How can land transfer trusts be advanced steadily?
Editor's Note
After integrating scattered land transfers and entrusting them to trust institutions, which then lease the land to agricultural enterprises, this should be a matter satisfactory to all parties. Why do various problems arise? Is the risk assessment for land transfer trusts adequate, is the corresponding oversight in place, and how can we achieve both "fish" and "bear's paw"? In this issue, let us explore together how land transfer trusts can develop in a healthy way.
Project not approved for a long time, trust cannot be implemented-
Why is the land transfer trust in Suzhou, Anhui "slow as a snail"
After Guyu, the wheat in Zhumiao Village, Zhuxianzhuang Town, Yongqiao District, Suzhou City, Anhui Province, is growing vigorously, and in just over a month it will welcome the joy of harvest. This piece of land also holds many expectations and concerns beyond the harvest, because this is the birthplace of CITIC Trust's first rural land transfer trust plan.
Current situation: Farmers have only received two years of transfer fees
"The land rent for 2014 and 2015, the farmers have all received. But the profit dividends promised at the beginning have not yet been fulfilled." Village Party branch secretary Shen Jialiang explained that their land transfer fees were all distributed through the district finance department via bank card.
In 2013, the land management rights of this village were transferred to Anhui Diyuan Agricultural Investment to build a modern agricultural circular economy park; in October, the management rights of 5400 mu of farmland belonging to 450 people in the village were re-entrusted to CITIC Trust Company, which was asked to design related wealth management products. Thus, CITIC Trust's first rural land transfer trust plan landed in Suzhou.
"The district government signed a framework agreement with CITIC Trust, entrusting 5400 mu of land to CITIC Trust, and the trust company then entrusted Anhui Diyuan Agricultural Investment as a third party to operate the land." A staff member of the Modern Agriculture Office of Yongqiao District, Suzhou City, explained that this is the rural land management rights transfer trust plan launched by CITIC Trust. According to the agreement signed by CITIC Trust and Diyuan Company in October 2013, CITIC Trust, as trustee, intervened in operation and management, providing 110 million yuan in financing to Diyuan Company's agricultural demonstration park project, with an annualized interest rate of 10%, to promote the development of the demonstration park. CITIC Trust stated at the time that once this project was running, it would not only guarantee land rent of 1000 jin of wheat per mu per year, but also decide to distribute 70% of the land value-added income to farmers. However, because the project has still not become profitable to date, farmers have not enjoyed any dividends.
"In 2011, on behalf of the village committee, I signed an agreement with 450 farmer households in the village, and the farmers collectively entrusted their farmland management rights to the village committee." Shen Jialiang said that they did not understand what a trust was either, and only cared about whether the people's annual "land rent" could arrive on time.
Crux: Financing encounters a "choke point"
"We cannot let the land sit idle. Besides growing grain, we also launched a straw charcoal project." Xu Junjian, the person in charge of Anhui Diyuan Modern Agricultural Investment and Development Co., Ltd., explained that the project is now "stuck" on land use. Because the transferred land was originally intended for circular economy projects such as breeding, it needed certain construction land and agricultural facility land quotas. The state requires that changing the use of farmland must be accompanied by payment of a land reclamation guarantee deposit. In addition to the advanced land transfer fees, this huge expense is undoubtedly a "high threshold" for enterprises engaged in agriculture. On the one hand, there is not enough funds to pay the guarantee deposit; on the other hand, because the procedures are incomplete, financing from investors cannot be obtained. This kind of "awkwardness" makes the road to financing long.
A staff member of the Agriculture Office of Yongqiao District, Suzhou City, explained that according to Diyuan Company's plan, to build projects on the transferred land, the nature of the land would have to be changed. According to regulations, farmland must be used for agriculture, and changing the nature of the land requires government approval, but after Diyuan Company signed the agreement with CITIC Trust, its project has never been approved.
A relevant person from CITIC Trust explained that financing funds must be used exclusively for the project according to project progress. Because the project land use has not been approved, the project cannot start, so CITIC Trust's funds cannot be released, and the trust cannot be implemented.
Lessons: "Finance going to the countryside" must do risk assessment
The slow progress of this land transfer trust project in Anhui, from a certain perspective, also confirms that agricultural development is "weak" and "difficult." "According to the current situation, this land trust project is very difficult to sustain. First, the nature of agricultural land cannot be changed, and pure grain production alone can hardly achieve the expected profit. If projects such as breeding are carried out, it means changing the nature of the land, and then it faces bottlenecks in land and funds. Under the current circumstances, being able to distribute farmers' land rent smoothly is already considered a 'relatively good outcome.'" A relevant person familiar with the inside story revealed.
It is reported that trust companies have very strict risk control measures. According to the regulatory requirements of the China Banking Regulatory Commission: first, all projects undertaken by trust companies must be reported to the China Banking Regulatory Commission; second, each year a certain amount must be set aside from income as bad debt reserves; third, if one project has problems, all subsequent projects must stop.
"As far as the Suzhou land trust is concerned, CITIC Trust's funds may enter in the form of a loan, and Anhui Diyuan Investment pays a 10% annual interest rate for the paid use of these funds. The state and local government provide 3%-4% fiscal interest subsidies for agricultural projects, so an annual interest rate of about 6% is not considered high, but for agricultural enterprises, paying an annual financing cost of 6% is not easy. The more than 6 million yuan in land rent paid to the people each year by CITIC Trust is temporarily advanced by Anhui Diyuan Investment. For CITIC Trust, whether the financing of land trust products is ideal is currently unknown. In the difficult process of project progress, there are still many variable factors." A financial research expert in Anhui Province told reporters that the implementation of trust products in the agricultural field has many uncertain factors and a relatively high risk coefficient. When promoting such projects, risk assessment must be done well and investment must be cautious. Otherwise, it may run counter to the original design.
