How can rural capital start flowing? Injecting financial vitality into rural revitalization

Recently, the State Council issued the "Guiding Opinions on Carrying Out Pilot Programs for Mortgage Loans on Rural Contracted Land Management Rights and Farmers' Housing Property Rights" (hereinafter referred to as the "Opinions"), which has major practical significance and far-reaching historical significance for thoroughly implementing the spirit of the 18th National Congress of the Communist Party of China and the Third and Fourth Plenary Sessions of the 18th Central Committee, granting farmers usufructuary rights over contracted land, revitalizing rural land assets, and exploring channels for farmers to increase property income.

Constrained by relevant laws that urgently need improvement, and unlike urban residents' commercial housing, which can be freely bought, sold, and mortgaged, rural residential housing cannot be freely bought, sold, and mortgaged through market-based actions, which greatly hinders the capitalization of rural residents' property and is not conducive to increasing rural residents' property income. Before management rights were separated out, rural land ownership and contracting rights were legally unable to be mortgaged for loans.

⟦NL> After years of investigation and interviews, Peruvian economist Hernando de Soto and his colleagues reached a startling finding: the citizens of developing countries not only do not lack funds, but actually possess real estate worth 9.3 trillion US dollars; developing countries, home to four-fifths of the world's population, are not without assets. What they lack is the process and ability to express ownership and create capital. Because they lack these most basic expressions of ownership, they have never been able to create enough capital to make the capitalist system work. This rigid "capital," lacking formal legal documentation, cannot be used to mortgage assets or allow their land to realize its greatest value in investment. If this dead capital could be turned into living capital through formal legal documentation, national wealth would greatly increase.

De Soto's research on capitalist countries gives us great inspiration. For rural China, among the three factors of labor, land, and capital, capital is the scarcest. In "The Wealth of Nations," Smith pointed out that at the time, the development of agriculture and the prosperity of rural areas in Western Europe benefited from the return flow of urban capital. From China's current reality, the spontaneous return flow of capital from cities to rural areas still requires time. If rural land (including rural homestead land) can be "capitalized," together with the abundant rural labor force, it will play an immeasurable role in promoting rural development in China. So-called land "capitalization" means converting land from an immovable "asset" form into a mobile "capital" form.

A major problem currently facing China's development is still the existence of a dual economy, namely the coexistence of an underdeveloped rural economy and a developed urban economy. To solve this problem, striving to achieve urbanization has become the only choice. But urbanization is a natural historical process that cannot be separated from industrialization. Asking farmers to move upstairs is not urbanization. Urbanization is the urbanization of people, not of things, and urbanization must be supported by sustainable industrial development. Where people go, where money comes from, and how industries grow are still major questions. In essence, urbanization is a one-directional behavior, namely the continuous concentration of rural people, finances, and materials into cities. This behavior has never stopped since reform and opening up, and it can be said to be a major factor leading to the decline of rural areas in some places today; a series of rural social problems have also arisen because of it.

Solving the series of problems caused by the dual economy requires the urban economy to nourish the rural economy in return, and requires the return flow of people, finances, and materials, especially the return flow of capital. If urban capital is to return to the countryside, the countryside must have corresponding tradable products. Under market economy conditions, the prerequisite for commodity transactions is clarity of commodity property rights. If a commodity's property rights are unclear, it is very difficult to complete a transaction, or even if a transaction is completed, it cannot truly reflect the commodity's actual value. Rural land and rural residents' homestead land have always been unable to be traded as commodities, and for rural residents, their contracted land and homestead land are the largest assets of the family individual. The introduction of the "Opinions" this time is precisely to allow these two largest types of assets to be capitalized, especially by clearly making homestead land use rights part of farmers' housing property rights, which is the most crucial point and also the most disputed point in the past. This clarification is of extremely important significance and has a driving effect on revitalizing farmers' assets.

Allowing mortgages on the "two rights" and granting the "two rights" financing functions has the following significance: First, it helps expand the channels through which farmers can use capital, grants farmers more property rights, deepens rural financial reform and innovation, effectively revitalizes rural resources, funds, and assets, increases funding input for medium- and long-term and large-scale agricultural production operations, provides experience and models for steadily advancing rural land system reform, and promotes farmers' income growth and prosperity and the accelerated development of agricultural modernization; second, it helps the return flow of social capital to rural areas and has historic significance for activating and innovating rural areas. The introduction of the "Opinions" this time will have historic significance no less than the implementation of the household contract responsibility system in those years. It is of extremely great significance to the sustainable development of China's economy, the sustainable advancement of new rural construction, the continuous weakening of the dual economy, the ultimate realization of urban-rural integration, and even the reshaping of the foundations of traditional Chinese culture and rural civilization.