family was poor," said Hu Hongling, a 33-year-old woman from the rural Anhui province who lives in Beijing with her husband. "My husband is an only child and he sometimes feels lonely. It's difficult for him to make friends." Hu is currently planning to have her first child; she hopes someday to have two.

However, the policy's relaxation is unlikely to lead to a population boom. Many urbanites, already burdened by rocketing education and housing costs, consider multiple children an exclusive province of the rich. Zhang Xin, a 39-year-old media worker in Beijing, is newly eligible to have two children – he is an only child, his wife has siblings, and they already have a seven-year-old son. Yet "the new policy doesn't make a big difference for me," he said. "I don't think we could afford another child, in terms of time and financial pressure."

The plenum report detailed a number of less dramatic reforms, including promises to explore ways of setting up an intellectual property court, reduce the number of crimes subject to the death penalty, and "build a more impartial, sustainable social security system, with an improved housing guarantee mechanism".

It was also laced with a number of contradictions. While officials promised to ensure "independent, fair use of judicial authority" and uphold the country's constitution – which promises freedom of assembly and freedom of speech – they also pledged to "strengthen public opinion guidance and crack down on internet crimes," suggesting that media and internet censorship policies will remain in place.

"We do know that rule of law has become more of a rhetorical constant in Chinese language, and speaks to things that China finds important, for example, internationalisation," said Rana Mitter, professor of Chinese studies at Oxford University. "If you can show genuine progress in fields such as criminal law, that will give you more credibility in other areas, such as international finance."

He added: "It's obvious but worth saying that this is, yet again, the party making it clear that it is in no way going to relax its grip on power. It doesn't suggest the greater liberalisation or pluralisation of politics."

Additional reporting by Cecily Huang