I don’t have a citation, just personal experience of knowing people who were exactly in this situation. You don’t lose PRC citizenship when losing your hukou, you still qualify for a chinese passport. The policy in the 90s was that you had to turn in your ID card/hukou when going abroad to study and work, and there was no easy way to get it back. I don’t think that is true today, but it’s a reason why many older Chinese in the tech industry have citizenship but no hukou.

You can fly internally on a chinese passport. Again, because not all chinese citizens have or qualify for ID cards.