Is it true that no one farms the land in rural China?

What kind of land is left unfarmed?

On May 26, General Secretary Xi Jinping issued important instructions on current agricultural land policy, stressing the need to protect arable land as we protect giant pandas. On one hand, we must strictly enforce the policy of balancing the occupation and compensation of arable land and hold the red line for arable land; on the other hand, we must regulate land transfer and prevent a Great Leap Forward in land transfer. In recent years, the focus of the central government's agricultural work has been to build a new type of agricultural management system. In the process of implementing policy, many local governments have interpreted the new type of agricultural management system one-sidedly as expanding the scale of agricultural operations. It has been common for local governments to help industrial and commercial capital go to the countryside to transfer land from farmers, and a Great Leap Forward in land transfer has occurred.

According to statistics, in 2009 land transfer nationwide was 11%, and today the transfer rate has risen to around 30%. Calculated according to the pace of population transfer, in 2009 there were fewer than 230 million rural migrant workers nationwide, and in 2014 there were more than 270 million. The growth rate of rural land transfer has exceeded the growth rate of rural migrant workers, and rural land transfer is clearly accelerating. Land transfer varies across regions. One obvious paradox is that in some areas with good production conditions, flat terrain, concentrated plots and better water conservancy conditions, the proportion of land transfer is high, while in some mountainous and hilly areas, not only is the proportion of abandoned land high, but the proportion of land transfer is also low. My hometown is in the Dabie Mountain area of southern Henan. When I returned home during the Spring Festival, some fellow villagers complained that the local government was doing nothing and asked why it had not long ago brought in business owners to transfer land, so that they could get rent without working. A preliminary estimate is that in mountainous areas like my hometown, abandoned land is close to 30%. The most direct reason for land abandonment is that the land is fragmented, water conservancy conditions are poor, and mechanized operations are impossible. The farming conditions of carrying everything on one's shoulders and back make many people unwilling to farm. In fact, in those abandoned lands in hilly and mountainous areas, no one is willing to farm even for free, so how could business owners come to contract them?

By contrast, land abandonment rarely occurs in plain areas, such as the North China Plain, Northeast China, and the Jianghan Plain. These areas have good farming conditions and a high degree of mechanization, farming requires little effort and can still be profitable, so farmers are all willing to farm. It is only in these areas where the land is relatively easy to farm that industrial and commercial capital is also willing to farm, and it is precisely in these areas that local governments and enterprises may join forces to promote land transfer.

Take a certain city in central China as an example. The city has about 3 million mu of arable land, and more than 1.7 million mu has already been transferred. Among this, a total of 834,700 mu has been transferred by individual entities with a scale of more than 1,000 mu each. Leading enterprises dominated by industrial and commercial capital have transferred 1,211,100 mu, accounting for 69.4%, while the rest has been transferred by large farming and breeding households and family farms dominated by farmers. Research in the city found that current land transfer has two notable features: first, government policy bias and financial support are the main drivers of rapid land transfer; second, the recipients of land are mainly industrial and commercial capital, and their actual agricultural management capacity is insufficient.

⟦NL> In recent years, the city has introduced a series of preferential policies to guide land transfer and invested a large amount of fiscal funds. Staff from the agriculture department of a district under the city reported that among the beneficiaries of fiscal funds in the agricultural sector of the district, the share received by industrial and commercial capital, family farms, and traditional small farmers was 7:2:1. Industrial and commercial enterprises that transfer land on a large scale are the main beneficiaries of fiscal funds. In order to guide land transfer, the local government set clear limits on operating scale when formulating policies and investing funds. For example, only those with at least 100 mu could obtain special subsidies for a “family farm.” For example, since 2013, around the construction of the “vegetable basket” project, the city government invested more than 100 million yuan in fiscal funds to support the creation of standardized vegetable production bases, mainly subsidizing steel-frame greenhouses and supporting infrastructure. It was stipulated that each mu of greenhouse would receive a subsidy of more than 15,000 yuan, and with land leveling subsidies added, this could basically cover the cost of building greenhouses. However, in project approval, a construction scale of more than 1,000 mu was required to obtain project funds, which excluded traditional farmer vegetable growers. Almost all industrial and commercial enterprises, after applying to the government for funds to build greenhouses, would then subcontract the greenhouses to farmers for operation, and the industrial and commercial enterprises themselves basically did not directly engage in production activities. In addition to this kind of direct subsidy, other central, provincial and municipal agriculture-related projects, such as high-standard farmland improvement project funds, small-scale farmland water conservancy project funds, and comprehensive agricultural development project funds, are generally first directed to these areas where land has been transferred.

