What is the relationship between farmland system innovation and rural economic development? Lu Fuxing explains in detail

In theory, China's current rural land system belongs to a system of separation of the two rights of land, and in essence it is quasi-state ownership. With the rapid development of the economy and society, calls for innovation in the farmland system are growing stronger. Only by accelerating innovation in the farmland system, clarifying the boundaries and responsibilities of farmland property rights, giving full play to the function of land as a factor of production, and stimulating the potential of the land factor can we meet the needs of the current rapid development of the rural economy and society and re-ignite the potential and vitality of rural development.

I. The theoretical basis of farmland system innovation

The theory of the farmland system has a long history and a very solid foundation. China's collective ownership of farmland is a special form of the farmland system, and its fundamental requirement is to uphold collective ownership of land. At present, the theories of farmland system innovation are roughly as follows:

1. Marxist theory of rent. Marx pointed out: “Whatever the specific form of rent may be, all its types have one thing in common: the appropriation of rent is the economic form in which landed property is realized.” [1] The most core issue in innovation in the farmland ownership system is the economic interest reflected in rent. Therefore, the theory of rent is one of the important theories for farmland system innovation. Marx divided rent into differential rent and absolute rent. He believed that differential rent is a kind of excess profit, the excess profit obtained from leasing superior land and appropriated by the landowner. Differential rent is linked to land grade, and differences in the natural conditions of land are the natural condition or natural basis for generating differential land rent. Absolute rent refers to the rent obtained by the landowner by virtue of a monopoly on landed property, and is the rent absolutely possessed by virtue of landed property. Marx's theory of rent reveals the formation and gradation of land rent. It is an important theoretical basis for farmland reform and one of the basic laws that must be observed in land system innovation. Innovation in the farmland ownership system must follow the economic laws of rent theory and make choices between property rights system innovation and forms of ownership; otherwise, farmland system innovation will lack a theoretical basis.

2. Property rights theory. Property rights are a kind of property right, including material means and intangible assets. Property rights are tangible or intangible things that can be controlled, disposed of, or enjoyed by the subject of the property rights, and they must have cultural, scientific, and economic value. Examples include various mechanical equipment, production raw materials, intellectual property, and so on. Property rights have exclusivity, separability, divisibility, and incompleteness. Separability is the main characteristic of property rights. This characteristic allows the various rights of property rights to belong to different subjects. For example, in collective land, farmers may have land use rights and income rights, while the contractor may have management rights; an enterprise's investor may enjoy the income right to enterprise property, and the enterprise's operator may exercise the right to use enterprise property. That property rights can be traded or transferred is determined by the separability of property rights. There are many forms of property rights transactions, such as contracted operation, leasing, share participation and holding, merger and acquisition, and so on. At the same time, property rights can also be exchanged. Not only can their various powers be separated, but after separation the various powers can be further subdivided and exchanged, making the operation of property rights more complex and diverse. For example, the right of investors in a joint-stock limited company to choose managers can be further divided into one share, one vote. The establishment and subdivision of property rights powers should enable the subject of property rights to save social resources in the adjustment of economic interests. Clear property rights content and boundaries can reduce friction in the transaction process, thereby lowering transaction costs. Property rights theory shows that the separability or divisibility of legal property rights theory is an important theoretical basis for China's current rural land household contract responsibility system, and also a theoretical basis for further innovation in farmland ownership.

3. Agglomeration economy theory. Agglomeration economy theory holds that economic activities are not evenly distributed in space, but present the characteristics of local concentration as economic collections or groups. Agglomeration economy theory holds that the phenomenon of local concentration in space can improve the low efficiency under dispersed conditions. Agglomeration can make the function of the overall system greater than the sum of the functions that can be realized under dispersed conditions, that is, agglomeration can form a “1+1>2” effect. Therefore, the agglomeration of enterprises in local space can obtain the additional benefit of increasing returns to scale, while the dispersion of farming households leaves agriculture lacking agglomeration effects. Agglomeration theory is a theory of external economies of scale in space. Agglomeration economy theory shows that farmland system innovation must adhere to the principle of concentrated land use and must aim to promote large-scale land operation, so that land is concentrated in the hands of skilled farmers and people with relatively high science and technology, fully giving play to the scale effect of land.

4. Transaction cost theory. Transaction cost theory reveals that in market transaction activities, every transaction by an economic actor has a cost. These costs include: (1) the cost for both parties to the transaction to collect relevant transaction information, that is, search cost; (2) transactions are completed through contracts, and signing a contract requires cost; (3) the supervision cost of supervising the completion of the contract, such as legal litigation. Market subjects establish enterprises in order to save transaction costs, so that transactions that would be completed through the market can be completed within the enterprise. Therefore, the reason enterprises exist is to avoid transaction costs. According to transaction cost theory, one of the main principles of institutional innovation is to save transaction costs, and this is true of any institutional innovation. Therefore, the purpose of farmland system innovation is not only to promote the rational flow of the land factor, but also to minimize the circulation cost of the land system. Transaction cost theory provides ideas for innovation in farmland ownership and also expands the space for farmland system innovation.

