Pu Zhiqiang has been hospitalized for three days to stabilize his blood sugar, but the prominent Chinese human rights lawyer is not slowing down. From his hospital bed, he is fighting for the abolition of laojiao – a Gulag-style “re-education through labor” system that could become the first major reform of China’s new leaders.

“The name of re-education through labor stinks, and it signals that China is a police state,” says Pu. “What we need is to rebuild the rule of law.”

Among the many calls for political reform facing Xi Jinping, China’s new Communist party chief, none is louder than the demand for changes to the laojiao system.

Recent signs suggest that Pu and other critics of the decades-old system may emerge victorious. Last month, the Communist party said it would “push reform” of the labor camp system this year. And evidence also is mounting that authorities have significantly reduced the use of the camps in recent months.

“There is consensus at the top to abolish the system,” says Wang Gongyi, a recently retired senior justice department official who is China’s most prominent official labor camp expert. “The pressure has grown too big, and the police are the only ones that want to keep the camps.”

Demands to reform the judicial system have grown in recent years particularly after Hu Jintao, Xi’s predecessor, granted greater powers to the domestic security apparatus in an attempt to contain unrest in an increasingly complex society.

This was highlighted in 2009 with the 11-year jail sentence handed to Liu Xiaobo, the dissident who the following year won the Nobel Peace Prize, and by the nearly three-month detention without charge of Ai Weiwei, China’s most prominent contemporary artist.

But laojiao – which allows police to detain people for up to four years without trial – is the most potent symbol of the hollowing out of China’s legal institutions. The system was designed in the 1950s to silence political opponents, but has become a dumping ground for people who have run afoul of the security services.

Government figures from 2009 put the number of labor camp inmates at 160,000. But Wang says police stopped sending new prisoners a couple of months ago except for a minority accused of certain violent offenses.

“The total number of inmates was down to about 50,000 at the end of last year, and if the current trend continues, there will be just 20,000 left by the end of this year,” adds Wang.

These figures tally with observations of others familiar with individual camps. Liu Hua, a woman who was released late last year after two years in Masanjia, says no new inmates have arrived at the camp in northeast China since Sept. 26, 2012. Another activist who keeps in contact with a network of female camp inmates says she has observed the same pattern across the country.

Pu believes no inmates have arrived in camps in Chongqing since Bo Xilai, the former Communist party secretary of the western metropolis, was purged in April.

Abolishing laojiao would be a remarkable assertion of Xi’s powers over the bloated security machine. But any effort to do so could be helped by the fact that the top official for security issues no longer sits on the Politburo Standing Committee, a change that occurred when Xi was appointed the new party boss in November.

From defense lawyers to judges, the whole Chinese legal establishment argues that laojiao is unconstitutional. Former inmates describe the camps as hellish places of excessive forced labor, torture and humiliation.

“Anyone who would speak would be punished by having to work while squatting,” says one former inmate of Tuanhe Farm, a camp just south of Beijing.

Inmates also recount frequent beatings with electric batons, being pricked with needles from the sewing machines inmates use to make paramilitary uniforms, and solitary confinement in dark cells.

In the wake of the Bo scandal, activists argued that the excessive use of labor camps by Wang Lijun, the former Chongqing police chief, underscored the need to end the entire Gulag system.

Since last May, Pu has helped secure the release of 21 inmates from camps in Chongqing. A typical case was that of Tian Hongyuan. In 2010, Tian suggested to property owners in an online forum that they bring a dispute with the developer of their compound to the attention of Xi Jinping, then vice president.

The police responded by interrogating and beating Tian, and sending him to a labor camp. His case was widely followed on the Chinese internet, as his background as a white-collar worker and property owner, and the unpolitical nature of his comments, helped many members of China’s middle class identify with him.

“The system has become local officials’ tool for personal revenge,” says Wang Gongyi.

The Communist party created laojiao in 1955 to control “counter-revolutionaries” – people whom it perceived as a threat but who could not be accused of any crime. The scope of the system was soon broadened to include anyone who fell out of favor during the party’s many political struggles.

After China initiated its market reforms in 1978, the camps’ focus changed to small offenders, including drug addicts and prostitutes. But as a growing income gap, official corruption and abuse of power swelled the ranks of the disaffected, the camps have been filling with people the party sees as a threat to its power.

Former inmates interviewed by the Financial Times say petitioners – people who complain to higher administrative levels about grievances the local government fails to address – formed the biggest group imprisoned in their camps. Between a quarter and half of the inmates were followers of Falun Gong, the outlawed sect, they added.

These numbers raise doubts about how far Beijing’s reform can go, given that party leader will still want to find a way to deal with such people.

“The question is what to do with these people?” says Wang. “When the troublemakers start flooding the streets, police will be under pressure again to maintain stability. They will think of new ways.”

For now, experts say the camps are gradually being transformed into drug rehabilitation centers. The Standing Committee of the National People’s Congress, China’s rubber stamp parliament, is this year expected to issue an opinion abolishing the regulation governing the camp – which is when the real work starts.

“After that, we will need a large-scale overhaul of our criminal code,” says Wang.

Whether that can really help usher in the rule of law in China remains to be seen.

“There is no other option,” says Pu. “We still have all the same problems we had 10 years ago. Hu Jintao’s ‘harmonious society’ is in a dead end.”

Additional reporting by Zhao Tianqi