Large farms are favored but do not make money

There are two reasons why local governments actively promote land transfer and support industrial and commercial enterprises in transferring land through policy. First, in previous years the central government's goal of a new type of agricultural management system was not clear, and local governments focused on the issue of operating scale in practice. Some local governments even used the scale and proportion of land transfer as assessment indicators and political achievement projects, artificially driving a Great Leap Forward in land transfer. Second, as the management and mobilization capacity of rural grassroots organizations has weakened, local governments generally face the problem that it is difficult and costly to deal with small farmers. One notable change is that in the past, rural areas in central and western China not only had “seven stations and eight offices” such as water conservancy stations and agricultural machinery and agricultural technology service stations at the township level, but the village and group levels also played a coordinating role in agricultural production. Since the abolition of agricultural taxes and fees, a few areas such as Hubei Province reformed and abolished the “seven stations and eight offices,” and grassroots service departments in most areas also showed a trend toward bureaucratization. The village and group levels gradually withdrew from the agricultural production process, and agricultural production completely became a matter for each household. At present, of the national agricultural support funds that increase year by year, apart from a portion that is paid directly into farmer accounts through direct subsidy cards, many other portions of agricultural support funds are required to be used in a coordinated way. For example, during the “Twelfth Five-Year Plan” period, the state planned to invest 600 billion in land leveling funds. A large amount of fiscal funds for improving agricultural infrastructure, such as land, water conservancy, and roads, involves the interests of millions of small farmers in the course of investment, which is very troublesome. Local governments cannot deal with tens of millions of farming households, so they hope to transform the management entities and turn small farmers with a plot of land into large farms of several hundred or several thousand mu like those in the United States. Compared with investing in small farmers with a plot of land, when the government improves infrastructure such as water, electricity, ditches, and roads for a single management entity reaching a thousand mu, not only is the cost of dealing with them low, but the fund input also easily shows results.

⟦NL> Serving small farmers is not only unlikely to show results easily, but also very troublesome. This is the principle that it is not easy to grasp everything all at once, but once it is braided it is easy to grasp. Since the implementation of the household contract responsibility system, the agricultural land system, tax and fee system, and grassroots organizations have all developed in the direction of increasingly dispersed agriculture. When things reach an extreme, they reverse, and finally today small farmers have become so dispersed that they can hardly operate, and the transaction costs for the government to provide services to small farmers have also become so high that they are almost unbearable. Faced with this, in local practice there naturally emerged the impetus to expand agricultural management entities, and the Great Leap Forward in land transfer was its manifestation.

The problem is that industrial and commercial capital transferring land cannot improve agricultural production efficiency. It is a consensus in agricultural economics that the land output rate of large farms is lower than that of small farmers, and some empirical studies also prove this. Our rural surveys found that after enterprises transfer land, grain yield per unit area is at least more than 10% lower than that of small farmers. At present, the basic goal of China's agricultural policy is to ensure grain production security, and maintaining or increasing the land output rate is a basic requirement for innovating the agricultural management system. At present, many industrial and commercial enterprises transfer land both because they are driven by policy and because in the early period they did not understand the laws of agricultural production and had unclear positioning. Many farmer-entrepreneurs who did engineering, ran factories, or did construction outside returned to their hometowns to contract land under the encouragement of local governments. Some barely sustained themselves with local government subsidies, and most lost everything after contracting for a few years. In our surveys, we did not see a single case of large-scale contracting of farmers' land for grain production that could successfully continue. In a district under the central China city mentioned above, along the national highway there appeared more than ten farms each with a scale of several thousand mu, basically all invested in by real estate enterprises. One farm, a local positive example, abandoned several hundred mu of land in a remote area that leaders' inspections could not reach. An informed person said: “The more you plant, the more you lose. If you abandon it and do not plant, you lose only 800 yuan per mu in transfer fees each year.” These real estate developers' land transfers have a strong speculative motive of “enclosing land.”

