Central Document No. 1 Does Not Intend to Spur Rural Real Estate Demand
Not long ago, a report titled “No. 1 Document Expected to Spur Rural Real Estate Market Demand” attracted considerable attention. An expert said in a media interview that after the reform of the rural collective property rights system, new demand in the rural real estate market could be stimulated, moderately easing the currently sluggish urban real estate market.
For a long time, what is traded in the real estate market has by default been housing built on urban construction land. The phrase “rural real estate” is quite eye-catching at first glance. No wonder this report interviewed several experts about this year's Central Document No. 1 and singled out this point from among the many views of various experts to put in its title. Can the reforms mentioned in Document No. 1 really stimulate demand in the rural real estate market? Should rural construction land be opened up to social capital? A series of questions need to be analyzed and clarified.
■The reform of the rural land system is merely a pilot program; the pilot has just started, and nationwide implementation has not even been put on the agenda, so how can one speak of spurring rural real estate market demand
■Document No. 1 sets three limits on the “transfer, lease, and equity participation functions” of rural collective construction land: first, compliance with planning; second, compliance with use control; third, rural collective operational construction land
■It is of course no problem for farmers to freely enter cities, but capital freely going to the countryside must be guarded against, especially “urban residents outside the collective” buying homes in rural areas must not be opened up
He Xuefeng
A media outlet published interpretations by 3 experts of the 2015 Central Document No. 1, asking them to answer “how agriculture should dance under the new economic normal.” Among them, one expert believed that this year's Document No. 1 proposed implementing land system reform pilots by category, which “is conducive to broadly drawing on external forces and attracting social capital to engage in the development, construction, and operation of rural homestead land and rural collective construction land markets”; “after this reform of the rural collective property rights system, it is expected to first spur the rural homestead land and collective construction land markets, broadly attract external forces and social capital to engage in the development, construction, and operation of these land markets, which can quickly advance the building of a new countryside and the renewal of its appearance, enhance the countryside's attractiveness, and also promote the preservation and appreciation of rural collective assets and increase farmers' incomes by revitalizing these markets, and can also stimulate new demand in the rural real estate market, moderately easing the currently sluggish urban real estate market.” He also believed that the specific effects “will be affected by factors such as whether urban residents outside the collective are allowed to buy homes, and whether infrastructure construction such as rural roads and power grids is complete.”
From Document No. 1 to the salvation of the housing market, the path given by this interpretation is: Step one, the reform of the rural collective property rights system promoted by Document No. 1 can allow rural homestead land and collective construction land to freely enter the market; Step two, attract capital into rural areas to develop and operate homestead land and collective construction land; Step three, massive inflows of external capital, and farmers obtain monetary income from transferring homestead land and construction land; Step four, farmers have spare money to buy homes in cities, and the currently depressed urban real estate market is saved.
Interpreting the spirit of Document No. 1 on “implementing land system reform pilots by category” from the perspective of spurring rural real estate market demand is clearly biased. Document No. 1 clearly stipulates that the reform of the rural land system is merely a pilot program, and requires “strengthening guidance and supervision over the pilot work, ensuring closed operation and controllable risks, and, while piloting, summarizing, and improving, forming reform results that can be replicated and promoted.” The pilot has just started, and nationwide implementation has not even been put on the agenda, so how can one speak of spurring rural real estate market demand.
Even regarding the pilot content of the rural land system reform, Document No. 1 has clear boundaries and limits: “grant rural collective operational construction land that complies with planning and use control the functions of transfer, lease, and equity participation, and establish and improve market transaction rules and service supervision mechanisms.” It is worth noting that Document No. 1 sets three limits on the “transfer, lease, and equity participation functions” of rural collective construction land: first, compliance with planning; second, compliance with use control; third, rural collective operational construction land, rather than all rural collective construction land. With these three limits, the pilot is confined to a very limited scope, and is more intended to resolve historical legacy issues that existed in rural collective operational construction land in the past.
Regarding the reform of the homestead land system, Document No. 1 says this: “protect farmers' homestead land rights and interests in accordance with the law, reform the method by which farmers obtain residential land, and explore new mechanisms for farmers' housing security.” Obviously, Document No. 1 emphasizes protecting farmers' homestead land rights and interests, and has no intention at all of allowing homestead land to enter the market. From the relevant wording of Document No. 1, the central government's basic attitude toward land system reform is prudent and steady, not impatient and reckless. This year's Document No. 1 has not expressed any intention of spurring rural real estate market demand.
Document No. 1 adopted a prudent and steady attitude toward rural land system reform because China is currently in the middle-income stage, a period when contradictions occur frequently. If reform is careless, it is easy to fall into the so-called middle-income trap. The middle-income trap refers to a state in which, after a country's per capita income reaches a middle level, it cannot smoothly realize the transformation of its economic development mode, leading to insufficient momentum for economic growth and ultimately economic stagnation. According to World Bank standards, in 2012 China's per capita GDP reached 6100 US dollars, already placing it among middle-income countries. At present, although almost all farmer households have someone who has gone to cities to work or do business, most migrant workers have not settled down in cities, and elderly parents or young children remain in the countryside. When they are young they go to cities to work, but when they get older they may return to the countryside to farm. It is precisely this two-way flow, with the freedom to enter cities and the freedom to return to the countryside, that gives them more choices. This right to choose gives China's social structure great elasticity. The countryside therefore becomes the stabilizer and reservoir of China's modernization.
China's current stage of development determines that most rural migrant workers can hardly obtain in cities the stable employment and reliable security needed for a decent settled life, and the state cannot provide such relief to such a large-scale population. Precisely because of this, being able to return to the countryside is the most basic right of migrant workers. This is the bottom line, and policy must protect this bottom-line right. In other words, land is farmers' basic security and social insurance, and basic security and social insurance cannot be freely traded.
There is currently a widespread misunderstanding in academic circles that urban-rural integration means farmers freely entering cities and capital freely going to the countryside. It is of course no problem for farmers to freely enter cities, and future policy should further create institutional and mechanical conditions for farmers to enter cities. Capital freely going to the countryside must be guarded against, especially “urban residents outside the collective” buying homes in rural areas must not be opened up. At present, cities have already accumulated massive excess capital. If capital going to the countryside is opened up, every time capital obtains one farmer household's land rights, it means one farmer who has entered the city loses the opportunity to return to the countryside. If they succeed in entering the city and settle down there decently, that is of course good. The problem is that most farmers who enter cities cannot settle down decently in cities, and many countries internationally have produced urban slums at this stage of development. Slums are not only inhumane, but will certainly become an amplifier of any economic, financial, social, or political crisis.
There is also a common view that farmers entering cities and capital going to the countryside in parallel can narrow the urban-rural gap. The problem is that letting high-income urban people occupy in rural areas the land that farmers rely on as a retreat means that even if the urban-rural gap can be narrowed, it will inevitably lead to an increasingly severe urban dual structure. Forming an increasingly sharply opposed dual structure within the cramped space of cities is obviously not a good thing for China, which is in the middle-income stage with frequent contradictions.
It is precisely from this consideration that, from the overall perspective of China's response to the middle-income trap, the reform of the rural land system must be prudent and steady, and must never be rushed.