getting chinese nationality for the baby

Suresh, if your kid was born in China, he/she will automatically acquire Chinese nationality. Compared with nationality, Hukou is much more important. If you both are foreigners, I am afraid that it's almost impossible to acquire Hukou for your kid. So I think you both should contact your embassy to register your baby's birth, apply for his/her a passport and then go to local police station to apply a visa. Otherwise, you may have trouble when you take him/her out of China.