II. Path choices for farmland system innovation

Since the formation of China's farmland system, innovation in the farmland system has never stopped. With the continuous advancement of China's urbanization and industrialization, new contradictions and problems have emerged in the land system. How to innovate the existing land system has become a hot topic explored by many experts and scholars. At present, the path choices for land system innovation are roughly divided into three types:

Path one: start with management rights and innovate on the basis of the separation of the two rights. The rural household contract responsibility system is an innovation that follows this path, and this is also the path currently encouraged and supported by China's land system innovation. The characteristics of this path are: on the premise of adhering to unchanged collective ownership of farmland, through institutional arrangements, further solidify farmers' land management rights, including extending farmers' contract periods, allowing inheritance and transfer of contracted land, promoting the circulation of land management rights and preserving and increasing their value, and increasing farmers' property rights and interests. The path starting from management rights is a kind of farmland system innovation consistent with China's collective ownership of rural land. It can not only stabilize farmers' expectations regarding management rights and eliminate farmers' worries about “fearing change,” but also promote the circulation and scale of land. At the present stage, it is conducive both to giving play to the social security function of rural land and to maintaining the stability of rural society, and it conforms to the goals and requirements of current land reform, so it is easily accepted by the government. However, with the development of the social economy, the innovation space of this path is limited, and the scope for innovation is not large because it has been continuously expanded since 1978. In particular, with the deepening of rural social and economic development, its universal applicability to rural development is relatively poor, and the innovation space needs to be further expanded on this basis.

Path two: start with ownership and innovate in the fundamental system. The path starting from farmland ownership attempts to innovate the farmland system and release rural development space through reform of farmland ownership. This path is further divided into two completely different directions. One is the direction of nationalization. Those who hold this view believe that changing land ownership from collective ownership to state ownership, that is, nationalizing rural land, is an effective path for current rural land system innovation. They advocate taking land into state ownership and then granting farmers permanent tenancy. Theoretically, implementing state ownership of land should be able to prevent phenomena that infringe on farmers' rights and interests, and with nationalization of farmland, village collective leaders would in theory no longer have the right to intervene in the disposal of rural land. Farmers' land property rights would be exercised uniformly by the state on their behalf, which could give fuller play to the benefits of land and promote large-scale use of land. But in practice, there are many difficulties for the state as an agent to manage rural land. At China's current stage, the practice of the state managing rural land is difficult to realize, and the subject of state ownership is even harder to establish. In addition, China has a vast territory, and it is unrealistic for the state to uniformly exercise land ownership. The other is the direction of privatization. Some believe that the key to farmland system innovation is to clarify property rights, and that the existing collective ownership system has blurred property rights, so land use efficiency is not high. They advocate thorough privatization of land and letting farmers own land ownership, so that farmers can be encouraged to cherish land and make full use of it. The problem is that land privatization violates China's traditional socialist theory, because traditional socialist theory holds that collective ownership of rural land is the foundation of socialism and the premise of socialist public ownership. Therefore, this path of innovation has already broken through the bottom line of China's fundamental system. At present, in discussions on the rural land ownership system, although extreme propositions of nationalization and privatization appear from time to time, they have never occupied the mainstream position in theoretical research and policy exploration. [2]

Path three: start with property rights powers and innovate through socialization of property rights powers. Socialized collective ownership of farmland property rights powers means allowing collective farmland property rights to join social economic organizations or other organizations and to combine and operate property rights beyond the scope of their own collective in order to preserve and increase value. One form is joining social economic organizations or other organizations in the name of the collective. Although the collective organization holds land ownership, other powers are exercised jointly or in alliance with social organizations. The most typical examples are jointly running enterprises in the name of the collective or using collective land as shares. Another form is that the collective organization first contracts farmland to farming households within the collective organization or subleases or transfers it to other individuals, and then the farming households or other units and individuals possessing collective land operate it in the form of land shares or cooperative participation. The collective then only holds ownership of the farmland, while other powers such as the income right, transfer right, possession right, and disposal right of the farmland are all exercised by the share participants or participants. This kind of collective organization or collective members joining an enterprise or a larger collective as shareholders is in fact the socialization of the powers of collective farmland property rights. The shareholding of collective farmland property rights promotes the socialization of farmland property rights, releases the mobility of farmland, and adapts to the requirements of large-scale farmland operation. Therefore, on the premise of not changing the foundational status of household contracted operation, finding ways to subdivide the property rights of collective land ownership, then freely combining them on the basis of clear property rights to form economies of scale, changing the situation of diseconomies of scale, promoting the circulation of land use rights, and taking the road of appropriately scaled operation has become one of the paths in current practice.

