Industrial and commercial capital going to the countryside must rely on mechanisms to avoid risks

Recently, the Ministry of Agriculture, the Office of the Central Rural Work Leading Group, the Ministry of Land and Resources, and the State Administration for Industry and Commerce jointly issued the "Opinions on Strengthening Supervision and Risk Prevention of Industrial and Commercial Capital Leasing Rural Land" (hereinafter referred to as the "Opinions"), which set out clear provisions on strengthening the standardized management of industrial and commercial capital leasing rural land, improving the risk prevention mechanism, and strengthening interim and ex-post supervision.

Both pros and cons: the area of rural land leased by industrial and commercial capital has reached 38.825 million mu

In recent years, industrial and commercial capital going to the countryside to contract rural land has developed rapidly. According to statistics from the Ministry of Agriculture, in the past three years the area of contracted land flowing to enterprises has grown at an average annual rate of more than 20%. As of the end of 2014, the area of contracted land flowing to enterprises had reached 38.825 million mu, accounting for about 10% of the total area of contracted land transferred by rural households nationwide.

Chen Xiaohua, Vice Minister of Agriculture, pointed out that from actual operation, industrial and commercial capital entering agriculture has both advantages and disadvantages: on the one hand, industrial and commercial capital can accelerate the transformation of traditional agriculture and the building of modern agriculture; on the other hand, when industrial and commercial capital leases rural land for a long time and on a large scale, it easily aggravates the tendency toward "non-grain" and "non-agricultural" use of cultivated land, with many hidden dangers.

"What we worry about most is the combination of industrial and commercial capital with administrative power. After all, the land issue involves the vital interests of hundreds of millions of farmers. We must consider both the scale effect and the maintenance of farmers' livelihoods. The introduction of the 'Opinions' is a practical necessity, under the background of industrialization and urbanization, for guiding the orderly transfer of land and promoting the development of modern agriculture," said Chen Xiaohua.

Strengthen supervision: eliminate the hidden dangers of "non-grain" and "non-agricultural" use

In many areas, large tracts of cultivated land that had originally been used to grow wheat and corn before industrial and commercial capital went to the countryside to lease land have all been converted to cash crops.

Why does capital going to the countryside not grow grain? He Xuefeng, director and doctoral supervisor of the China Rural Governance Research Center at Huazhong University of Science and Technology, found in his research that capital going to the countryside has no advantage in growing grain.

"Nationwide, capital going to the countryside on a large scale to farm has pushed up land rents, in some cases reaching 1,000 yuan per mu per year or even higher. However, the annual net income from one mu of land is only around 1,000 yuan, leaving little room for profit," said He Xuefeng.

In response, the "Opinions" issued this time set out clear provisions on the areas where industrial and commercial capital going to the countryside is encouraged and restricted. "We encourage industrial and commercial capital to focus on developing capital- and technology-intensive industries, and to engage in agricultural product processing and distribution and agricultural socialized services. If industrial and commercial capital leases rural land for a long time and on a large scale, we will also impose restrictions, and it is strictly prohibited to use the government or grassroots organizations to force farmers to transfer rural land through methods such as assigning targets and setting tasks. We strictly prohibit illegal and irregular acts such as unauthorized changes in agricultural use and serious damage to or pollution of leased rural land. This bottom line cannot be crossed," said Chen Xiaohua.

Improve mechanisms: establish a risk guarantee fund system

Experts pointed out that at present the core of relevant departments' research on access supervision measures lies in how to define whether an industrial and commercial enterprise is leasing rural land "for a long time and on a large scale," how local governments can control industrial and commercial enterprises leasing land within the upper limit, the exit mechanism and sanctions measures after exceeding the upper limit, and how to scientifically establish a risk guarantee fund system, among other issues.

"In order to avoid the emergence in rural areas of large capital squeezing out small farmers, to avoid large-scale land mergers, and to avoid a large number of farmers losing their status as business entities, we must adopt a cautious attitude toward industrial and commercial enterprises leasing farmers' contracted land for a long time and on a large scale." Han Jun, deputy director of the Office of the Central Financial and Economic Leading Group, believes that there is an urgent need to explore and establish a strict access and supervision system for industrial and commercial enterprises leasing farmers' contracted cultivated land.

"To prevent the possible risks brought by industrial and commercial capital leasing rural land, the 'Opinions' put forward three measures. First, industrial and commercial capital leasing rural land should be carried out in a standardized way through open markets. It is strictly prohibited for industrial and commercial capital to use the government or grassroots organizations to force farmers to transfer rural land through methods such as assigning targets and setting tasks. Second, guide industrial and commercial capital and farmers to sign standardized transfer contracts, and clearly specify matters such as the use of land transfer, risk protection, land reclamation, whether mortgage guarantees and re-transfer are allowed, and liability for breach of contract. Third, encourage all localities to establish and improve a risk guarantee fund system for leased rural land, to prevent damage to the rights and interests of contracted farmers," said Chen Xiaohua.