Risks of Two Rights mortgage loans clarified: Central bank stresses red line on arable land must not be breached
A relevant official of the People's Bank of China answers reporters' questions on issues related to the pilot program for rural “Two Rights” mortgage loans
Recently, the State Council issued the "Guiding Opinions on Carrying Out the Pilot Program for Mortgage Loans on Rural Contracted Land Management Rights and Farmers' Housing Property Rights," and decided that the People's Bank of China, together with the Central Rural Work Leading Group Office and 11 other departments, would organize the pilot program for mortgage loans on rural contracted land management rights and farmers' housing property rights (hereinafter referred to as the “Two Rights”). A relevant official of the People's Bank of China answered reporters' questions on issues related to the "Guiding Opinions."
1. Why carry out the pilot program for “Two Rights” mortgage loans?
Carrying out the pilot program for rural “Two Rights” mortgage loans is an explicit task put forward by the Third Plenary Session of the 18th CPC Central Committee and an important institutional innovation in China's rural land system reform and rural financial system reform. At present, China is in a critical period of transition from traditional agriculture to modern agriculture. The transfer of rural land management rights has clearly accelerated, and developing appropriately scaled operations is a realistic choice. Traditional farmer households and new types of agricultural operating entities such as family farms have a real need to activate the existing assets of the “Two Rights.” In recent years, under the organization and promotion of local governments and relevant departments, financial institutions have adopted various flexible methods and explored rural “Two Rights” mortgage loan business in light of local conditions. Some regions have formulated institutional measures and accumulated experience. However, the standards for “Two Rights” mortgage loan business vary from place to place, practices differ, and there is a lack of complete laws, regulations and institutional safeguards, which need to be gradually improved through reform pilots. Prudently and steadily carrying out the pilot program for “Two Rights” mortgage loans is a realistic need for adapting to the development of agricultural modernization, appropriately scaled operations and new urbanization. It is conducive to activating rural land assets, enhancing the efficiency of rural land resources, advancing innovation in rural financial products and service methods, injecting new vitality into rural finance, improving farmers' access to and convenience in obtaining loans, and promoting the accelerated development of agricultural modernization.
2. What are the overall principles of the pilot program?
⟦NL> First, lawful and orderly. The pilot program must be based on legal grounds, first carried out within the approved scope, and steadily promoted only after experience has been accumulated. Where related legal provisions must be breached, the Standing Committee of the National People's Congress shall be requested to authorize suspension of their implementation in the pilot areas. Second, independent and voluntary. “Two Rights” mortgage loans shall be voluntarily applied for by farmer households and other agricultural operating entities, ensuring that the farmer masses become truly informed participants and beneficiaries. Third, steady progress. On the premise of safeguarding farmers' lawful rights and interests, properly handle the relationships among farmers, rural collective economic organizations, financial institutions and the government, and prudently and steadily advance the pilot work. Fourth, controllable risks. Adhere to the bottom line that the nature of public ownership of land is not changed, the red line for arable land is not breached, and farmers' interests are not harmed. Improve various supporting policies in the pilot areas, prevent, control and resolve risks, and ensure the pilot work is carried out smoothly and steadily.
3. What are the main contents of the pilot program?
The pilot program mainly advances steadily in the following five aspects: First, grant the “Two Rights” the function of mortgage financing. Strengthen institutional development, guide and urge financial institutions to always take safeguarding, realizing and developing farmers' land rights and interests as the starting point and foothold of the reform pilot, implement the mortgage financing function of the “Two Rights,” and activate the property attributes of farmers' usufructuary rights to land. Second, advance innovation in rural financial products and service methods. Financial institutions should, in accordance with the functional attributes of the “Two Rights,” intensify innovative support in areas such as loan interest rates, terms, amounts, guarantees and risk control. Third, establish a mechanism for disposing of collateral. Financial institutions shall be allowed, on the premise of ensuring farmers' contracting rights and basic housing rights, to dispose of collateral in various ways in accordance with the law and improve collateral disposal measures. For the disposal of collateral for farmers' housing property rights mortgage loans, transferees shall in principle be limited to the scope prescribed by relevant laws and regulations and the State Council. Fourth, improve supporting measures. Pilot areas shall accelerate confirmation, registration and issuance of certificates, do a good job in valuing the “Two Rights,” establish and improve rural land property rights trading platforms, establish and improve specialized service mechanisms for the mortgage, transfer and evaluation of the “Two Rights,” and improve the rural credit system. Fifth, increase support and coordination. Increase support and coordination in areas such as monetary policy, fiscal policy, regulatory policy and insurance protection.
4. What are the conditions and considerations for selecting pilot areas?
The pilot program for “Two Rights” mortgage loans takes county (city, district) administrative regions as units. The pilot program for mortgage loans on rural contracted land management rights is mainly carried out in rural reform pilot zones, modern agriculture demonstration zones and other areas where the transfer of rural land management rights is relatively well developed; the pilot program for farmers' housing property rights mortgage loans shall in principle select areas designated by the Ministry of Land and Resources as pilot areas for reform of the homestead system. Pilot areas need to meet conditions such as a high rate of confirmation, registration and issuance of certificates, a sound rural property rights transfer and trading market, relatively strong willingness among farmer households to transfer land, good momentum in appropriately scaled agricultural operations, a relatively good rural credit environment, and relatively sound supporting policies.
5. How can farmers' lawful rights and interests be safeguarded and risks prevented during the pilot process?
The Party Central Committee and the State Council have repeatedly stressed that reforms related to the rural land system must be carried out on the premise of protecting farmers' lawful rights and interests and respecting farmers' wishes. To protect farmer households' lawful rights and interests and prevent potential risks in the pilot program, the "Opinions" put forward requirements in four aspects: First, make clear that “Two Rights” mortgage loans shall be voluntarily applied for by farmer households, family farms, farmers' cooperatives and other agricultural operating entities, ensuring that the farmer masses become truly informed participants and beneficiaries. Second, stress the need to uphold the bottom line that the nature of public ownership of land is not changed, the red line for arable land is not breached, and farmers' interests are not harmed. Third, stress the need to support appropriately scaled agricultural operations and encourage loans to agricultural operating entities of appropriate operating scale. Fourth, require pilot area governments to establish risk mitigation and compensation mechanisms for “Two Rights” mortgage loans by means such as interest subsidies, developing government-supported guarantee companies, using rural land property rights trading platforms to provide guarantees, and setting up risk compensation funds.