In 1978, China’s historic reform and opening up started with a land reform in Anhui Province. Thirty years later, new land policy may bring China into a new age. Everyone wants to know whether China can have another round of fast development, just like thirty years ago. 

Even before the start of the third Plenary Session of the 17^th Communist Party of China (CPC) Central Committee, the new land policy which may be issued in that meeting has already attracted many people’s attention. One week after the end of the meeting, the new land policy went public at last, which undoubtedly raised hot discussions in the public. 

Two Sides

There are two completely different understandings of the statement to the new land policy in the third Plenary Session of the 17^th Communist Party of China (CPC) Central Committee. The appearance of the solution to the land acquisition system, which has always been a hard problem of China’s land system, has a profound meaning. The rural construction land which has been included in the planning can bypass the land acquisition by the government and directly enter the market of industrial and commercial land. The farmers who own those lands can enjoy the legal income from the land appreciation. That means the “small property room” (the room or house whose property license is not issued by China’s central government but by the governments of countries or towns of China) may be legalized.

There are two sides in the discussion about the new land policy. What is strange is that both sides believe to defeat the opponent in the discussion.

One side is to support the collective ownership of the rural land. The document Decisions Made by CPC on Some Important Problems of Promoting the Reform and Development of the Rural Areas in China (hereafter Decisions) has attenuated that the two-tier management system that integrates the collective ownership of rural land and household contractual management must not be changed. The “three-no” restriction has been exerted on the flow of contractual management right of land, which means “no change in the character of the collective ownership of rural land, no change in the land use and no damage to the farmers’ rights and interests of land contracting”. In addition, there is no clause about whether rural land can be mortgaged in the Decisions. This means the adapted land privatization has been denied. So the collective-support side thinks they win the discussion. 

The side supporting the privatization of land attenuates that the Chinese central government gives the farmers the permanent right of household land contracting. Although the land mortgage is not mentioned in the Decisions, the clauses concerning the rural banking mention “the enlargement of scope of rural valid guaranty”. They think the valid guaranty may include the land. Using the word “guaranty” instead of “mortgage” is to get rid of dispute. 

However, some people holding pessimistic attitude think that the new land policy obviously is the compromise between the both sides mentioned above. Maybe it can not solve the old problems but generate new ones.

According to the Decisions, the scope of land acquisition by government will be reduced to the one for the public welfare projects. For the planned land acquisition for the non-public welfare projects, the rural collective construction land can enter the market directly.

This change has a profound meaning. From now on, the farmers and the rural areas can benefit from the land appreciation occurring in the process of turning agricultural land into non-agricultural land. This can not only increase the Chinese farmers’ income but also prevent the money-for-power corruption to some extent. And the so-called “small property room” can be legalized.

The relevant authorities of government are busy with the details of the land reform and the modification of relevant laws.

Rural Banking

The scholar Li Changping has spent three years in the experiment of village land bank in his hometown. In his opinion, it is the first time that the document of CPC mentions the rural banking as the core of the modern rural economy. The farmers’ cooperative or mutual-assistance banking is usually developed in priority in the countries with small-scale peasant economy, because the small-scale peasant economy must adopt the mode of cooperation and the cooperation is hard to be realized without the financial support.

Now the yearly interest rate of the loan in the credit corroborative in rural areas is not less than 10% (in the city the rate is usually 7%). Such a high rate results in the huge risk of the Chinese farmers who lend the loans. So the rural financial institutions must be turned into the farmers’ own financial institutions. Then the farmers can enjoy the banking support; and, furthermore, the interests can become the income of the organizations of farmers.

Li said that the agriculture of Japan and Taiwan was both of small-scale peasant economy. Their rural financial cooperation is very advanced. The income from the cooperative financial institutions takes 85% of the one of the agricultural associations in Japan and Taiwan.

In reverse, if the private banks enter the rural areas first, the cooperative finance of farmers can’t be well developed. So in Japan, Korea and Taiwan the private banks have been forbidden to enter the rural areas for nearly 100 years. Only when the cooperative financial institutions of the farmers are developed well enough, the entry of the private banks can be allowed.

In Li’s hometown where he has conducted the experiment of cooperative banking for three years, the farmers can mortgage their house sites or land contracting rights for the loans in a land bank or a land credit corroborative. If a farmer fails to return the loan, he just loses the land contracting rights. The land still belongs to the village. Assuming that the mortgage of the land contracting right lasts three years, the farmer can get his land back three years later. However, if the farmer mortgages his land in a private or foreign-funded bank, the income of the interests will be taken by them. In addition, his land will be sold by the banks if he fails to return the loan, which may push him into a desperate situation.

