The Basic Direction and Future Prospects of China's Land System Reform

The root cause of the negative consequences of the current land system lies in the "same land, different rights" of urban and rural land, and rural land cannot be traded on the market or used for non-agricultural construction and development in the same way as urban land. Faced with this dilemma, in recent years the central government has issued many policies, striving to advance the reform of the current land system starting from the reform of the property rights system, further release land dividends, and provide support for sustained economic growth.

At the Third Plenary Session of the 18th Central Committee, regarding "establishing a unified urban-rural market for construction land," it was proposed that, on the premise of complying with planning and use control, rural collectively operated construction land be allowed to be transferred, leased, and used as shares, and be admitted to the market with the same rights and same prices as state-owned land; regarding "accelerating the construction of a new type of agricultural operation system," it was proposed to encourage and guide industrial and commercial capital to go to rural areas to develop modern planting and breeding industries suitable for enterprise-based operation, and to input modern production factors and operation models into agriculture; regarding "granting farmers more property rights," it was proposed to protect farmers' usufructuary rights to homestead land, reform and improve the rural homestead system, select a number of pilot projects, and prudently and steadily advance the mortgage, guarantee, and transfer of farmers' housing property rights, and explore channels for farmers to increase property income. In March 2014, the State Council issued the "National New Urbanization Plan (2014-2020)," which devoted a separate chapter to "deepening the reform of the land management system," covering all aspects of the land system. In June 2014, 11 departments including the National Development and Reform Commission and the Ministry of Housing and Urban-Rural Development jointly issued the "Notice on Carrying Out Pilot Work on Comprehensive National New Urbanization," requiring each province to select eligible cities, counties, and towns at different levels as pilots, with land system reform being one of the pilot reform contents. Combining the arrangements of the Third Plenary Session of the 18th Central Committee and the National New Urbanization Plan, this series of studies sorts out the following reform contents.

I. Urban and rural land entering the market with equal rights

1. Establish a system of equal rights for land under the two types of ownership

Grant collectively owned land the same rights of possession, use, income, and disposal as state-owned land, provide equal protection for the rights enjoyed by land under the two types of ownership, and realize same land and same rights under the protection of the Constitution and relevant laws.

2. Make use control the only access system

Under use control, farmers' collective land and land of other entities shall enjoy equal rights to enter non-agricultural use in accordance with the law and equal rights to share in the value-added income from non-agricultural land. It should be made clear that the main role of planning is to implement spatial and functional layout, and to change the pattern in which local governments turn farmers' collectively owned land into state-owned and government-operated land through planning revisions.

3. Break the current boundary division between cities and rural areas

Regarding the policy of access according to different ownership for land inside and outside the circle, in addition to land outside the circle being usable for non-public-interest non-agricultural construction, farmers' collectively owned land inside the circle may also, on the premise of complying with use control, undergo non-agricultural construction without changing the nature of ownership.

4. Clearly limit urban land being state-owned to existing land in built-up areas being state-owned

For newly added construction land used for non-agricultural economic construction, except for expropriation for public interest purposes, collective ownership may be retained. For existing collectively owned land within built-up areas, methods such as "retaining rights and sharing profits" or "transferring rights and preserving profits" may be adopted to protect farmers' land property rights and interests.

II. A unified urban-rural market for construction land

Establishing a unified urban-rural market system for construction land contains three meanings: first, same land and same rights. That is, collectively operated construction land can be transferred, leased, and used as shares just like state-owned construction land, breaking the ice on the prohibition of leasing collective construction land. Second, equal entry into the market. That is, collectively operated construction land and state-owned construction land are legally traded on the same platform, changing the current pattern in which state-owned construction land is exclusively traded on the platform while collective construction land is traded irregularly on the gray market. Third, prices are determined by supply and demand. The entry of collectively operated construction land into the market will change the current situation in which the government's exclusive transfer determines supply and causes price distortion. Multiple collective economic organizations entering the market as entities of collectively operated construction land will truly form a mechanism in which prices are determined by supply and demand, promoting the healthy development of the land market.

It should be noted that allowing collectively operated construction land to enter the market is strictly limited. First, it is not that collective land enters the market with the same rights and same prices as state-owned land; it only opens a gap for collectively operated land. Second, even for collectively operated land, it must comply with planning and use control.

III. Advancing reform of the land expropriation system

Since the 16th National Congress, the Party and the government have made arduous efforts to advance reform of the land expropriation system, but obstacles have been numerous. The main reason is that the traditional development model supporting this system is difficult to change. The "Decision" of the Third Plenary Session of the 18th Central Committee proposed reform of the land expropriation system, including the following contents:

1. Narrow the scope of land expropriation

According to constitutional principles, land may be expropriated only for public-interest purposes. However, because public-interest purposes are difficult to define, the catalog of public-interest land use has long been difficult to finalize. The next step may adopt a negative list approach, under which land may not be expropriated for any for-profit use.

2. Standardize land expropriation procedures

Although this item was proposed long ago, it has not been implemented well. In the next step, after the scope of land expropriation and the safeguard mechanism are established, a prior procedure will be added to the land expropriation procedure, allowing the land-using party and the farmers' collective to negotiate first, and only starting the land expropriation procedure if negotiation fails.

3. Establish a reasonable, standardized, and diversified safeguard mechanism

This is the core of land expropriation system reform. So-called reasonable means that, while adhering to the principle of use control, market-based compensation is provided for expropriated land according to locational conditions; so-called standardized means that, once there is a clear scope of land expropriation, compensation price, and procedure, if land must be expropriated, it must be done according to law; so-called diversified means that the problem of land-lost farmers lacking long-term livelihood security must be effectively solved.

IV. Reforming and improving the homestead system

The "Decision" of the Third Plenary Session of the 18th Central Committee proposed: "Protect farmers' usufructuary rights to homestead land, reform and improve the rural homestead system, select a number of pilot projects, and prudently and steadily advance the mortgage, guarantee, and transfer of farmers' housing property rights, and explore channels for farmers to increase property income." This sets out the principles and scope for the next stage of homestead system reform.

First, protecting farmers' usufructuary rights to homestead land (right of possession and right of use) is the bottom line of homestead system reform. In the next step, in accordance with the general principles of usufructuary rights, the usufructuary rights to homestead land will be improved, and holders of homestead land use rights will be granted the right to income and the right to transfer.

Second, reform and improve the rural homestead system. At present, against the background of the separation of rural population from villages, the rural homestead system has institutional incompatibility. In the next step, different types of areas will be selected for pilot homestead system reform, with the focus on exploring paid acquisition and use of homestead land, homestead land transactions and circulation, and breaking the boundaries of homestead members and village communities. The basic orientation is to gradually realize the exchange of welfare distribution rights for property rights empowerment, realize farmers' complete usufructuary rights to homestead land, and promote effective land use.

Third, select a number of pilot projects to prudently and steadily advance the mortgage, guarantee, and transfer of farmers' housing property rights. Here, the rights of mortgage, guarantee, and transfer are granted to farmers' housing rather than homestead land, which is reasonable under the constraints of the current system and laws. Clearly granting farmers the right to mortgage, guarantee, and transfer housing is conducive to more steadily realizing farmers' property returns. Of course, the implementation of the above rights can only be carried out first in pilot areas, and once conditions are ripe, homestead land mortgage, guarantee, and transfer may then be carried out.