The archive would replace the current system, which was set up by different administrations and is only accessible by the Ministry of Foreign Affairs, making it difficult to track down people who overstay their visas or work illegally, China Daily reported.
"Investigating illegal staying and employment heavily relies on public tip-offs," said Zhao Yu, a professor of foreign public security.
The proposed law would give information on foreigners to the appropriate government departments, for example the Ministry of Education would receive records of overseas students in China and the Ministry of Human Resources would have records of people in the country on work visas.
Experts say the reform is needed as travel into and out of China has greatly increased since the country opened up to visitors in the 1970s. There were 260 million arrivals and departures from January to September in 2011, the Public Security and Foreign Affairs ministries said, compared with 12.1 million in 1980.
Because of an increase in travel to China, the number of cases of illegal entry, staying and employment has also increased, officials said, with 13,000 of such cases being reported by Beijing's Public Security Bureau's arrival and departure department since 2008.