How Farmers' Land Rights Return in the New Urban-Rural Relationship

Land is an important factor of production and also an institutional bottleneck in rural reform and development. The "Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform" (hereinafter referred to as the "Decision"), adopted at the Third Plenary Session of the 18th Central Committee, has pointed out the direction and clarified the path for a number of land system issues that have been much debated in recent years but avoided in policy, or that have been explored in reform practice for many years and urgently await a policy answer. This is of great significance for deepening rural institutional reform, improving the institutional mechanisms for integrated urban-rural development, forming a new type of worker-peasant and urban-rural relationship, and improving farmers' land rights.

I. The Connotation of Farmers' Land Rights in the Context of the New Worker-Peasant and Urban-Rural Relationship

1. Rural Land Contracted Management Right

How should the rural land contracted management right be understood?

(1) According to the Property Law, the rural land contracted management right is a type of usufructuary right. The "Decision" once again makes clear that the rural land contracting relationship should be stabilized and maintained unchanged for a long time. In some places, after the contracted land has been verified and registered, the contract term has been recorded on the contracted management right certificate as “unchanged for a long time.” How long is a long time? Should the practice of the previous two rounds be followed, granting another term after the second round of contracting expires? Some people have suggested setting the contract term at 70 years by reference to the term for urban real estate land, but no consensus has yet been reached on this issue, and further discussion is needed. However, rural land issues are very complex. Even with policies or even legal provisions, some specific problems may not necessarily be resolved. For example, the provision in Article 27 of the Rural Land Contracting Law that land must not be adjusted has not been implemented in some places. Therefore, it is suggested that, on the basis of verifying and registering contracted land, it be directly specified as unchanged for a long time, and that after the second round of contracting expires, direct extension of the contract be announced, so as to show the central government's determination to stabilize the contracting relationship, while leaving specific problems for the people themselves to resolve.

(2) What powers and functions does the contracted management right have? According to the Rural Land Contracting Law and other laws, in addition to possession, use, and income, there are also the rights to subcontract, assign, lease, exchange, and contribute as shares to agricultural cooperative production. The "Decision" adds the powers of mortgage and guarantee, and expands the power of the rural land contracted management right to be contributed as shares to develop industrialized agricultural operations. Theoretically speaking, as far as contracted cultivated land is concerned, there is still no provision on the right of inheritance. In addition, since rural land contracting is based on the farmer household as a unit, if there is only an increase or decrease in family members, then no adjustment of contracted land is involved, and there is therefore no issue of inheritance.

(3) On mortgage and guarantee. This is a major breakthrough in the rural land system. In recent years, pilot programs in many places have almost all explored mortgage methods, but there has been considerable controversy among theorists and policymakers in various quarters. The focus of the controversy is twofold: first, mortgage risk, worrying that once a contracted land mortgage cannot repay a loan, farmers will lose their land, or that it will lead to land concentration; second, worrying that it is not operable, and how banks should handle contracted land as collateral. Local areas have a set of practices for preventing risk, such as the government establishing a risk guarantee fund, with the risk fund bearing 80% of losses and banks bearing only 20%; and limiting land used for mortgage to 2/3 of the contracted land area, etc. In addition, banks also have rules for preventing credit risk. In the author's view, from the perspective of deepening reform of the rural property rights system, from the perspective of integrated urban-rural development, and from the perspective of equality of rights, equality of opportunity, and equality of rules, farmers should all be granted the right to mortgage contracted land, giving farmers one more way to obtain loans.

(4) On whether farmers who move to cities should withdraw from contracted land. According to the Rural Land Contracting Law, if the whole family moves into a districted city and obtains household registration there, they must withdraw. In practice, some use contracted land in exchange for social security, while others do not require withdrawal. After farmers move to cities, they can contribute contracted land as shares to cooperatives and receive dividends. Although there is still controversy at present, as a right it should be protected and should not be forcibly withdrawn. In addition, there are more than 160 million migrant workers working away from home. To encourage migrant workers to settle in cities, the principle of voluntariness should be adopted, allowing farmers to bring their land into cities (including large cities), while exploring the establishment of a paid withdrawal mechanism.

(5) On agricultural land transfer. To develop modern agriculture, it is necessary to take the path of appropriately scaled operations. As early as the early 1990s, Deng Xiaoping put forward the thesis of two leaps. Appropriately scaled operations require the transfer of contracted land. In recent years, new types of operating entities such as large growers and breeding households, family farms, farmer cooperatives, agricultural enterprises, and socialized service organizations have developed rapidly. At the same time, land transfer has also accelerated, showing characteristics such as scaled transfer, contiguous transfer, and an increased proportion of transfer by enterprises and cooperatives. In some places, there is forced transfer, or transfer arranged arbitrarily by village officials, which goes against farmers' wishes. Contracted land transfer must respect farmers' wishes, must not force farmers to transfer, must not harm farmers' interests, must not change the agricultural use of the land, and must not damage comprehensive agricultural production capacity.

