Selling the farm

Why rural land reform is back on the agenda

Selling the farm

More than vegetables for sale?

Last week WiC wrote about China’s problem with “left behind children,” or youngsters who stay at home in rural areas while their parents decamp to the city to earn a better living. Government data suggests that half of all children in the countryside don’t live with their parents (see WiC152).

But it’s not only children that are being left behind. As more young people abandon the villages, rural farmland is also being left idle.

According to CCTV, the state-broadcaster, there were as many as 30 million mu, or 6 million acres, of unattended farm land in China last year. That’s more than 400 times the size of Manhattan.

For years academics have argued for land reforms that free up the rural property market. Currently all rural land in China is “collectively” owned by the state. In practice that means it may only be leased to farmers on 30-year land use contracts. Mortgaging rural land or even selling houses built on it is accordingly banned.

Urban land is also state-owned. But by contrast it is readily traded, with far longer leases (hence the boom in China’s property market over the past decade).

Change may be afoot, if a couple of new schemes are anything to go by.

Shaxian, a small city in Fujian province, recently began experimenting with the idea of turning farmland into a financial product that can be exchanged not just between locals, but also with parties from other provinces and even with businesses.

Although farmers are still not allowed to sell their plots of land, in Shaxian they can now transfer their usage rights to others, says the Economic Observer. The new rules also allow them to enter into contracts with the local government to seek tenants on their behalf.

More importantly, under the new rules rural land can also be used as collateral for loans. If farmers can’t repay their debts on time, they forfeit usage to village committees which rent the land out to others to repay the loan instead.

The move could have far-reaching significance. If Shaxian’s pilot project were to be extended nationwide, hundreds of thousands of other small towns would be impacted. That would encourage the consolidation of tiny, inefficient plots of land and allow farmers to cash-in, increasing their spending power.

More importantly, the reform would go some way towards reducing one of the main sources of social tension in China today: land-grabs by local officials for which peasants are often poorly compensated (if at all).

Studies by researchers at the Chinese Academy of Social Sciences estimate that there have been more than 40 million illegal land confiscations by local officials over the past decade.

More recently, a land grab in Wukan led to riots (and then, more positively, to elections) grabbing national attention (see WiC133).

“China can no longer push forward its industrialisation and urbanisation at the cost of farmers’ property rights,” says Peng Sen, deputy minister of the NDRC, the country’s top economic planner.

That likewise explains why land reforms recently announced in Shenzhen could be even more significant.

Last month the city established a pilot programme of its own which grants farmers land ownership rights, often referred to as “minor property rights”.

This is a first, leading some academics and media to claim it could trigger a breakthrough in rural land reform.

Unlike Shaxian, which still maintains that rural lands are collectively owned, farmers in Shenzhen can sell their land to whomever they choose, says Securities Times.

Over the years many ‘radical’ ideas have been trialled in Shenzhen. This could prove to be one of the most important yet.

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