How can the rural property rights transfer and trading market develop in a healthy way?
The rural property rights transfer and trading market includes both an intangible market and a tangible market. The former began to develop and grow after farmers' contracted land use rights were allowed to be transferred in the mid-1980s, especially after the restructuring of township and village enterprises in the mid-1990s. At present, the widely existing transfer of contracted land in rural areas is mainly carried out through the intangible market. The latter is more complicated. In the early 1990s, trading platforms mainly serving property rights transactions of township and village enterprises once appeared. In 2004, Yong'an City, Fujian Province, established the country's first forestry factor market while advancing the reform of the collective forest rights system. In 2008, Chengdu established the country's first comprehensive rural property rights exchange. As of now, more than 800 counties (cities) and more than 13,000 townships (towns) across the country have established land transfer service centers, and more than 1,200 forest rights transfer service centers have been set up across the country relying on forestry management departments. A number of comprehensive exchanges represented by the Chengdu, Chongqing, and Wuhan rural property rights exchanges have been established one after another.
Current development status of the comprehensive rural property rights transfer and trading market
(1) Large differences in registered capital scale
After Chengdu officially established the rural property rights exchange in October 2008, the Chongqing Rural Land Exchange, Wuhan Rural Comprehensive Property Rights Exchange, Shanghai Agricultural Factors Exchange, and others also began operation. In recent years, many regions including Zhejiang, Jiangsu, Yunnan, Tianjin, Shandong, Guangxi, and Shanxi have successively established comprehensive rural property rights transfer and trading markets, but the scales vary greatly. The Wuhan Rural Comprehensive Property Rights Exchange, established relatively early, had registered capital of only 1 million yuan. The agricultural exchanges in Chengdu, Hangzhou, Shanghai, and other places had registered capital of 10 million yuan, and the Kunming Agricultural Exchange had registered capital of 20.5 million yuan. Among the larger ones, the Qilu Rural Property Rights Trading Center had registered capital of 30 million yuan, the Chongqing Rural Land Exchange reached 50 million yuan in registered capital, and the Beijing Agricultural Exchange had registered capital as high as 55 million yuan.
(2) Varying numbers of trading varieties
The property rights varieties that can be traded in each rural property rights trading market are diverse. The property rights involved range from rural land contractual management rights and rural collective construction land use rights to rural housing, equity rights of rural collective economic organizations, and agricultural production facilities such as agricultural machinery and fishery vessels, and even include agricultural intellectual property rights, ownership of agricultural products (live livestock and poultry), agricultural product options, and various other property rights. Some have fewer varieties, such as the Chongqing Rural Land Exchange with only 3, while the Kunming Pan-Asia Rural Property Rights Exchange and the Wenzhou rural property rights trading platform each have more than 10.
(3) Mainly for-profit
Some rural property rights trading institutions are public-interest legal persons. For example, the Chongqing Rural Land Exchange was established with funding from the Chongqing Municipal Government and is positioned as a non-profit public institution legal person. The Wuhan Rural Comprehensive Property Rights Exchange is positioned as a non-profit enterprise legal person and undertakes the functions of building a three-level trading platform at the city, district, and township levels and constructing a rural property rights trading market system. However, most rural property rights trading institutions are for-profit legal persons. For example, the Chengdu Rural Property Rights Exchange was jointly funded and established by institutions affiliated with the Chengdu Municipal Land and Resources Bureau, Housing Management Bureau, Forestry and Landscape Bureau, and Agricultural Committee at proportions of 50%, 25%, 12.5%, and 12.5%, respectively. It adopts the organizational form of a limited liability company, with a board of directors and a board of supervisors under the shareholders' meeting, and operates according to a modern enterprise management model. The Kunming Pan-Asia Rural Property Rights Exchange is positioned as a corporate enterprise legal person, with the purpose of building a unified citywide information exchange network system for rural property rights transactions and promoting rural property rights transactions. The Beijing Rural Property Rights Exchange was established with funding from Beijing Agricultural Investment Co., Ltd., with a board of supervisors and an executive director under the shareholders' meeting, and has set up branches in 14 agriculture-related districts and counties to improve functions such as information collection and market development. The Tianjin Rural Property Rights Exchange is a wholly state-owned joint-stock enterprise jointly funded and established by the Tianjin Municipal Agricultural Committee, the Baodi District Government, and the Tianjin Property Rights Exchange Center, with a board of directors, a board of supervisors, and various functional departments under the shareholders' meeting. The Wenzhou Rural Property Rights Service Center is a wholly state-owned company and specializes in rural property rights trading services by building a trading market system covering the city, county, and township levels.