2. Use Right of Rural Collectively Operated Construction Land

The "Decision" grants rural collectively operated construction land powers and functions symmetrical to those of state-owned construction land———“entry into the market on equal terms, equal rights and equal prices,” providing institutional guarantees for establishing a unified urban-rural construction land market. For a long time, the institutional arrangement for land was that the government highly monopolized the primary market. Apart from rural collectives and villagers establishing township and village enterprises, villagers building homes, and rural public facilities and public welfare undertakings, no other construction could directly use collective land and had to be expropriated as state-owned construction land. This both lost efficiency and harmed fairness. In recent years, Guangdong, Zhejiang, Jiangsu, Tianjin, Chongqing, Chengdu, and other places have carried out pilot programs for the transfer and use of collectively operated construction land, exploring different transfer models.

“Entry into the market on equal terms, equal rights and equal prices” has been called a revolutionary reform by some, and Minister Jiang Daming of the Ministry of Land and Resources called it “setting off the ice-breaking journey of rural land system reform.” There are still different understandings of this. But in the author's view, its significance lies in at least 3 points.

(1) It clarifies the direction for improving the powers and functions of collectively operated construction land. In the future, rural collectively operated construction land can enter the market on an equal footing with state-owned construction land, being transferred, leased, or contributed as shares in the primary market, and leased, assigned, mortgaged, etc. in the secondary market.

(2) It is conducive to breaking the government's monopoly on the primary market for construction land, truly handing the allocation right of land resources to the market, and removing institutional obstacles for reforming the land expropriation system and coordinating urban and rural development. Only market allocation of scarce resources can truly improve efficiency, transform the development model, and maximize benefits.

(3) It is conducive to farmers directly participating in the process of industrialization and urbanization and directly sharing the benefits brought by industrialization and urbanization. Of course, some systems or measures still need to be clarified: First, what conditions must rural operated construction land meet to enter the market, and how can scientific and reasonable planning be formulated and strictly implemented? Second, should collective ownership be allowed to exist in land within urban areas? On the one hand, the scope of land expropriation should be narrowed, and in the future not all land within urban areas will necessarily have to be expropriated; on the other hand, the "Decision" proposes that, as long as it complies with planning and use control requirements, collectively operated construction land can enjoy equal rights and equal prices with state-owned land in the same construction land market. This means that in the future there will be collective land within urban areas, but China's Constitution clearly stipulates that urban land is owned by the state. Third, can farmers' collective economic organizations use collectively operated construction land to develop real estate for use (sale) by members of their own organization? At present, China has 3 types of housing: commodity housing, rural homestead housing, and small property rights housing. It should be said that the central government's attitude toward small property rights housing is clear, and relevant ministries and commissions have repeatedly issued injunctions prohibiting it. But if farmers' collective organizations develop real estate on collective construction land and sell it to members of their own organization, how should this be viewed? It is suggested that pilot exploration be allowed.

3. Income Right of Farmers Whose Land Is Expropriated

Contradictions and disputes over rural land expropriation and occupation have become the biggest factor affecting rural social stability and the primary cause of mass petitions in rural areas. Local governments care about the demand for construction land from industrialization and urbanization, farmers care about the level of compensation, and the central government cares about cultivated land protection and food security. Since the reform and opening up, the land expropriation system has undergone 3 reforms: first, exploring multiple compensation and resettlement methods in the mid-to-late 1990s; second, beginning to raise compensation standards in 2004; and third, beginning to explore narrowing the scope of land expropriation after the Third Plenary Session of the 17th Central Committee of the Party. The Third Plenary Session of the 17th Central Committee of the Party and the 18th National Congress respectively put forward the requirements of “strictly defining public welfare and operated construction land, and gradually narrowing the scope of land expropriation” and “reforming the land expropriation system and increasing the proportion of farmers' share in land value-added proceeds.” The "Decision" of the Third Plenary Session of the 18th Central Committee also proposed “narrowing the scope of land expropriation, standardizing land expropriation procedures, and improving a reasonable, standardized, and diversified guarantee mechanism for farmers whose land is expropriated.” It should be said that the central government's direction for land expropriation system reform is clear. The key to the next step of implementation is to further improve the system and refine the measures, including: How should public welfare land be defined? How should compensation standards be determined? How should compensation and resettlement methods be improved?

(1) On public welfare land. Everyone has no objection to land for national defense and diplomacy, there are differences over including land for infrastructure such as transportation, water, electricity, and gas, and for education, science, culture, and health facilities within the scope of land expropriation, while there is widespread negative attitude toward including industrial and commercial land within the scope of land expropriation. However, foreign countries also have different understandings depending on economic development conditions. For example, during its period of rapid economic development, South Korea included iron manufacturing, fertilizers, and other important undertakings prescribed by presidential decree (such as electronics and shipbuilding, engine manufacturing, cement production, etc.) within the scope of “public interest” allowing land expropriation, but after economic development reached a relatively high level, it excluded the above undertakings from the scope of land expropriation in 2002. This shows that the concept of public welfare is relative and stage-specific. The United States defines public welfare through parliaments or court precedents, preventing arbitrary practices, which is worth referencing.

