Important Innovation in Rural Land and Financial Reform

     ——A relevant official of the central bank explains in detail the pilot program for mortgages on the two rural “rights”

The Opinions focus on meeting the real demand of traditional farmers and new agricultural business entities such as family farms to revitalize the stock assets of the “two rights.” The Opinions propose that the pilot must be lawful and orderly, voluntary, steadily advanced, and risk-controllable, must be realistic and consider conditions, and must not rush headlong into mass action

The Guiding Opinions of the State Council on Launching the Pilot Program for Mortgaged Loans on Rural Contracted Land Management Rights and Farmers' Housing Property Rights was published on the 24th. The guiding opinions decided that the People's Bank of China, together with the Central Rural Work Leading Group Office and 11 other departments, would organize the launch of the pilot program for mortgaged loans on rural contracted land management rights and farmers' housing property rights (the “two rights”). A relevant official of the central bank answered reporters' questions on related issues.

Revitalize rural land assets and inject new vitality into rural finance

Question: Why launch the pilot program for mortgages on the “two rights”?

Answer: Launching the pilot program for mortgages on the rural “two rights” is an explicit task put forward by the Third Plenary Session of the 18th CPC Central Committee, and is 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 farmers and new agricultural business entities such as family farms have a real demand to revitalize the stock 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 to explore rural “two rights” mortgage loan business in light of local conditions. Some areas have formulated institutional measures and accumulated experience. However, the standards and practices of “two rights” mortgage loan business vary from place to place, 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 mortgages on the “two rights” is a realistic need for adapting to the development of agricultural modernization, appropriately scaled operations, and new urbanization. It is conducive to revitalizing 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.

Ensure that farmers become truly informed participants and beneficiaries

Question: What are the overall principles of the pilot?

Answer: First, lawful and orderly. The pilot must adhere to having a legal basis, first be carried out within the approved scope, and then be steadily promoted after experience is accumulated. Where it involves breaking through relevant legal provisions, the Standing Committee of the National People's Congress shall be requested to authorize suspension of implementation in the pilot areas.

Second, voluntary. “Two rights” mortgage loans are voluntarily applied for by farmers and other agricultural business entities, ensuring that the farming public become truly informed participants and beneficiaries.

Third, steadily advance. 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, risk-controllable. Adhere to the bottom line that the public ownership nature of land is not changed, the red line for cultivated 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 smooth and stable implementation of the pilot work.

Grant the “two rights” mortgage financing function and advance rural financial innovation

Question: What are the main contents of the pilot?

Answer: The pilot mainly advances steadily in the following five aspects:

First, grant the “two rights” mortgage financing function. 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 “two rights” mortgage financing function, and revitalize the property attributes of farmers' usufructuary rights to land.

Second, advance innovation in rural financial products and service methods. Financial institutions should, in light of the functional attributes of the “two rights,” increase innovation support in areas such as loan interest rates, terms, amounts, guarantees, and risk control.

Third, establish a collateral disposal mechanism. Allow financial institutions, on the premise of ensuring farmers' contracted rights and basic housing rights, to dispose of collateral in various ways according to law and improve collateral disposal measures. For the disposal of collateral for farmers' housing property rights mortgage loans, transferees should in principle be limited to the scope stipulated by relevant laws and regulations and the State Council.

Fourth, improve supporting measures. Pilot areas should accelerate confirmation, registration, and certification, do a good job in valuing the “two rights,” establish and improve rural land property rights trading platforms, establish a specialized service mechanism 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 monetary policy, fiscal policy, regulatory policy, insurance protection, and other aspects.

Carry out under the premise of protecting farmers' lawful rights and interests and respecting farmers' wishes

Question: What conditions are there for selecting pilot areas? How are farmers' lawful rights and interests protected during the pilot process?

Answer: The pilot program for “two rights” mortgage loans takes county (city, district) administrative regions as units. The pilot for mortgaged loans on rural contracted land management rights is mainly carried out in areas with relatively good transfer of rural land management rights, such as rural reform pilot zones and modern agriculture demonstration zones; the pilot for mortgaged loans on farmers' housing property rights shall in principle select areas for the pilot reform of the homestead system determined under the leadership of the Ministry of Land and Resources.

Pilot areas need to meet conditions such as a high rate of confirmation, registration, and certification, a sound rural property rights transfer and trading market, relatively strong farmers' willingness to transfer land, good momentum in appropriately scaled agricultural operations, a relatively good rural credit environment, and relatively sound supporting policies.

The CPC Central Committee and the State Council have repeatedly stressed that reforms related to the rural land system must be carried out under the premise of protecting farmers' lawful rights and interests and respecting farmers' wishes. To protect farmers' lawful rights and interests and prevent potential risks in the pilot, the guiding opinions put forward requirements in four aspects:

First, clearly specify that “two rights” mortgage loans are voluntarily applied for by farmers, family farms, farmers' cooperatives, and other agricultural business entities, ensuring that the farming public become truly informed participants and beneficiaries.

Second, emphasize adherence to the bottom line that the public ownership nature of land is not changed, the red line for cultivated land is not breached, and farmers' interests are not harmed.

Third, emphasize supporting appropriately scaled agricultural operations and encourage granting loans to agricultural business entities with 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.