What Happens to Farmers After Land Transfer? Orderly Transfer of Farmland Faces Practical Difficulties
At the end of 2014, the General Office of the CPC Central Committee and the General Office of the State Council issued the "Opinions on Guiding the Orderly Transfer of Rural Land Management Rights and Developing Moderately Scaled Agricultural Operations" (hereinafter referred to as the "Opinions"), which, on the premise of upholding the household contract responsibility system without wavering, proposed the goal of “guiding the orderly transfer of rural land (contracted arable land) and developing moderately scaled agricultural operations”. The introduction of the "Opinions" marks that farmland transfer will enter a new stage, but how to respond to the practical requirements of this important reform issue in practice still needs to be clarified.
What Happens to Farmers After Land Transfer
Minister of Agriculture Han Changfu, in an interview with reporters about the introduction of the "Opinions", said that the "Opinions" represent a major institutional innovation, theoretical innovation and practical innovation in China's land system reform. His reasoning is that previously the farmland sector only had the “separation of two rights” - collective land ownership and farmers' contracted management rights - whereas the "Opinions" proposed the “separation of three rights”: land ownership, contract rights and management rights.
The “separation of three rights” has long existed in practice. For as long as the large-scale labor migration from rural areas to cities has continued, the practice of the “separation of three rights” in farmland has existed. The reason is simple: the large number of farmers who go out to work will not simply let their land lie fallow, so they will inevitably transfer the land within the village community.
Spontaneous land transfer takes place among acquaintances and generally has the following characteristics: first, the rent is low - in quite a few cases, the transferring party no longer collects rent after receiving state subsidies; second, the terms of the transfer period are flexible - if work goes poorly, one can return home at any time to take the land back and continue farming; third, whatever was originally planted is still planted after the transfer, with no major change in use.
This kind of land transfer suits China's current actual conditions. China's statistical urbanization rate of forty-some percent is calculated on a statistical basis that counts more than 200 million migrant workers as urban population, but they have not completed the process of settling in cities at all, and their labor reproduction still depends heavily on rural areas.
After the 2008 crisis arrived, China saw a wave of migrant worker unemployment, and tens of millions of workers were forced to leave factories. In any other country, this would be a major social problem, but in China, the problem dissolved into nothing. The secret lies in the special land system: tens of millions of migrant workers who lost factory jobs did not need to wander the streets, but instead went home to farm, and came out again once the situation improved.
We cannot say such a system is good, but we can say it is the least bad, as it can prevent worse situations from occurring.
Is it now time to change this institutional framework? The state guides farmland to gather toward “new agricultural operating entities” such as family farms, specialized large households and leading enterprises. Several years later, the rural operating landscape will certainly have undergone qualitative change. If the macroeconomy fluctuates again at that time (which is very possible) and large numbers of migrant workers lose their jobs, what then?
What we worry about is that after land transfer, if migrant workers who lose their jobs and return home in the future can no longer get their land back and return to their original life trajectory, then even if the rent from land transfer can keep them from starving, they will still become people with nothing to do.
It can be seen that the goals proposed by the "Opinions" are correct; rural land indeed suffers from problems such as being too fragmented and needing scaled operations, but to solve these problems, the first thing that should be solved is the problem of migrant workers truly settling down in cities. Only when migrant workers truly integrate into cities, do not need to return to their hometowns after retirement, and can be resettled locally if they lose their jobs, can rural land be confidently “transferred in an orderly manner”.
Let Farmers Increase Income and Capital Make Money
From the perspective of agriculture, the purpose of land transfer is to “optimize the allocation of land resources and raise labor productivity” and “safeguard food security and the supply of major agricultural products”; from the perspective of farmers, land transfer is meant to realize farmers' property rights. The goals are all good, but whether the goals can be achieved is another matter.
The land transfer model currently attempted in practice is roughly as follows: leading enterprises transfer farmers' land at a certain rent, promise farmers a share of land dividends, and farmers can also be hired by the enterprises to become agricultural workers. Logically, farmers then have two sources of income, land rent and wages, earning more than they did by farming themselves; after efficiency improves, agricultural capital can also become profitable. But is this possible?
Agricultural labor differs from office work and factory assembly-line work. Its biggest characteristic is that it is difficult to assess. Farmers describe farming as “tending the crops”; since it is “tending”, attitude is key. Bending down one more time or sweating one more drop can affect output, yet none of this can be incorporated into a performance appraisal system. Family operation is recognized as the most effective form of agricultural production, and not without reason, because under this system farmers do not count their labor input. If they become agricultural workers, incentives will again become a problem, and leading enterprises will have to worry about the same thing that the people's communes did back then: doing well or badly makes no difference.
The advantage of scaled agricultural operation lies only in the fact that output per capita is higher than under family operation. If comparing output per mu, scaled operation is destined to lose to the small-peasant economy. To truly give play to the advantages of scaled land operation, the requirements for the land-to-population ratio are extremely high; for example, under mechanization, one person manages several thousand or even more than ten thousand mu of land. However, this operating model cannot be realized in China, because China's actual situation is that there are many people and little land. On this point the "Opinions" also clearly state that land transfer “must not only pay attention to improving scaled land operation, but also prevent excessive concentration of land, balancing efficiency and fairness”.
This requirement in the "Opinions" is undoubtedly correct, but on the premise that efficiency cannot be greatly improved (and may even decline), it is not easy to both give farmers higher incomes and let capital make money.
Farmers: Benefiting or Suffering?
Governments at all levels probably know that the dual goals set cannot be achieved. No one will do a losing business, so the method of promoting transfer has become subsidizing various “large households”. In this way, the “large households” that transfer land make profits, and the government gains political achievements. In the future, land transfer will probably still have to rely on this model for support. The "Opinions" clearly state that “new agricultural subsidies will be tilted toward new agricultural operating entities”.
From the perspective of farmers who have transferred their land, they may gain real benefits in the short term because land rent has risen; but whether this income can be sustained is a question mark. In reality, there have already been many cases of agricultural enterprises running away after losses. Once enterprises go bankrupt, of course the rent will no longer be paid. If the use of the land has already been changed, for example from grain fields to vegetable greenhouses, farmers who want to adjust the land back to a familiar use will have to invest funds. Whether they ultimately profit or lose is truly hard to say.
Land is an element that cannot be moved, and this characteristic is most evident during transfer. If each household contributes 10,000 yuan, 10,000 households can gather 100 million yuan in funds, forming a scale effect of capital; but if each household contributes 1 mu of arable land, 10,000 households may not be able to gather 10,000 mu suitable for scaled operation, unless that 10,000 mu of land happens to form one contiguous piece. Fund contributors can redeem their funds at any time, but those who transfer land cannot redeem the land at any time.
The "Opinions" clearly state that “without written authorization from farming households, rural grassroots organizations have no right to decide by any means to transfer farming households' contracted land, and even less may they, in the name of the minority obeying the majority, concentrate the contracted land of farming households in an entire village or group for external investment attraction and operation. This prevents a small number of grassroots cadres from making private deals and seeking personal gain.” Motivated by preventing harm to farmers' interests, such a provision is good, but the characteristics of land also determine that farmland transfer requires the land owners, namely the collective, to play a leading role, because if one village has one “holdout household”, scaled transfer cannot be realized. This is a difficult problem to face in practice.
The significance of land transfer for farmers is probably less than its significance for some intermediary organizations waiting to profit from transfer. The large emergence of land transfer e-commerce platforms and the development of financial tools such as land transfer trusts are clear evidence. If the policy goals of farmland transfer themselves conflict with the vital interests of the broad masses of farmers and the stability of the whole society, then the latter must be given priority.