How Can the Disposal Rights and Powers of Contracted Land Be Improved? Conditions, Reform Ideas and Paths
In 2013, the report of the Third Plenary Session of the 18th Central Committee, the "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform," proposed for the first time granting farmers the rights and powers to mortgage and guarantee contracted management rights, launching reform to improve the disposal rights and powers of contracted land. In 2015, the No. 1 Central Document, "Several Opinions on Increasing the Intensity of Reform and Innovation and Accelerating the Construction of Agricultural Modernization," proposed “exploring effective forms of realizing the rural collective ownership system,” and improving the disposal rights and powers of contracted land is also a core issue in this exploration. However, under the basic framework of separating the three rights of ownership, contracting rights and management rights of contracted land, there is still a lack of clear reform design regarding the rights subjects, rights objects, scope of rights and interests, and realization paths of the disposal rights and powers of contracted land. These will have an important impact on farmers' rights and interests and on the organizational forms of agricultural production. With the goal of improving the disposal rights and powers of contracted land, this paper discusses the conditions, ideas and paths of reform, and from the perspective of various stakeholders analyzes the rationality and feasibility of reform, and finally puts forward the safeguard conditions for advancing reform.
I. The Connotation and Practical Significance of Improving the Disposal Rights and Powers of Contracted Land
Improving the disposal rights and powers of contracted land is key to deepening reform of the rural collective ownership system and the land system. Here, disposal rights and powers refer to the right to transfer and the rights to mortgage, guarantee and so on based on the right to transfer. For a long time, due to institutional constraints and unclear boundaries of property rights and powers, farmers have lacked disposal rights and powers over contracted land, which has restricted the realization of farmers' property rights and the flow and optimal allocation of land resources.
The right to dispose of ownership by transfer, gift and so on is the right of disposition of the property owner as stipulated by civil law and property law. Therefore, the disposal rights and powers of contracted land with ownership as the object belong to the collective. Due to the constraints of collective ownership, the ownership of contracted land in fact cannot be alienated, and the collective's right of disposition over contracted land cannot be implemented under the existing legal framework. Farmers have contracted management rights over contracted land, which are usufructuary rights established by the contracting party (the collective) over the contracted land. Article 120 of the Property Law stipulates that “the usufructuary right holder shall, according to law, enjoy the rights to possess, use and benefit from the immovable or movable property owned by others,” and does not have the right of disposition. That is to say, farmers do not have the right of disposition over the contracted land itself. What farmers can dispose of is the contracted management right. According to the Rural Land Contracting Law, “the contractor shall, according to law, enjoy the rights to use and benefit from the contracted land and to circulate the land contracted management right,” and the circulation methods of the contracted management right include not only lease and subcontracting but also transfer. Article 128 of the Property Law also stipulates that “the holder of the land contracted management right shall, in accordance with the provisions of the Rural Land Contracting Law, have the right to circulate the land contracted management right by means of subcontracting, exchange, transfer and so on.”
Relevant laws and regulations and central policies have shown a shift from “circulation of contracted management rights” to “circulation of contracted land.” Paragraph 1 of Article 16 of the Land Contracting Law stipulates that contracting households “shall, according to law, enjoy the rights to use and benefit from the contracted land and to circulate the land contracted management right,” and the report of the Third Plenary Session of the 17th Central Committee proposed “improving the rights and powers of land contracted management rights and guaranteeing farmers' rights to possess, use and benefit from contracted land according to law. ... allowing farmers to circulate land contracted management rights in the forms of subcontracting, lease, exchange, transfer, share cooperation and so on.” The report of the Third Plenary Session of the 18th Central Committee and the 2014 No. 1 Central Document respectively proposed “granting farmers the rights and powers to possess, use, benefit from and circulate contracted land and to mortgage and guarantee contracted management rights.” However, at present, what is referred to should still be the circulation of contracted land management rights, not the circulation of ownership; otherwise it would face two major institutional breakthroughs: first, a breakthrough in collective ownership through the transfer of collectively owned land, and second, a breakthrough in farmers' exercise of the right of disposition.
At present, farmers' disposal rights and powers over contracted management rights are incomplete. First, the Rural Land Contracting Law stipulates that circulation of contracted management rights by means of transfer shall be subject to the consent of the contracting party. Second, the transferee is restricted. So-called household contracting management, according to Article 15 of Chapter II of the Land Contracting Law, only members of the same collective economic organization are qualified. The Rural Land Contracting Law stipulates that “with the consent of the contracting party, all or part of the land contracted management right may be transferred to other farming households engaged in agricultural production and operation, and the household shall establish a new contracting relationship with the contracting party, while the original contracting relationship between the original contractor and the contracting party over that land shall terminate accordingly,” but when the transferee goes beyond the scope of collective members, what kind of contracting relationship the new right holder should establish with the owner of the contracted land and what legal attributes that contracting relationship has are both unclear. Third, the term of all forms of circulation, including transfer, cannot exceed the remaining term of the contracting period. Because of the various restrictions faced in disposal, the liquidity of contracted management rights is lower than that of ordinary property rights, and other rights and powers based on the disposal rights and powers of contracted management rights, such as mortgage and guarantee, cannot develop.
