China region to test allowing farmers to transfer land rights, in potentially pivotal reform

BEIJING – An eastern Chinese region is experimenting with letting farmers mortgage or transfer control of their publicly owned land, in what could help spread prosperity to the impoverished countryside and become one of China's most pivotal rural land reforms in 35 years.

There is no private land ownership in China, with all urban land under state ownership and rural land under collective ownership overseen by village officials. That wouldn't change in Anhui province, where the latest experiment is under way. But farmers would be given more flexibility in how their allotted plots are used and more opportunities to profit from China's booming real estate market.

"The goal is to activate a land market — to let the land flow," said Tan Shuhao, a scholar on rural development at Renmin University in Beijing. "The rural land policy must change, because it is the root for the wealth disparity between urban and rural populations."

Following a key meeting to set economic policy for the coming decade, Communist Party leaders last week pledged to give rural residents greater property rights and to close the gap in opportunities between rural and urban residents.

Their statements gave no details on how it would be done. However, policy changes in China often come as a result of small-scale experiments carried out by local officials acting on signals from national leaders. Successful experiments — those that fulfill goals without sparking any social instability — are rewarded.

Anhui also was spearheaded land reforms in the late 1970s.

In the countryside, rural collectives own the land in every village. In 1978, Anhui took the lead in a bold move to break up the previous commune-style, collective farming, when led to a nationwide policy change to lease collective-owned land to individual rural families for private farming. Thirty-five years later, another reform is looming to give the rural families more opportunities to profit from the land, where they have only been allowed to farm and build homes — unlike in urban areas where a thriving real estate market has evolved for long-term leased property.

Last week, the Anhui provincial government issued a document saying it would experiment with new land rules in 20 of its rural counties and districts.

It says rights to the publicly owned plots could be transferred, sublet, mortgaged, or turned into business shares — which could result in consolidation of land into bigger, more efficient farms. The statement does not clarify how control would be transferred, or what time or other constraints might be placed on a recipient's lease.

The state-run English-language China Daily endorsed rural land reform in an editorial Thursday.

"Fundamentally transforming the land use system to (villagers') benefit has become essential if the government is to realize its goals of common prosperity and national revival," the editorial read.

Currently, farmers are compensated when their land gets expropriated by local governments for commercial, residential and industrial development, but disagreements over the compensation have become a major source of instability. Villagers have frequently clashed with local officials, who take land and then lease it to developers with huge mark-ups that have provided a critical source of local government revenue.

Scholars say villagers would be more fairly compensated if the market gets to set the price, instead of the government.

"To allow rural construction land to be directly rented by investors from urban areas is a big step toward change," said Xie Peixiu, an expert on rural development from Anhui Academic of Social Sciences.

Yang Yubin, a leader of an agricultural cooperative in the Anhui village of Xiaogang in Fengyang county, where the first Chinese rural land reform occurred in 1978, said all the farmers in his community embrace the pilot project for land reform.

"I am in charge of a family farm in this village, and I feel the good news gives us lots more motives to work hard. We support the policy very much," Yang said.

Beijing has been pushing to urbanize a greater proportion of its rural population, but experts say that cannot take place fairly without giving villagers a bigger say in what happens to their land if they choose to move into a city.

Though against the law, Chinese villagers in practice have been trading their land in private. However, such trades are limited in scope — often within a single village — and can be risky because of a lack of legal protection.

"A policy and a system are needed to give legitimacy to this practice and to regulate the market so that the rights and interests of rural residents can be better protected. And of even greater concern, arable land needs to be strictly prohibited from being traded for non-agricultural purposes," the China Daily editorial reads.

The Anhui government said it wants to better unlock the potential of rural land. It wants to transform the traditional small-plot, family-style farming into more productive agricultural businesses, and see collectively-owned non-agricultural land used for commerce, industry, tourism or rural residential communities.

Any reforms are sure to meet resistance, especially from local governments that have done well from the requisitioning of land.

But the Anhui government is taking an initial step: It plans to survey its land to identify the current holder of rights over every plot by the end of 2015.

That is the prerequisite for creating a land market, Tan said. "You must have clear rights before the land can flow in a market," she said.