Economy

The green grass of home

More reports on land reform in advance of the Third Plenum

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Seeds of change?

Sometime in the fourteenth century a young orphan in rural England walked to London after hearing that its streets were paved with gold. He soon discovered his mistake, but has a stroke of luck when a benevolent merchant named Fitzwarren takes him in as a scullery boy. The boy buys a cat and much later becomes Mayor of London. Such is the (highly-abridged) tale of Dick Whittington, well known to generations of UK schoolchildren, as well as devotees of that strangely English stage phenomenon, pantomime.

The tale is based on a real individual, Richard Whittington, the younger son of a Gloucester businessman. He was indeed sent to London, but to become a mercer (cloth merchant). Whittington became a successful trader in silks and velvets, later becoming London mayor.

Whittington would have found it troublesome to rise to a similar position in modern-day China (after all, the post of mayor is not open to businessmen, only to Party bureaucrats). And he may also have found his move to the city a difficult one, thanks to the constraints of the hukou, China’s system of household registration. In fact, it was designed purposely to keep villagers in their villages, and discourage movement to cities.

In Mao Zedong’s time, the security apparatus made sure that migrants were repatriated to wherever their hukou designated. Later, as a result of Deng Xiaoping’s economic reforms, the state gradually relaxed its grip on the citizenry’s movements, allowing the rural poor to seek factory jobs in the city.

But the hukou didn’t go away. Today the source of frustration is it denies those who migrate the same basic rights as those enjoyed by urban residents, cutting them off from benefits like state healthcare and school places for their children.

That’s created a lot of angry migrants, perhaps as many as 236 million of them. That’s the number quoted in an official report of those who would like to settle for good in the cities in which they work. This weekend a meeting of China’s political bosses – known as the Third Plenum – has prompted speculation of potential reforms to the hukou system, ending the discrimination against migrants.

But that alone might not be enough because rural folk are less likely to settle permanently in cities unless another key issue is addressed: their right to sell their farmland.

Unlike their urban peers, rural residents cannot buy or sell land outright because they only hold the right to farm it (typically on 30-year leases). This effectively shuts them out of the property market. It also ties up their assets – their homes and surrounding land – and contributes to an underlying sense of economic insecurity.

In advance of the plenum meeting, policymakers have been tinkering with a range of pilot programmes designed to test land reform among rural folk. The Economist referred to one scheme last week in Guangdong that allows villagers in Gumian to mortgage their homes to borrow extra cash. In freewheeling Wenzhou, the local government plans to go a step further by allowing urban residents to buy houses from villagers – although the Chinese press warns that buyers will be cautious about doing something this radical until laws are changed at a national level.

And in another attempt to address the rural property rights conundrum Citic Group, one of the country’s largest conglomerates, is offering an innovative trust product backed by land rights on a small plot of land in Anhui province. The trust will lease land from farmers and hand it over to companies to manage, reports Reuters.

By bringing more land under professional management, there are hopes that agricultural productivity will improve. And the benefit for its former farmers is that they will receive a regular income (from the rent), but also a small cut of any profit made by the management company, reports the Shanghai Securities News.

Parts of Citic’s plan look similar to a project in Jiaxing in Zhejiang that allows farmers to lease their land to a professional agricultural firm but be guaranteed to regain the land rights should they want them back (see WiC199).

If Citic’s project works, the proceeds could help migrants with their transition to city life. Century Weekly believes the programme offers a “higher, long-term return than the usual one-off compensation” they get when land is sold off by local governments. Although the project is in its early stages, Zhang Jisheng, a senior official with Citic Trust, told Shanghai Securities News that there are teams preparing to replicate it in other places.

All of these schemes demonstrate a degree of experimentation ahead of the Third Plenum (see WiC213), when the leadership is expected to outline its key objectives for the next 10 years.

But attendees will also be forgiven a sense of déjà vu on rural land reform, after years of discussion on the topic. Hu Jintao called for the “gradual” establishment of a “unified rural and urban market” for land sales at his own third plenum meeting in 2008, for instance. Perhaps Xi Jinping will go further this month – at least he’s set a deadline that all farmers must receive formal deeds to their property by 2017.

Some already have. The Economist says this is an important step: “It is going to be a laborious task, with much squabbling and much recourse to satellite-aided surveying. But without demarcations, a well-ordered land market cannot take shape. And local media now frequently report on the handing over of deeds to happy farmers who have never held such things before.”

Despite this, those hoping for groundbreaking change in the months ahead are probably going to be disappointed, the South China Morning Post warns.

There are powerful interests which benefit from the current arrangements, not least the local governments who sell land to raise municipal revenue. As farmers often lack firm ownership credentials for their land, it makes it easier for local cadres to seize and sell it with token compensation, making massive profits by selling it on to real estate developers.

That’s a situation that suggest land reform cannot occur in isolation. There will need to be a thorough overhaul of how local governments are financed too.

No coincidence, then, that alternative means of raising revenue (municipal bond sales and property tax, for instance) are thought to be on the Plenum’s discussion agenda too…

Keeping track: it has been announced that Bayer Cropscience will become the operator of the farmland whose land rights are being leased by Citic from farmers. As we reported in WiC215 the move is part of a broader push for rural land reform, as a means to curb local government abuses (i.e. land seizures) and improve agricultural yields. This is the first time a foreign company has got involved in a land transfer project, and in this case the German multinational will play a pioneering management role thanks to its expertise in pest control, crop protection and agricultural management. The land in question covers 3.6 million square kilometres in Anhui province, and the trust structure Citic has created with the farmers lasts 12 years. Separately in Beijing’s first policy document of 2014 (known as the Number One Central Document) it was mooted that the next stage of reforms might permit farmers to mortgage their land use rights. (Feb 7, 2014)


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