Whose cheese does collective land entering the market really cut?

Collective land entering the market is not a new thing. Since the reform and opening up, the rise of township and village enterprises relied on land that was all collective land, in line with the 1988 "Land Administration Law" provision that "establishing township and village enterprises is permitted to use collectively owned land." But this law also clearly stipulated that "the right to use state-owned and collectively owned land may be transferred according to law. The specific measures for the transfer of land use rights shall be separately prescribed by the State Council." Two years later, the State Council promulgated the "Interim Regulations on the Granting and Transfer of State-owned Land Use Rights in Cities and Towns," but to this day it has not promulgated regulations on the transfer of collective land use rights. To be realistic, the existing legal system has basically blocked the routes and channels for "collective land entering the market." But according to Liu Shouying's research, in some developed coastal cities such as Nanhai District in Foshan, Guangdong, from the early 1990s the scope of collective land entering the market was not limited to "establishing township and village enterprises"; it was more used to build factory buildings for foreign-funded, joint-venture and private enterprises.

Although since 1988 collective land entering the market has been subject to policy "pursuit and interception," and all official documents concerning the transfer of collective land use rights say "prohibited, strictly forbidden" and the like, in fact a large amount of market-entry activity could only go "underground." At first the scale was not large and the impact limited, and local governments also "turned a blind eye." But once it "gradually took shape," the attitudes of local governments also split: some advocated "cleaning up and rectifying," while others insisted on "incorporating these extra-legal acts into the legal system" and advocated opening up legal channels by amending the law. Now when everyone discusses the logic of reform, there are disputes between "problem-oriented" and "concept-oriented," and debates between "grassroots innovation" and "top-level design," but all follow one principle: a large number of real-world "extra-legal innovative acts" form pilot projects, gradually forming a social consensus on reform, and the issuance of a "red-headed document" is the highest level's confirmation of reform. Collective land entering the market is no exception. After more than twenty years of exploration, at the Third Plenary Session of the 17th Central Committee in 2008, the sentence "gradually establish a unified urban and rural construction land market" was added, but the preceding word "gradually" still indicated that it remained at the pilot exploration stage, with no clear timetable. It was not until the Third Plenary Session of the 18th Central Committee that the word "gradually" was removed, clarifying the reform direction and path of "rural collective operating construction land entering the market on an equal footing with state-owned land, with equal rights and equal prices." In 2014, 33 counties and districts including Beijing's Daxing District were included as pilot areas for "collective operating construction land entering the market."

There is a great deal of literature on collective land entering the market. Since the 1990s, scholars such as Zhou Qiren and Liu Shouying began calling for "granting collective land a property rights system with equal protection to state-owned land." Since the Third Plenary Session of the 17th Central Committee, after the central government continuously released signals supporting the lawful entry of collective land into the market, a new round of intense debate arose in society. The debate focused on two points: one, "should it enter the market," and the second, "how should it enter the market."

On the first question, there are two completely different voices. One type of voice declares that "collective land entering the market will shock the urban land market, and even weaken the role of the existing land system in economic growth." The theoretical logic behind this confident assertion is that collective land entering the market breaks the monopoly under which urban land can only be supplied by the government; the rise in land supply lowers urban land prices and reduces the monopoly revenue local governments obtain from the land expropriation process. Market entry also, by "forcing" land expropriation reform, raises the cost of land expropriation, which is unfavorable to the current urbanization process that is highly dependent on the land expropriation system. Reasoning layer by layer according to the above logic, one naturally reaches the conclusion that "market entry is unfavorable to urbanization and affects economic growth." Another type of voice advocates that "collective land absolutely should enter the market." This is an important way to protect farmers' land rights and interests and strengthen collective assets and farmers' property income. More importantly, it breaks the duality of our country's land system, allowing farmers to enter the city with tradeable, priceable "land assets," which will thoroughly reform the existing urbanization model. Villagers remaining in rural areas and the collective economy also gain long-term stable asset income, which can be called "mutual benefit between urban and rural areas."

The author fully supports the second type of view. The existing urban-rural dual land system played an important role in China's rapid economic growth over the past decade or more. There are many theories used to explain it, but the most intuitive view is that it adapted to the highly investment- and export-dependent characteristics of China's economic takeoff and rapid growth stage. A large number of industrial parks, infrastructure, real estate and new city construction were inseparable from the mechanism of government monopoly over land supply. But the drawbacks of this model are becoming more and more obvious. Especially at the "new normal" stage, investment and exports, the two major engines that long supported rapid growth, have clearly slowed. The "want land, not people" urbanization model has in turn led to the creation of a large number of new cities without sufficient capacity for agglomeration. The land system, as an important support of the traditional urbanization and growth model, has also reached the point where "it must be reformed." Collective land entering the market breaks the institutional monopoly that "only state-owned land can be used for non-agricultural construction." The old urbanization model advanced by government land expropriation will of course "hit walls on all sides." In this sense, the first type of view's claim of "unfavorable to urbanization" is also correct, except that the "urbanization model" they speak of is the traditional one. "Unfavorable to growth" seems reasonable in the short term, but in the long term, breaking the dual land system and activating the "capital potential" of rural land has a major impact on China's sustainable and balanced economic growth.