(2) On compensation standards. At present, compensation is calculated according to Article 47 of the Land Administration Law, based on no more than 30 times the average output value of the previous 3 years according to the original use of the expropriated land. Although actual compensation has clearly exceeded this standard, farmers still believe compensation is too low, generally 30,000 to 50,000 yuan per 667 m2. According to a survey by the Development Research Center of the State Council, the land expropriation compensation received by farmers accounts for only 5% to 10% of the total land value-added proceeds. In the future, land expropriation compensation should change from being based on the original land use to fair compensation, with reference to the local land transaction market price. Strictly speaking, compulsory land expropriation compels a change in ownership, and property rights should be protected, that is, the economic value of property should conform to market rules.

(3) On compensation methods. In recent years, some places have explored methods such as retaining land and retaining property for resettlement during land expropriation, leaving part of the land to the village for development to ensure long-term, stable income, which is welcomed by the masses. For example, 2 villages in Fuyang City, Zhejiang Province, that implemented land-retention resettlement can obtain operating income of 7 million yuan and 2.8 million yuan per year respectively, with very good results. Therefore, these diversified guarantee and resettlement methods should be summarized and promoted.

4. Rural Homestead Use Right

China's rural homesteads and farmers' houses are under a completely different policy from urban real estate. The characteristics of the rural homestead use right system are “collective ownership, use by villagers; one household, one homestead, area limits; welfare allocation, long-term use; restricted powers, uncompensated recovery.” Its value orientation is: safeguarding public ownership of land, guaranteeing farmers' housing rights, and strictly protecting cultivated land. Historically, from 1950-1952, homesteads and houses were all owned by farmers individually. It was only with the advancement of cooperativization and the people's commune system that homesteads, like other rural land, became collectively owned. With the development of industrialization and urbanization, rural homestead management has also faced new problems, such as excess occupation of homesteads, land occupied by vacant residences, and idle homesteads. According to calculations by the Institute of Geographic Sciences and Natural Resources Research of the Chinese Academy of Sciences, comprehensive improvement of “hollow villages” across the country could increase the potential for cultivated land by 7.67 million hm2. In recent years, calls for reforming the homestead management system have occurred from time to time, mainly focusing on whether the one-household-one-homestead system should be maintained, whether a paid-use system should be implemented, and whether homestead use rights should be mortgaged, etc.

The "Decision" clearly proposes guaranteeing farmers' usufructuary rights over homesteads and reforming and improving the rural homestead system. How should reform proceed? It emphasizes the need to proceed through pilot programs, cautiously and steadily advancing the mortgage, guarantee, and transfer of farmers' housing property rights, and exploring channels for farmers to increase property income. At present, pilot areas have different ways of using homesteads. From the perspective of guiding ideology and starting point, there are 2 aspects: first, serving the land needs of urbanization and industrialization, carrying out comprehensive land improvement and linking increases and decreases, and exchanging homesteads for urban housing; second, considering increasing farmers' income and rural land development, carrying out mortgage and leasing of farmers' houses, and developing agritainment and rural tourism, etc. In recent years, property income in some relatively developed coastal eastern areas has accounted for more than 20% of farmers' income, but nationally it is still very low, about 3%. Rural homesteads involve the survival of farmers' descendants for generations and are basic means of survival. Judging from their history and the welfare function of homesteads, reform of homesteads should be cautious; but from the perspective of assets and increasing farmers' property income, 13.33 million hm2 of homesteads is a huge asset with great room for reform. However, at the present stage, the author believes that homestead reform pilot programs should adhere to closed operation within the scope of rural collective economic organizations, and rural homesteads and houses should not yet be opened to urban citizens.

5. Income Right of Rural Collective Assets

Land is the largest collective asset. Because land is a scarce resource and because a system of joint ownership is implemented, rural collective land does not have transferability or exclusivity, causing every member to find ways to occupy land and obtain income, which is not conducive to asset management and improving efficiency. In some places, collective assets have been seriously lost and collective debt is serious. In recent years, various places have begun to explore reform of collective assets by establishing collective asset joint-stock companies or land share cooperatives, quantifying collective assets to individuals, implementing corporate management, clarifying property rights, playing a role in preserving and increasing the value of collective assets, and also safeguarding the rights and interests of members of collective economic organizations. The "Decision" grants farmers the rights to possession, income, and paid withdrawal of collective asset shares. In the author's view, this affirms the practices of reform practice and at the same time clarifies the direction of reform of collective assets.