(4) Small trading radius
Except for the Wuhan Rural Comprehensive Property Rights Exchange and the Shanghai Agricultural Factors Exchange, which are positioned to serve both rural property rights transfer and trading within their jurisdictions and the whole country, other trading markets are basically local. For example, the Beijing Rural Property Rights Exchange mainly serves rural property rights within the Beijing area, and the Chengdu Rural Property Rights Exchange is mainly focused within Chengdu, while a few other relatively complete property rights varieties (such as agricultural machinery) can also be traded outside the city and province. The main task of the Kunming Pan-Asia Rural Property Rights Exchange is to build a unified information exchange network system for rural property rights transactions in Kunming. The Wenzhou Rural Property Rights Service Center, the Ezhou Rural Comprehensive Property Rights Exchange in Hubei Province, the Hangzhou Rural Comprehensive Property Rights Exchange, and the Guangzhou Rural Property Rights Exchange are also mainly oriented to local areas.
Overall, in recent years the rural property rights transfer and trading market has promoted the flow of rural property rights and played a certain role. For example, as of the end of March 2014, the Chengdu Rural Property Rights Exchange had completed a cumulative total of 39.686 billion yuan in various rural property rights transactions, including 10,326 transactions of land contractual management rights with a transaction amount of 20.943 billion yuan, and 766 transactions of collective construction land quotas with a transaction amount of 11.684 billion yuan. As of the end of 2013, the Wuhan Rural Comprehensive Property Rights Exchange had organized 1,669 transactions of various rural property rights with a transaction amount of 9.969 billion yuan, involving 981,600 mu of rural land area. Together with financial institutions, it realized 1.147 billion yuan in rural comprehensive property rights mortgage loans for agricultural enterprises, cooperatives, and large-scale farming and breeding households, with the highest single loan amounting to 55 million yuan. Since 2010, the Qilu Rural Property Rights Trading Center has completed more than 8,200 transactions, with a transaction volume of more than 380 million yuan. Since 2010, the Beijing Rural Property Rights Exchange has completed 158 transactions of various property rights projects, with a transaction amount of 900 million yuan. Since its establishment on September 18, 2009, the Shanghai Agricultural Factors Exchange has had more than 1,000 listed trading projects, with a cumulative transaction amount of 2 billion yuan, including 1.5 billion yuan in transfers of land assets and agricultural land contractual management rights. To a certain extent, the rural property rights transfer and trading market has achieved efficient, reasonable, and smooth transfer of rural property rights resource factors.
Issues needing attention in promoting the healthy development of the rural property rights transfer and trading market
Although both the intangible market and the tangible market for rural property rights trading have developed and played an obvious role in practice, from the perspective of further promoting the healthy development of the rural property rights trading market, there are still many issues that need to be studied and answered. These are mainly concentrated in: How large is the demand for rural collective property rights transactions? Is it necessary for all localities to rush into building rural property rights trading markets? How should the boundary between the government and the market be clarified, what functions should the government undertake, and what legal and institutional obstacles do rural property rights transactions face? Should all rural property rights enter market transactions, and how should prices be determined? In the face of these questions, our basic views are:
(1) It is unnecessary to build tangible rural property rights trading markets everywhere
From the perspective of the scope of rural property rights transactions, the property rights involved in most areas are mainly land contractual management rights and collective forest rights. From the perspective of rural land contractual management rights transactions, as of June 2014, the area of transferred land contractual management rights was 380 million mu, accounting for 28.8% of the total household contracted cultivated land area. Most of these transactions are carried out spontaneously by farmers, and only some occur on the trading floor, namely the more than 800 county (city) and more than 13,000 township (town) land transfer service centers across the country. From the perspective of forest rights transactions, as of the end of 2012, the cumulative area of collective forest land transferred nationwide was 192 million mu, accounting for 7.12% of forest land with confirmed rights. These transactions also only partly occurred on the trading floor, namely the more than 1,200 forest rights transfer service centers established across the country relying on forestry management departments. According to statistics by some scholars on county-level forest rights trading centers in Anji, Longquan, Suichang, and other places in Zhejiang, the forest rights trading market has shown many problems such as shrinking transaction volume, low efficiency of trading institutions, complicated trading procedures, and low willingness of forest farmers to transfer out.
