No. 1 Central Document will guide farmers to become shareholders in enterprises with their land management rights
As the 2015 No. 1 Central Document approaches, the practice tested in many places of “farmers becoming shareholders in cooperatives and leading enterprises with their land management rights” will receive comprehensive “top-down” support in 2015.
The reporter recently learned that the 2015 No. 1 Central Document's policy phrase for the new type of agricultural operation system is “accelerate the building,” and under this goal it will promote the construction of agricultural industrialization demonstration bases and the transformation and upgrading of leading enterprises, innovate land transfer and scale operation methods, guide farmers to become shareholders in cooperatives and leading enterprises with their land management rights, and encourage industrial and commercial capital to develop crop and livestock farming suited to enterprise-style operation, agricultural product processing and distribution, and agricultural socialized services.
“Farmers becoming shareholders in cooperatives and leading enterprises with land management rights is a direction consistent with the spirit of the Third Plenary Session of the 18th Central Committee, but previously it was only carried out locally. This is the first time it is being rolled out in a "top-down" manner.” An official from the Ministry of Agriculture told the reporter, “According to convention, specific operational documents will follow the No. 1 Central Document.”
Survey says farmers' enthusiasm is not high
The practice of farmers becoming shareholders in cooperatives and leading enterprises with land management rights has already been carried out in many places across the country. In local practices, local governments and enterprises have maintained relatively high enthusiasm for land management rights being used as shares. In June 2014, Jinshan District of Shanghai proposed in the Several Opinions on Deepening Agricultural and Rural Reform that it would explore new operation methods for rural land management rights being used as shares and ensure that farmers obtain higher and more sustainable returns from the land.
But a survey conducted by the Suzhou Municipal Agriculture Committee of Anhui Province shows that, regarding farmers' land management rights being used as shares, agricultural enterprises, cooperatives and other industrialized operation organizations have a strong willingness, while farmers' participation enthusiasm is generally not high.
Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences, told the Daily Economic News reporter that the method of using land management rights as shares helps develop large-scale agricultural production, improve land allocation and utilization efficiency, and enable farmers to benefit in secondary distribution. However, in many places, farmers are not willing to get involved in this method of using land management rights as shares and becoming shareholders.
“Although farmers can receive dividends through this method, risks go hand in hand with it.” In Li Guoxiang's view, if problems arise in the operation of the cooperative or leading enterprise, farmers will also bear risks according to their equity shares, that is, shared risks; whereas if it is simply transferring land to collect rent, farmers feel much more secure.
Li Guoxiang explained that when an enterprise or new type of operation entity leases or transfers land, it needs to pay rent to farmers first, while using land management rights as shares means dividends are paid after profits are made. For cooperatives or leading enterprises, this can save upfront capital investment, ease funding pressure, and also mobilize the enthusiasm of farmer shareholders to participate in industrialized operation. But farmers prefer a guaranteed land rent income rather than dividends from shares that are difficult to determine under market risk.
Still awaiting policy drivers
The reporter learned that under the effect of multiple operational difficulties, using land management rights as shares is in a window period of “still needing policy stimulus.”
“Farmers becoming shareholders with land management rights has already emerged in many places, mostly in developed areas and places with "capable people," but the proportion is still not large at present. According to our survey, multiple operational difficulties still exist.” Li Guoxiang told the reporter, “First, for this "joint-stock company," since it is to operate, it requires relatively high management ability, but there are not many farmers and village officials with market acumen and operational quality; second, after becoming shareholders, how to operate -- direct operation by themselves, transferring out, or hiring a CEO? Farmer shareholders' opinions are prone to differences and hard to unify; finally, leading enterprises are very powerful, and farmers' land management rights can actually account for only a very small proportion. For such enterprises, becoming shareholders and operating is a relatively troublesome matter.”
In the experiment in Jinshan District of Shanghai, because the pilot Langxia Town involved leading enterprises with high investment and high returns, it was relatively difficult to determine the proportion of farmers' land management rights as shares; while another pilot, Zhangyan Town, adopted a collective farm model, with all returns belonging to farmers, operated on the basis of 1 mu as 1 share, and thus was relatively easily accepted by farmers.
The survey by the Suzhou Municipal Agriculture Committee of Anhui shows that current land transfer prices are relatively high, and most local farmers are unwilling to participate in a share cooperative system of shared interests and shared risks with their own land management rights. They are only willing to participate in leasing forms with relatively smaller market risks, and some grassroots officials are also unclear about the concept of rural land being used as shares. In the face of leading enterprises, cooperatives and other scale operation entities, farmers feel very vulnerable, perceive information asymmetry, feel uneasy about becoming shareholders, and would rather have somewhat lower returns in order to put money safely in their pockets.
From the perspective of land use, Tan Mingzhi, an engineer at the Land Consolidation Center of the Ministry of Land and Resources, believes that farmland being used as shares involves issues in all aspects of agricultural operation, village governance, and benefit distribution. If one starts simply from solving agricultural operation problems, hidden risks will inevitably be left. Once the value carried by land is no longer limited to agricultural production, various types of interest disputes centered on the collective will emerge endlessly.
On this point, the above-mentioned Ministry of Agriculture official held a relatively optimistic attitude. He said, “The role of policy is to guide land management rights being used as shares in cooperatives and leading enterprises, but after any policy is issued there will be a certain buffer period and adaptation period. Its implementation methods will certainly be of multiple types. Driven by the market, how can the use of land management rights reach the optimum? We must believe that farmers and enterprises will certainly make the choice most in line with their own interests.”