From the proposal at the Third Plenary Session of the 17th Central Committee that contracted management rights remain unchanged for a long time, to pilot registration and certification of contracted land, and then to the proposal at the Third Plenary Session of the 18th Central Committee to grant farmers the rights and powers to mortgage and guarantee contracted land, the basic direction of land system reform is to strengthen farmers' property rights over contracted land, and improving the disposal rights and powers of contracted land is an inherent part of this direction. Through reform, first, the rights and interests relationships of different subjects over contracted land can be clarified, farmers' protection of their rights and interests in contracted land can be strengthened, especially the rights and interests of farmers who have left the land, thereby facilitating urbanization; second, it is conducive to accelerating the circulation and optimal allocation of contracted land and improving land use efficiency; third, it is conducive to the development of scale operations and the cultivation of modern agricultural entities, promoting the construction of modern agriculture and safeguarding national food security.
II. Reform Goals and Ideas
(I) Reform Goals
Improving the disposal rights and powers of contracted land means, on the basis of adhering to collective ownership, changing the current situation in which the property rights arrangement is neither conducive to the realization and protection of farmers' (contracted management right holders') rights and interests, nor conducive to improving the efficiency of cultivated land use and building modern agriculture. Improving the disposal rights and powers of contracted land is a search for the intersection of possible institutional arrangements for achieving different goals. Reform must meet the requirements of three aspects:
1. Make contracted management rights a complete property right. For contracted management rights, to become a complete property right they must be transferable through buying and selling and so on. On this basis, financing methods such as mortgage and guarantee can develop, and contracted management rights can change from property into assets.
2. Reform must help farmers form stable and reasonable expectations of their rights, so that farmers can leave the land and their hometowns with confidence and achieve urbanization. This is the objective requirement for the continued development of industrialization and urbanization.
3. Reform must also be conducive to the reasonable flow of contracted management rights, to the development of agricultural scale operations and the stable operation of new agricultural entities, avoiding abandonment and extensive management, and improving the efficiency of cultivated land use. Problems such as the inversion between the market prices of bulk agricultural products and import landed prices need to be solved by transforming the agricultural production mode and improving agricultural production efficiency. However, in scale circulation there is generally the serious problem of coveting the non-agricultural value of farmland, non-grainification and non-agriculturalization, and these can only be solved by the joint action of reasonable property rights arrangements and land use regulation.
(II) The Basic Ideas of Reform
1. Improve the disposal rights and powers of contracted land under the framework of separating the three rights of ownership, contracting rights and management rights. The separation of ownership and contracted management rights greatly promoted agricultural development. With the advancement of industrialization and urbanization, the separation of contracted management right holders from actual agricultural operators has become increasingly common. In order to regulate and protect the economic interests of different subjects, the separation of contracting rights and management rights is also inevitable. On September 29, 2014, the fifth meeting of the Central Leading Group for Comprehensively Deepening Reform deliberated, and on November 20, 2014, the General Office of the CPC Central Committee and the General Office of the State Council jointly issued, the "Opinions on Guiding the Orderly Circulation of Rural Land Contracted Management Rights and Developing Appropriate Scale Agricultural Operations," which proposed further deepening reform of the rural land system and separating the “three rights” of rural collective land ownership, contracting rights and management rights.
2. After separation, contracting rights and management rights have independent value and value foundations. Clarifying the relationship between land-related interests and various property rights is key to achieving the reform goals. The value foundation of management rights is the use benefits based on agricultural use of farmland. The value foundation of contracting rights has two aspects: one is the rental income from the circulation of management rights; the other is asset-based income generated in circumstances such as land expropriation.
3. Contracting rights and management rights can have their own independent right holders. The right holders of contracting rights and management rights can be different, and on the basis of agricultural use of farmland, the contracting right holder has no right to interfere in the production and operation of the management right holder.
4. The management right holder has complete disposal rights and powers, and the disposal rights and powers of contracting rights and management rights are mutually independent. Complete management right disposal rights and powers mean that the right holder can transfer or circulate the management right for a long term without a fixed term, and the transferee is not limited to members of the collective economic organization. In the case of long-term circulation without a fixed term, the contracting right holder may not take back the management right without cause or due to reasons not attributable to the management right holder. The disposal rights and powers of contracting rights must be established gradually in stages on the basis of solidifying contracting rights. First, ensure free transfer within the scope of members of the collective economic organization, and when conditions are ripe, open the transferee to persons outside the members of the collective economic organization. Independent disposal rights and powers mean that the holder of management rights can independently decide the circulation of management rights (including short-term circulation, long-term circulation without a fixed term, transfer and so on), and the new right holder receiving the management right can also independently decide the circulation of the management right; the current right holder's circulation rights are not constrained by the owner, the contracting right holder or the original management right holder; the circulation of contracting rights is not affected by the owner or the management right holder, and at the same time the circulation of contracting rights does not affect the production and operation activities of the current holder of management rights. The independence of disposal rights and powers means that provisions such as those in Article 37 of the Land Contracting Law that “circulation by means of transfer shall be subject to the consent of the contracting party,” Article 11 of the Measures for the Administration of the Circulation of Rural Land Contracted Management Rights that “circulation by means of transfer shall require an application for transfer to be submitted to the contracting party in advance,” and Article 13 that “where the transferee re-circulates land circulated by the contractor by means of subcontracting or lease, the consent of the original contractor shall be obtained” do not apply to long-term circulation and transfer of management rights.