China's rural land system has become largely settled

Recently I returned to my hometown. My aging parents said the family's contracted land has already been given to a distant grandson to cultivate, at 500 yuan per mu per year. This amounts to collecting rent. As for the family's land, besides my parents' share, the share belonging to my married-out younger sister has also been kept, and back when I was studying, during the second round of land contracting, according to regulations I too enjoyed contracting rights, but later after I started working there happened to be a policy shift of "no increase for births, no decrease for deaths," so the contracted land was not adjusted, and thus our family's land is relatively more, several mu. There are already quite a few households like ours that cannot cultivate all their farmland and transfer it to relatives or neighbors to plant; since they are all acquaintances, no contract is signed, and the amount paid is not fixed, just roughly agreed. But market rates do exist, and currently the minimum is 600 yuan per mu (per year).

When the topic of contracted land came up, my parents, with their simple sense of fairness, believed that because contracted land is no longer adjusted for the long term, the per capita land held by each household varies, which is unreasonable. I said that my married-out younger sister lives in the same village, and she did not receive any land in her in-laws' household either; ultimately it just means there is one extra person's contracted land, and besides, you would not go so far as to return my share to the collective, would you? Of course, that was said in jest. But in light of the recent major shift in land policy, the farmland system truly deserves deep reflection. Farmland, strictly speaking, besides contracted arable land, also includes rural construction land and homestead land; what is discussed below mainly refers to contracted arable land.

Since China established the household contract responsibility system in the late 1970s and early 1980s, debate over the farmland system has always been a hot topic in academia. Overall there are two main viewpoints: one can be called the "privatization camp," composed mainly of liberal economists, who advocate that land privatization, or euphemistically "giving farmers full property rights over land," is the fundamental path to solving China's rural problems. The other can be called the "rural reconstruction camp," represented by Wen Tiejun and He Xuefeng, whose basic proposition is to rebuild the rural community through establishing farmers' cooperative organizations and cultural construction; although they have not put forward distinct proposals on the farmland system, they basically endorse the current two-tier management system combining unified and separate management, especially emphasizing its "unified" aspect, believing that rural collectives should control more resources, and they are dismissive of giving farmers more land rights. But judging from the decision-making direction of the governing level, the state's approach to reforming the farmland system has been consistent and gradually deepening, namely upholding the household contract responsibility system under collective land ownership, which both negates the privatization direction and continuously stabilizes and consolidates the existing land contracting relationship. This direction of institutional reform, from the second round of land contracting to 2003 and 2004, has become increasingly stable. In farmers' words, it is "no increase for births, no decrease for deaths." This reform approach was further clarified in the recently issued "Opinions on Guiding the Orderly Transfer of Rural Land Contracting and Management Rights to Develop Moderate-Scale Agricultural Operations" (hereinafter referred to as the "Opinions"), which states the need to "improve the land contracting and management rights registration system" and "advance the work of confirming, registering and issuing certificates for land contracting and management rights." Therefore, some in academia compare it to the permanent tenancy system of traditional China, but the existing contracting system differs from permanent tenancy in at least two respects: first, under the contracting system land is initially distributed equally; second, contracting rights are limited to the scope of the collective. The collective based on the production team during the commune period is a socialist legacy and also fits the traditional rural geographical relations. The "Opinions" this time also clearly states that "where contracted land is transferred by means of assignment, in principle it should be conducted among members of the same collective economic organization." This article holds that the issuance of the "Opinions" marks that China's farmland system, or rather the basic economic system of rural China, based on and centered on the household contract responsibility system, has become largely settled.

Besides this contracting system, the current farmland system also includes a series of supporting institutions:

First, land use control under the red line of 1.8 billion mu of arable land. The "Opinions" reaffirms "adhering to the strictest arable land protection system" and proposes four "strictly prohibited" and one "resolutely prohibited."

Second, land transfer under the separation of the three rights of "ownership, contracting rights and management rights." The "Opinions" proposes "adhering to collective ownership of rural land, stabilizing farmers' contracting rights, and liberalizing land management rights." This institution neither touches the core of collective ownership nor fails to greatly increase the scale, scope and speed of land transfer.

Third, protection of farmers' land rights and interests under unified urban-rural household registration. The "Opinions of the State Council on Further Advancing the Reform of the Household Registration System" issued in July 2014 emphasizes that "withdrawal from land contracting and management rights, homestead land use rights, and the right to distribution of collective returns shall not be made a condition for farmers to settle in cities." Theoretically, this is historical compensation for farmers' enormous sacrifices, and also provides basic institutional support for giving play to the role of rural areas as a reservoir and stabilizer for China's modernization.

Fourth, restrictions on industrial and commercial capital under large-scale land transfer. The main purpose of the "Opinions" is to promote large-scale land operation, proposing to "actively cultivate new types of operating entities and develop various forms of moderate-scale operation," but at the same time pointing out the need to "strengthen supervision and risk prevention over industrial and commercial enterprises leasing farmers' contracted land," and clearly proposing a series of restrictions such as "there must be a clear upper limit control on industrial and commercial enterprises leasing farmers' contracted land for long periods and on a large scale."