Another advantage of the cooperative banking of farmers is that it can help with the quit of contractual management right of arable land. The farmers’ contracting land is usually scattered. If one family settle down in the city, they will sell the management right of their contracting land. Because the scattered land is useless for the commercial banks, they are not interested in buying this land. However, the land credit corroborative can solve the problem by buying out the ownership of this land and then re-contract the land to others in the village.  

In Li Changping’s opinion, this land reform may be divided into three stages. The first one is to modify the constitution. The constitution stipulates that the Chinese farmers have the collective ownership of rural land in China while the government owns the urban land. When agricultural land is turned into the land for non-agricultural use, there is collective-owned land in the cities, which is forbidden in the previous laws. The second stage is the legalization of the “small property room”. If the land acquisition by government can only be done for the public welfare use, the commercial or industrial land of cities can be gained from the collectivity of farmers. The third stage is to cancel the land acquisition system and to shift it into the system of turning agricultural land into non-agricultural land. The People’s Congress voted to agree that the turning of agricultural land into non-agricultural land can go on according to the urban planning. The government can acquire the land for public welfare use free of charge to build schools, hospitals and roads. The use of collective-owned land can be changed directly. This is the system which Taiwan adopts.

In conclusion, now it is not the time to discuss the problem of privatization or nationalization, but to design the frame for the system.

Some Misunderstandings

He Xuefeng, a professor from Huazhong University of Science and Technology, pointed out some misunderstandings of the land system.

Nowadays there are two different kinds of land in the rural areas of China. The one is the land changed from agricultural use to non-agricultural use for the urban development and the construction of public utilities; the other is the land for agricultural production, especially the staple agricultural products. The land changed from agricultural use into non-agricultural use only takes a small part of the whole rural land and relates to the minority of farmers in China. The real rural land means the land owned by 90% of the Chinese rural population. This kind of land is mainly for farming. It’s the basic arable land of China and the foundation of the supply of food and other agricultural products.

Though turning the agricultural land in the outskirts into the non-agricultural land raises many disputes and even conflicts, the problems of this kind of land is the focus of the whole society. Most of the farmers owning this kind of land don’t live very bad lives. Oppositely, some of them are admired by the urban residence. The farmers living in the outskirts may have big benefits from selling their land while the farmers in the farming areas have much smaller one.

In He’s opinion, when we talk about the rural land, we must distinguish which kind we are talking about. Or we can plunge into the trouble of speech and chaos of logic.

Many people usually consider the problems of the land changed from non-agricultural use to agricultural use in the outskirts as the problems of the farming areas in China. This undoubtedly confuses the different requirements of the farmers in the two different areas in China.

According to He, there is a popular view which seems to be right: the scale operation of agriculture is a must for the modernization of agriculture. That means we must collect the arable land and skillful farmers into a corporation or organization with a large amount of capital. When the scale of farming reaches a certain extent, the modernization of agriculture will be realized.

There are nine hundred million farmers or 230 million rural households in China. China owns arable land of 1.8 billion mu (1500 mu equals 1 square km). The average area of the land each rural household owns is about 8 mu. Assuming the scale operation of agriculture reaches 100 mu per household, only 18 million households in China have land to farm. The other 90% have no land, as well as income from the land. And such income takes half of the income of a rural household.

Apart from the agricultural income, the farmers could only live upon the income from working in the cities, which is small and instable. This will not only push the farmers into a very poor condition but also cause great damage to the society of China. So the scale operation of agriculture in China is a very absurd thought.

Furthermore, China is a state in which the disparity between cities and countries is becoming larger and larger. So many people think that China must change its urban-rural dual structure to make farmers live the life of urban residence.

However, in the current economic structure of China, not more than 30% of the farmers who come to the cities have good luck, finding jobs with high and stable income or obtaining profits from businesses. The other 70%, however, will have to go back to the rural areas finally. What’s worse is that some of them can’t get used to their former lives with enough food and clothes and small cost after returning home. So they have to stay in the cities and take the jobs with the salaries which are only enough for them to eat and wear.

In that situation, the disparity between cities and countries becomes larger and larger. The inner structure of the city is also changing: the disparity between the rich and the poor increases. However, even the poorest men in China can have adequate food and clothes. This may be the largest secret of why China can make economic development and keep the society stable. This is also the bottom line of human right that the Chinese farmers can enjoy.