In fact, since their establishment, many rural property rights exchanges have had very few transactions in collective asset equity, collective physical assets and agricultural production facilities, and agricultural intellectual property rights. Some only play a role in registration and filing, and do not provide much supplement or substitution for land transfer service centers and forest rights transfer service centers. It can be foreseen that the returns obtained through property rights transactions will also be very limited. Some areas even require that rural collective property rights transfer and transactions within their jurisdictions must be listed and traded at the trading market, which to a certain extent increases the transaction costs of rural property rights. Moreover, establishing a trading market is relatively costly. For example, a forest rights on-exchange trading center, according to requirements, needs to set up office space, provide office supplies, and staff full-time personnel. Generally speaking, the average annual expenditure of a county-level forest rights trading institution needs 200,000 to 300,000 yuan. If there are too few on-exchange transactions, the trading institution's returns will be very low, and it will be difficult for the trading institution to maintain itself. For example, the first intermediary institution in Wenzhou involving land and forest rights transfer services, Ruian Zhonghe Land Transfer Information Consulting Co., Ltd., existed for only a little more than two years before applying to have its business license revoked in 2013. The rural property rights trading center in Jiangdu District, Yangzhou City, Jiangsu Province, and the rural property rights trading center in Jiyuan City, Henan Province, have traded only a few small projects since their establishment. This warns us that whether to establish a tangible trading market should start from actual trading demand and must not follow trends or chase fashion.
(2) The boundary between the government and the market should be further clarified
Rural property rights transactions include multiple links such as asset evaluation, release of trading information, price discovery, organization of property rights transactions, signing contracts, delivery, and enforcement. This chain is mainly led by market mechanisms. Outside this chain, strict institutions are needed to ensure the integrity and smooth operation of the chain. These crucial institutions include policy and legal support, policy and legal information consulting, property rights confirmation and registration, asset evaluation, property rights verification and change registration, property rights mortgage and pledge, dispute handling and arbitration, and so on. Generally speaking, these institutional safeguard links belong to the category of pure public services or quasi-public services and are mainly completed by the government and social intermediaries. In the early stage of market development, these pure public services or quasi-public services can be provided by the government. But as the market matures, some quasi-public services, such as policy and legal information consulting, asset evaluation, and property rights mortgage and pledge, can be undertaken by social intermediary organizations because they are somewhat profitable. Pure public services directly related to government management functions, such as policy and legal support, property rights change registration, and dispute handling and arbitration, belong to core institutional safeguards and should still be undertaken by the government. In this way, the boundaries of the behavior of the market, intermediaries, and the government are clarified.
From the current situation, what urgently needs the government to play a role is not investing in and building property rights trading markets, but safeguarding pure public services, cultivating intermediary institutions, and improving quasi-public services. The government's main functions are: First, amend laws to grant complete powers and functions to property rights. In some areas, rural property rights listed for trading are not within the scope of legal authorization, and some property rights transactions have no corresponding legal and regulatory support. This not only suppresses transaction prices but also plants many hidden dangers. Second, advance rights confirmation and certification. In some places, rural property rights confirmation is difficult and progressing slowly, and the confirmation of rural collective construction land use rights and housing ownership rights is far from complete. In some areas, the land certificates and property certificates for homesteads used for transactions are still old certificates, and there are loopholes in listing them for trading. Third, clarify measures for the disposal of rural property rights. Although some measures for rural property rights transfer and trading clarify judicial disposal procedures, given the actual situation in rural areas, in the actual implementation process it is very difficult to dispose of rural collective property rights through auction, sale, and other methods. Fourth, cultivate intermediary institutions and improve quasi-public services. The cost of rural property rights evaluation is high, the returns from evaluation are low, and third-party evaluation intermediaries are underdeveloped. These problems also need to be solved quickly.
(3) Rural property rights with incomplete powers and functions and an unsound pricing mechanism are not suitable for market trading
Rural property rights lack some key powers and functions, and the value of some rural property rights is easily underestimated. Because strict restrictions are imposed on the use of farmers' homesteads by persons without membership qualifications, rural homestead use rights can only be transferred within the village or villagers' group. Calculating on the basis of about 600,000 administrative villages and 3 million villagers' groups nationwide, the transfer and trading of rural homestead use rights is divided into 600,000 to 3 million tiny markets, resulting in very low prices. In places where the community shareholding cooperative system reform has been implemented, in most cases the collective asset equity obtained by farmers lacks mortgage guarantee powers and functions, and the book prices of equity from many years ago are difficult to reflect the current true value. For example, in Jiangbei District, Ningbo City, Zhejiang Province, equity pledge loans from share economic cooperatives have been realized in recent years, with 1,079 households receiving equity pledge loans and a cumulative disbursed amount of 43,999,800 yuan. However, the equity is pledged only at book price, while after recent years of development of the share economic cooperatives, the actual value of the equity is far higher than the book price, and the equity value is underestimated. This kind of underestimation also exists in other areas. Farmers holding collective asset shares often lack sufficient understanding of the appreciation prospects and true value of collective assets, and are prone to losses when transferring equity under conditions of asymmetric information.
When some rural property rights lack key powers and functions and their value is underestimated, rushing them into market trading will inevitably harm farmers' interests. In some urbanized areas, the appreciation potential of rural collective assets is extremely great. In addition, the state's support for rural areas is strong and there are many policy dividends. Transferring and trading rural property rights too early can easily lead some farmers to "settle accounts afterward," affecting social stability.