Land transfer trust in Caowei Town, Yiyang, Hunan-
Returns are considerable but risks need to be guarded against
"Although I am reluctant, there is no choice now that I am older and in poor health, so I had to contract it out. I hope the boss who rents the land will still grow grain when he has more fields." On April 27, in Leyuan Village, Caowei Town, Yiyang City, Hunan Province, 73-year-old Wang Jieru told reporters.
Four years ago, Wang Jieru, as a principal, signed a contract with Yuanjiang City Xiangyuan Rural Land Contracted Management Rights Trust Co., Ltd. (hereinafter referred to as "Xiangyuan Company"), "entrusting" 8 mu of family land to the company, while receiving a transfer fee of 660 yuan per mu per year.
Xiangyuan Company, established in 2010, is a land trust company established solely with government funds, aimed at bridging operators and farmers and providing follow-up services for land transfer. Recently, reporters came to Caowei Town to investigate what changes the land transfer trust has brought to farmers and this land.
A "land transfer trust" born in response to the times
Caowei Town is located in the hinterland of Dongting Lake and is the largest agricultural township in Yuanjiang City. However, under the dual factors of the call of urbanization and the low comparative returns from grain cultivation, most young and middle-aged laborers go out to work, and agricultural production in this major agricultural town has encountered difficulties - land abandonment has shown an unstoppable trend. Under such circumstances, in 2008, the Yiyang Municipal Party Committee and Municipal Government proposed the idea of a "land transfer trust," namely establishing a wholly government-funded trust company responsible for collecting and publishing land information. After doing good industrial planning, accepting farmers' land entrustment, and signing trust transfer contracts with farmers, it screens agricultural operating companies, contracts land to them, and supervises their operations, while also integrating agriculture-related funds and implementing related projects. The pilot "land transfer trust" settled in Caowei Town, a "major grain town," and thus the "Caowei model" came into being.
"With agricultural enterprises entering, bringing funds and technology, farmers receive a transfer fee of 660 yuan per mu, and also have the opportunity to work in the enterprises and earn labor income." In the view of Li Yinghui, Party secretary of Caowei Town, the land transfer trust resolved the contradiction between farmers who "have land but no strength" and enterprises that "have strength but no land," and better answered the questions of "who will grow the land, who will provide the funds for scale operation, and where farmers will go."
Some land has been revitalized and utilized
What is the output efficiency of land after trust transfer?
Tong Zhengqing, chairman of "Zhengfeng Rice Planting Professional Cooperative," told reporters that in 2010 he contracted more than 80 mu of cultivated land in Group 2 of XiWanzhou Village, Caowei Town, to grow double-season rice and had a bumper harvest. After getting a first taste of success, he successively contracted 2247 mu of land in Minzhu Village and Lixin Village, achieving stable and high yields.
Behind the high yield is intensive cultivation and investment in infrastructure. Although the investment was considerable, the output was also impressive, and Tong Zhengqing considered such investment worthwhile.
"In the past I transferred land directly from farmers, and there were endless disputes. Because the transfer was not standardized, I never dared to invest in more equipment and technology." Li Weibing, general manager of Yiyang City Dadi Agriculture Co., Ltd. and a beneficiary of the land transfer trust, told reporters that for more than ten years he had moved around many counties and cities in the Dongting Lake area, and having to change locations every two or three years made him miserable.
In 2009, after the pilot land transfer trust in Caowei Town, he signed a 10-year contract with the trust company established by the government, ending many years of "wandering-style" production. In just four years, Li Weibing invested more than 10 million yuan in a vegetable base of more than 1500 mu, built more than 200 high-standard off-season vegetable greenhouses, produced and sold 13000 tons of organic vegetables each year, and obtained benefits per mu more than 10 times higher than the previous scattered cultivation of open-field vegetables.
The improvement of comprehensive land benefits attracted more and more agricultural enterprises. So far, Xiangyuan Company in Caowei Town has signed trust transfer contracts with 58 agricultural enterprises, some land has been revitalized, and the town's trust transfer area has reached 62000 mu.
Need to guard against "non-grain" and "non-agricultural" trends
Can the "land transfer trust" born in response to the times ride the trend and achieve more? During interviews in Leyuan Village, reporters found that a small amount of transferred land had only one season of rice planted, or nothing planted at all. Farmers also felt puzzled: growing grain is not very profitable in the first place, and if transferred land is used for only one season, it is bound to lose money. Could such enterprises be trying to obtain state project funds or trying to change the use of farmland?
This phenomenon is obviously contrary to the original intention of the government-proposed three-party win-win "Caowei model." As an important national grain production base, how can it ensure that land use does not change after transfer and that maximum benefits are brought into play? The reporter interviewed Wang Wenqiang, executive director of the Hunan Rural Development Research Institute and associate researcher at the Rural Development Research Center of the Hunan Academy of Social Sciences.
"This may be related to inadequate supervision. Because Caowei's rural land trust company is a wholly state-owned company, the government plays the role of 'carrying two ends on one shoulder,' lacking corresponding supervision, so risks exist." Wang Wenqiang stated that the "Caowei model" has brought considerable economic benefits to local farmers and operating enterprises, and its guiding role is indispensable, but if there is no sound supervision mechanism to effectively supervise the government-established farmland trust company, hidden dangers are inevitable, and it is necessary to guard against possible corruption and tendencies toward land "non-agriculturalization" and "non-grainization." He suggested that a reasonable and sound supervision mechanism should be established, and multiple supervisory subjects should be introduced to achieve mutual checks and balances, thereby ensuring the healthy, orderly and long-term development of land transfer trusts.