It can be seen that the design of the current farmland system is nearly "perfect," taking into account the interests of all sides and being full of flexibility. Of course, the "privatization camp" believes it may not be thorough enough, since land still cannot be freely bought and sold. In fact, farmers have permanent land contracting rights; if the lease term is long enough, how much essential difference is there from private ownership? Moreover, even if free transaction were allowed, under the realistic conditions of land use control and the low comparative returns of agriculture, how much could it sell for to give farmers capital for engaging in non-agricultural industries and settling in cities? On the contrary, the risks brought by land privatization cannot but be considered. The complexity of China's problems lies in this: as long as a very small opening is made, the powerful and privileged will amplify it infinitely, and here one should not overestimate the state's capacity for control. As long as public ownership of land is upheld without relaxation, the scourge of land concentration caused by seizure by force and trickery need not be feared. For the "rural reconstruction camp," the consolidation of land rights leading to the inability to periodically adjust land will leave some farmers landless, which is very unfair. Some scholars even believe that the post-80s and post-90s generation now entering cities, having received no contracted land and being stuck between city and hometown, will become thoroughly "proletarianized," which will lead to very serious social stability problems. Examined closely, this is somewhat exaggerated. The allocation of rural contracted land is based on population as the standard and the household as the unit; after land adjustment ceased following the second round of contracting, the next generation of farmers who did not receive contracted land does not mean the household has no land. Generally speaking, in a household, when the elderly die, when women marry out, and in situations like mine of studying or serving in the military, the land remains, so the contracted land becomes more. Households with less contracted land are generally those where at the time of allocation there were few elderly and many children and grandchildren; as the children and grandchildren marry wives and have children, the contracted land seems even less. But then again, the wives who marry in still have land in their natal families. This uneven distribution of land in space and across generations exists whenever adjustment stops. If farmers truly want to farm, they will not likely have no land to farm; the countryside is a society of acquaintances, and once a farmer does not farm his contracted land, it is generally transferred or leased to neighbors or relatives for compensation, at a low price, or free of charge. As for the potential threat arising from the "proletarianization" of the "second generation of farmers" entering cities, relying on forcibly reserving a share of contracted land for them in the countryside is of no help; one should instead base efforts on China's industrial upgrading and improvements in social governance policy. As for the "rural reconstruction camp's" worry that the consolidation of farmers' rights and interests will weaken collective strength and lead to insufficient capacity for supplying rural public goods, this is indeed a big problem. At the same time as the "Opinions" was issued, the central government also released the "Pilot Program for Actively Developing Farmers' Shareholding Cooperatives and Empowering Collective Asset Shares." The state's conception is to reconstruct collective economic organizations on a new economic foundation. Previously, collective economic organizations were basically empty shells and, apart from land contracting, had little to do with farmers. Now farmers are to increase their incomes through the reconstruction of collective economic organizations. But the biggest difficulty is that for the vast number of villages lacking collective assets, there is simply no collective economic organization to reconstruct.

My view is that the state's thinking in this regard is to choose the lesser of two evils. Rural cadres are a special group of people produced since the founding of our country; they played an irreplaceable role in the rural changes in history, but if viewed from a de-ideologized perspective, rural cadres are also a group of people who, "given a single needle, can absolutely move a camel for you." If they were given the power to periodically adjust land, the harm they would cause would be far greater than the benefits. Just like the tax and fee reform: in order to use rural cadres to collect a little tax and fee, farmers across the country were full of grievances; once it was abolished, the problem immediately vanished into thin air, though of course it brought the problem of a "governance vacuum." But for the ruling party, rural cadres doing nothing is still better than acting recklessly; first deal with reckless action and then talk. As for the supply of rural public goods, hoping to exploit limited land resources is also a drop in the bucket; one must still rely on increasing effective state investment, including introducing social capital, and improving the rural governance structure; the "virtuous rural gentry culture" advocated by the state and the farmer cooperation praised by the "rural reconstruction camp" should also be actively encouraged.

Of course, the current farmland system also has some flaws:

First, to whom exactly should agricultural subsidies be given? The "Opinions" proposes that "the attribution of the original direct grain subsidy, improved seed subsidy and comprehensive agricultural input subsidy shall be determined through consultation between the contracting household and the transferee, and the newly added portion should be tilted toward grain production scale-operation entities." Since the contracting household obviously holds the advantage in bargaining, the subsidy will naturally go to the contracting household. Whether this is reasonable, and even how the entire agricultural subsidy should be distributed fairly and effectively to play a positive role, is worth further consideration.

Second, what if all contracting households are not in the village? Previously, after a farmer's whole family moved to the city, the contracting law provided that the land could be recovered. Now it is clearly stipulated that contracted land cannot be recovered as a condition for settling in the city. Thus so-called "absentee farmers" will appear, just like the former "absentee landlords." This situation has in fact already appeared: some farmers with the means settle in cities and bring the elderly into the city too. This is still manageable, since the elderly are still alive; but what about some years later, when the elderly die and the next generation becomes entirely urban residents, how should their land contracting rights be handled? For this, current policy should reserve some space.

Third, how should the proceeds from land demolition and relocation be distributed? China is still in a long process of industrialization and modernization, and a large number of major project demolitions and urbanization demolitions remain unavoidable. But the "Opinions" clearly states that the confirmation and registration of land contracting and management rights should in principle be confirmed to the household and to the plot. Then once these plots already confirmed to households are demolished, the compensation proceeds should naturally belong to the contracting households, and other contracting households will inevitably be envious and feel it is unfair; and although the demolished household may hold a large sum of money, once it is spent and used up, they become landless farmers again, so what then? If, according to the wishes of the collective villagers, the demolition compensation proceeds were distributed uniformly by the collective and the contracted land readjusted, this would clearly not be permitted by current policy. How to balance the intrinsic reasonable values of policy, law and rural ethics cannot but be considered.