The yield per unit area of enterprises farming land is lower than that of farmers, and various costs are similar to those of farmers. In addition, they must pay rent of more than 500 yuan, while farmers farming land only “earn labor fees and hardship fees.” Therefore, unless industrial and commercial capital changes the use of the land or plants cash crops, it will inevitably be unable to make a profit after transferring land. If the government does not give policy or fiscal favors, most industrial and commercial enterprises will quickly withdraw after transferring land because they cannot make a profit. The problem is that current central policy is misled by the question of “who will farm the land.”

“No one farms the land” is a false problem

Theoretical circles and the media generally worry about “no one farms the land.” This is a completely false problem. China's rural labor force is about 400 million, and currently China's rural migrant workers number only 270 million. For a long period in the future, China's rural labor force will still remain above 100 million. With 100 million rural laborers and 1.8 billion mu of arable land, how could there be no one to farm? The intuitive phenomenon related to the worry about “no one farms the land” is the appearance of abandoned land in people's hometowns around them. The question is, in which regions is land abandoned? In the North China Plain, the Jianghan Plain, and Northeast China, is land abandoned in these areas? What is actually abandoned is mountainous and hilly terrain like my hometown. The land in these areas cannot be cultivated after the current agricultural production infrastructure has been damaged. If farming conditions are not improved, no one will cultivate the land in these areas even for free, so how could industrial and commercial capital go to transfer it (unless for special crops such as medicinal herbs)? In other words, the problem of land abandonment caused by poor farming conditions is not that no one farms the land, but that there is land that cannot be farmed. The way to solve the problem is not to bring in industrial and commercial capital to transfer land, but to improve infrastructure and provide farmers with convenient conditions for farming.

Common-sense misunderstandings such as “no one farms the land” and “land abandonment” are widespread and to a certain extent have misled policymakers. The central government worries about food security, so it encourages local governments to innovate the agricultural management system and also increases funding, resulting in local governments joining with industrial and commercial capital to transfer land.

The Great Leap Forward in land transfer has two consequences. First, land transfer squeezes out farmers' employment opportunities. Before local governments promoted land transfer, spontaneous land transfer widely existed within villages among relatives, neighbors, and friends. For example, if I went out to work and gave you the land to farm, when I returned home for the New Year you could give me a bag of rice and a bottle of oil, enough for the Spring Festival, and that was a matter of human relations. Some theorists believed that such land transfer could not bring “property income,” so they demanded formal land transfer, formal contracts, and various property rights exchanges. After a formal land transfer market appeared, land rent rose, reaching 500 yuan per mu or even higher. The old human-relations arrangements no longer worked, and transferring land required paying rent. This pushed a group of people who had stayed in villages to farm out of agricultural production. We call this group “core farmers.” They are the “elite” among the rural left-behind groups after the outflow of rural people and resources. Because they picked up dozens of mu of others' land to farm, they maintained a moderately comfortable life, and by the way also served as village cadres and group leaders, took on the role of caring for left-behind elderly and children in the countryside, handled rural public security, and became the main body maintaining the fragile basic order in rural areas. Before industrial and commercial enterprises entered villages, such “core farmers” existed in every natural village, and their existence was very important. After industrial and commercial enterprises entered villages, this group of farmers was also driven into cities. The countryside was left completely with the elderly, the weak, women, and children, and maintaining grassroots order became a major problem.

Another negative consequence is that large farms have low land output rates. Once industrial and commercial enterprises become the management entities, food security is instead not guaranteed. An even more far-reaching impact is that once policies, institutions, and grassroots service systems are all reset around these industrial and commercial enterprises that transfer land, the agricultural socialized service system supporting traditional smallholder family production will disintegrate, and a new agricultural service system will form. The result is falling into a situation where the family-centered agricultural production mode cannot be retreated to and the large-farm mode is inefficient, ultimately creating the possibility that policy will be hijacked. At present, the central government's proposal to prevent a Great Leap Forward in land transfer not only means prohibiting local governments from helping industrial and commercial capital transfer land from farmers, but also requires local governments not to ignore the traditional household agricultural production mode and its needs in agricultural work. In improving the land system, supplying agricultural public goods, and building the agricultural socialized service system, taking the still dominant and vital household agricultural production mode as the main policy target is the key to current agricultural work.