Why must land reform adhere to the market-oriented direction?

Editor's note: The goal of “establishing a unified urban-rural market for construction land” is unshakable. In particular, we must do a good job of the major undertaking of “allowing rural collective operational construction land to be transferred, leased, and used as equity shares, and implementing entry into the market on equal terms with state-owned land and equal rights at equal prices.”

Land is no small matter, and the debate over the basic direction of land reform naturally deserves special attention. One year ago, the Third Plenary Session of the 18th CPC Central Committee made a breakthrough on land reform. Unexpectedly, implementation afterward was difficult, and controversies arose on all sides. In recent months, multiple rounds of debate have erupted among experts and scholars, with different views clashing fiercely. For major and complex issues, debate is better than no debate. However, the market-oriented direction of land reform was confirmed only after decades of difficult exploration and heavy costs, and it should be upheld. The decision adopted at the Third Plenary Session of the 18th CPC Central Committee should become the bottom line and starting point for the next round of land reform. Wavering and backsliding offer no way forward.

⟦NL> The key to this debate does not lie in whether the various participants occasionally have something acceptable or occasional omissions in their analysis of specific issues, but in the fundamental differences over the basic orientation of land reform, historical understanding, and solutions. Land, like capital and labor, is a basic factor of production in a market economy. With the deepening of market economy reform, “establishing a unified urban-rural market for construction land” has become a clear goal of land system reform. Unexpectedly, controversy has arisen again this time, and “equal rights for the same land” has been called into question. In past explorations of reforming the land expropriation system, there was already consensus on strictly defining public-interest and operational construction land. This time, strikingly, significant objections have reappeared.

Planning is a hot word in this controversy. In the process of urbanization, planning needs to be formulated scientifically. However, such planning is usually functional. Planning built on the basis of property rights protection and freedom of contract has no fundamental conflict with the market. Yet in this debate, planning has been placed by some commentators in opposition to the market, arguing that the primary allocation of land, that is, the allocation that changes land use, can only rely on planning; only in the secondary market can the market play a decisive role. When planning is emphasized, “public power,” “regulation,” “governance,” and “penalties and crackdowns” flash from time to time, while the confirmation and protection of land rights are rarely mentioned.

It can be seen that in land system reform, whether to uphold “the market plays a decisive role in resource allocation” is the focus of the debate; and whether to respect citizens' land rights is the value basis of the disagreement.

Different starting points have led to a series of specific disagreements. Some people believe that the fundamental difference between urban and rural land lies in use regulation, not in ownership powers. This clearly does not conform to the facts. Rural land can be invested in urban construction only after being expropriated as state-owned, which clearly carries a discriminatory flavor. This is also the reason why the “Decision” proposed “equal rights for the same land.” Today, in urban-rural fringe areas, even if an area has already been included in the urban district in planning, the nature of land use is not changed, and farmers still cannot legally use collective land for construction. However, after all, the door of the market cannot be blocked, and reality and regulations have already become two separate things. Some commentators harshly attack farmers' “illegal construction.” However, to regulate this underground market, there is no other way except to grant farmers the legal right to use collective land for development.

Some scholars also believe that because of the existence of use regulation, the right to develop land belongs to the state, not to the owner, and that the right to develop land and property rights can be separated. This is in fact a misunderstanding. Land development rights is the translated term for “development rights” in the Anglo-American legal system, and is called “superficies” in the civil law system. It refers to the right to build buildings, structures, and ancillary facilities on land and obtain income from it. In China, this corresponds to what is called “construction land use rights,” a type of usufructuary right separated (independent) from ownership. Obviously, this is a property right. At present, mature market economy countries generally implement use regulation compatible with the market, with the aim of preventing negative externalities, and have no intention and no possibility of replacing owners' rights. Authorities in charge of land use regulation have the responsibility to explain why land use cannot be changed by the owner themselves, and their reasons based on public interest and negative externalities must be recognized by the entire community. Fundamentally, the market still dominates resource allocation.

This debate makes people pay even more attention to the future of land reform and hope that the implementation plan for the next round of land reform can be introduced as soon as possible. The relevant decision of the Third Plenary Session of the 18th CPC Central Committee was hard-won. Against the background of deepening and intensifying contradictions caused by the current land system, and after full investigation and demonstration, it was a solemn political commitment made in the form of the ruling party's highest document, and resistance should be removed and it should be resolutely implemented. The goal of “establishing a unified urban-rural market for construction land” is unshakable. In particular, we must do a good job of the major undertaking of “allowing rural collective operational construction land to be transferred, leased, and used as equity shares, and implementing entry into the market on equal terms with state-owned land and equal rights at equal prices,” and on this basis continue to make breakthroughs.

Land reform is major and complex, involving the interests of many parties. At the operational level, decision-makers may adhere to a prudent approach, with pilots first, to form policies and institutions. China has carried out pilot programs for more than ten years on allowing collective construction land to enter the market and has accumulated considerable experience, but it has been difficult to deepen because of the lack of top-level design and supporting reforms in taxation, law, and other areas. A new round of pilots should open up more space in areas such as defining operational collective construction land and the uses for market entry. When reform results emerge and social consensus forms, laws should be amended in due course to give legal status to the results of reform.

Land reform affects the whole body with a single move. It concerns the advancement of urbanization and economic transformation, as well as fairness, justice, and social stability. At present, a series of thorny problems, such as increased downward pressure on the economy and high government debt, show that the current land system has reached a point where it must be changed. Reform is difficult to understand and even harder to carry out. It requires sitting and speaking, and even more, it requires rising and acting.