At present, the main forms of innovation in collective ownership of farmland are as follows: First, the household contract operation system. The household contract operation system of land is a form of agricultural production responsibility system in which farming households contract land and other means of production and production tasks from collective organizations on a household basis. Second, the two-field system. That is, cultivated land is divided into two categories. One is “grain ration land,” which is distributed equally according to the number of people in the farming household; the other is “responsibility land” or “contract land.” “Grain ration land” is distributed equally to safeguard the food security of farmers' survival, while “contract land” is contracted by person, by labor force, or through bidding. Among the two methods of the “two-field system,” the former embodies the principle of fairness, and the latter embodies the principle of efficiency. Third, shareholding. Shareholding uses land as shares to participate in land operation. It neither changes collective ownership of land nor involves the transfer of household contract management rights. It merely turns household contract management rights into shares, which can realize large-scale land operation and capitalization of land property rights. Fourth, auction of the “four wastelands.” The auction of the “four wastelands” is the public sale of the use rights of “four wastelands” land, and this form mainly occurs in economically underdeveloped areas. Compared with other innovative forms of the farmland property rights system, the auction of the “four wastelands” means that reform of the farmland property rights system no longer remains at the incremental stage of improving use rights, but has entered the stage of stock adjustment of land use rights. The auction of “four wastelands” use rights has already granted operators full and complete contracting rights. Through the auction of the use rights of the four wastelands, the long-standing obstacle to the circulation of land use rights faced by the farmland system has been resolved. Fifth, the permanent tenancy system of land. This is an improvement adapted to the current household contract responsibility system for farmland, and its purpose is to grant farmers permanent use rights to land and realize the free circulation of land. Sixth, the public field system. The public field system is an innovation of the traditional Chinese clan “public field system.” Seventh, land trusts. A land trust is a form in which land is entrusted through contract to a specialized institution for capitalized operation. Land trusts have changed the original mode of land operation and realized innovation in the land use and management system.

III. Restrictive factors in farmland system innovation

The farmland system is the focus of rural reform and also the concentrated expression of farmers' interests. Advancing farmland system innovation is an important guarantee for unleashing rural productive forces. However, there are still many restrictive factors in China's farmland system innovation. Specifically, the main ones are:

(1) Restrictiveness of laws and regulations. Law is the fundamental guarantee for orderly innovation in collective ownership of farmland and also the driving force for promoting innovation. In order to protect farmers' land rights and interests, China has promulgated laws such as the Land Administration Law and the Rural Land Contracting Law, as well as some administrative regulations, granting farmers long-term and stable land contract management rights. But on the other hand, these laws and regulations freeze land adjustments and prevent the flow of land, because the state protects the long-term stability of rural land contracting relations in the form of law and clearly stipulates “unchanged for 30 years.” Within this legal framework, farmers enjoy the rights of possession, use, income, and transfer and disposal over existing contracted land. In addition, the Property Law grants farmers the power as individuals to appeal against and resist infringement of individual rights and interests in the name of the “collective,” stipulating that “where a decision made by a collective economic organization, a villagers' committee, or its responsible person infringes upon the lawful rights and interests of collective members, the infringed collective members may request the people's court to revoke it,” and for the first time clearly stipulates the inheritance right of contracts for cultivated land, grassland, and forest land. While maintaining stable contracting rights over rural land and protecting farmers' interests, national law also limits the space for rural land system innovation. How to innovate collective ownership of farmland under existing legal provisions and fully give play to the resource efficiency of farmland is a challenge facing the continued innovation of the farmland system.

(2) Restrictiveness of the social system. China's agricultural land system carries a strong planned economy flavor, overemphasizes the socialist character of the land system, and ignores or denies the property attributes of land. Since reform and opening up, the central government's rural land policy has adopted measures such as extending contract periods, expanding the scope of farmers' land rights, and strengthening the clarification and legalization of ownership relations. However, all reforms of the land system follow the bottom line of collective ownership of farmland, insisting that collective ownership of farmland is the mark of rural socialism. Under the presupposition of this mark, the subdivision of collective ownership of farmland has been recognized and implemented, but for other reforms involving subdivision, breaking the ice in the farmland system is still very difficult, and the socialist standard of productive forces has not truly been upheld. Although farmland privatization has been advocated for a long time and has much theoretical support, collective ownership of farmland remains unshakable. The farmland system involves the survival and development of 800 million farmers, and the particularity of farmland does not allow reform to fail. Therefore, innovation in collective ownership of farmland is inevitably constrained by China's policies. How to break through the limits of public and private ownership and how to fully give play to the role of farmland as farmers' property resource are issues of difficult exploration in farmland system innovation.