Upper limit to be set on industrial and commercial capital leasing farmland

Following November 20, after the state issued the "Opinions on Guiding the Orderly Transfer of Rural Land Management Rights and Developing Moderate-Scale Agricultural Operations" (hereinafter referred to as the "Opinions"), a 21st Century Business Herald reporter learned from authoritative channels that state ministries and commissions have recently been intensively soliciting suggestions from various regions on the regulation of industrial and commercial capital access and risk prevention, and are expected to introduce specific rules regulating industrial and commercial capital going to the countryside.

The reporter learned that the key points of the solicitation include issues of widespread concern such as upper limit controls in various regions on industrial and commercial enterprises leasing farmers' contracted land for long periods and on a large scale, exploring how to specifically define the area and time upper limits for leased land.

Setting limits on leased land

Capital tycoons going to the countryside to "play at agriculture" has become increasingly fashionable. Industrial and commercial capital going to the countryside has, to a certain extent, brought large-scale and modernized agricultural operations, but controversy over some "capital land enclosure" has never ceased.

After the introduction of the "Opinions," specific rules regulating industrial and commercial capital going to the countryside have been under intensive discussion.

The "Opinions" clearly propose strengthening the regulation of and risk prevention for industrial and commercial enterprises leasing farmers' contracted land. Various regions must have clear upper limit controls on industrial and commercial enterprises leasing farmers' contracted land for long periods and on a large scale, establish and improve qualification review, project review, and risk guarantee fund systems, and make provisions on land leasing conditions, business scope, and penalties for violations.

A 21st Century Business Herald reporter learned from authoritative channels that the focus of soliciting regulatory opinions at the national level includes how to define industrial and commercial enterprises, how "long period and large scale" should be defined, how local governments should control industrial and commercial enterprises leasing land within the upper limits, and specific sanctions for their exceeding the upper limits. Among these, the most controversial is how to determine the time and area upper limits for leasing, that is, how long enterprises going to the countryside can lease land, and the maximum area they can lease.

This also means that the "political achievement benchmarks" set up by some local governments in the past for large land transfer lessees will be redefined.

A 21st Century Business Herald reporter learned in interviews that during the official solicitation of opinions, an eastern province has already submitted relevant regulatory implementation opinions to the national level. These opinions were the first to propose specific time and area upper limits for industrial and commercial enterprises leasing farmland, and are expected to be introduced as soon as possible and piloted first.

In fact, although the central government has repeatedly issued policies emphasizing that "in order to stabilize agriculture and stabilize rural areas, industrial and commercial enterprises are not encouraged to lease and operate farmers' contracted land for long periods and on a large scale," most localities have no specific area upper limit provisions for industrial and commercial enterprises going to the countryside to lease farmers' contracted land, and the contracting time varies greatly from place to place.

An agricultural department official who declined to be named told a 21st Century Business Herald reporter that under the current background of comprehensive reform to reduce administrative approvals, issuing corresponding documents regulating land transfer is very difficult, which also shows the central government's determination; in addition, this clear stipulation of time and area upper limits for industrial and commercial capital leasing farmland means that regulation of access for industrial and commercial capital going to the countryside will be put into practice, but specific operations are still relatively complex and require a large amount of solicited opinions.

Discussing the risk guarantee fund system

Industrial and commercial capital going to the countryside has always been controversial, bringing both benefits and risks.

An official in a central province responsible for land transfer work told a 21st Century Business Herald reporter that social capital's large-scale "march" into agriculture has brought in social funds, alleviated the problem of insufficient investment in agricultural development, and also brought high-tech and advanced management concepts. In the city where he works, social capital investment accounts for more than 60% of all land transferred for agricultural projects.

He also listed some problems with social capital entering agriculture. First, excessively long leasing periods pose hidden dangers. Among projects already transferred, industrial and commercial enterprises all hope the land transfer period is as long as possible, which makes the expected value of the land in the later period difficult to estimate and also difficult for regulators to supervise.

In addition, most of the existing large-scale transfer projects involve social capital. In the process of capital going to the countryside, a small number of enterprises unilaterally violate contract agreements and arbitrarily change land use control regulations, causing transferred land to become "non-agricultural" and "non-grain," and some enterprises even fraudulently obtain project funds for capital operations.

He Xuefeng, a professor at Huazhong University of Science and Technology who has researched land transfer in many places, told a 21st Century Business Herald reporter that the central government's current document setting upper limit standards on area and time is very necessary. At present, many local governments encourage and promote transfer, treating large-scale transfer and leasing as political achievements, and even providing project fund subsidies. Industrial and commercial capital developing sightseeing agriculture through land enclosure has become a common phenomenon in rural areas around provincial capitals.

As for how to control and prevent the risks brought by industrial and commercial capital going to the countryside, state ministries and commissions are currently soliciting opinions, including how to improve qualification review, project review, and establish a risk guarantee fund system.

A person familiar with the matter revealed that on the regulatory side, state ministries and commissions already have a preliminary intention and are considering establishing a land transfer review committee. This committee would be government-led, organized under the leadership of agricultural economic departments, and composed of farmer representatives and relevant departments. This measure will be piloted first.

An official of the Wuhan Agricultural Bureau told a 21st Century Business Herald reporter that Wuhan explored risk prevention and control relatively early and was one of the earlier regions in China to propose establishing a risk guarantee fund. That is, raising the access threshold for social capital, requiring social capital participating in land transfer to first pay a deposit of 3-5 times the annual transfer rent as a "risk guarantee deposit."

According to the introduction, two districts in Wuhan are currently piloting the risk guarantee deposit system. The purposes of collecting the "risk guarantee deposit" are, first, to prevent enterprises from withdrawing midway due to poor operations and affecting farmers' rental income; second, to prevent enterprises from arbitrarily changing land use, to be used as penalties; and third, to prevent enterprises from predatory operations on the land that damage the soil, with the deposit usable as land reclamation fees.

As for the use of funds, the above official introduced that the "risk guarantee deposit" is held in escrow by the "dual escrow" accounts of various economic management stations. If the company enterprise has not violated relevant regulations, it is returned year by year after 5 years until fully refunded after the contract expires.