Background interpretation of China's rural land three-rights separation system

Background of China's rural land "three-rights separation" system: Land is a means of insurance for farmers, not a tool for getting rich

(Part One)

Recently, 17 experts submitted a proposal to the central government advocating "land reform." It is said that the full text is 13,000 characters long. I could not find the full text of the proposal and can only get a glimpse of it from media reports; its core points are roughly "to thoroughly reform the planning and land use control system, and launch reforms such as allowing collective land to enter the market, reforming the land expropriation system, and building a unified urban-rural construction land market." Since only rural land is collectively owned, the proposal, plainly put, is (1) hoping to weaken planning authority and defer to market choice; (2) hoping to relax control over rural land and let capital enter the rural land market. Then implement free land circulation, consolidation, and conversion of use.

Letting rural land use rights flow freely and letting capital enter agriculture - such voices have existed consistently. As economic growth slows and the capital market remains sluggish, such voices have grown stronger and stronger. The reasons these people put forward are mainly: (1) prevent farmland from being left idle and improve productivity, (2) reduce resistance to land expropriation, (3) raise land expropriation prices and reduce the impulse for real estate development, (4) allow farmers' use rights to be monetized, etc. Capital entering rural land - the experience of countries around the world shows that its ultimate goal is always to expect the premium from converting rural land to non-agricultural use.

In fact, the capital market has already begun to lay out its plans. Many large capital companies have already started investing in agriculture; for example, Evergrande has begun to get involved in animal husbandry. I do not like conspiracy theories, but behind this, is there an expectation of possible land system reform, and a coveting of the excess profits from land use conversion?

All developed countries in the world (including the United States, Japan, and Germany, etc.) have very strict land use planning systems; they strictly restrict the conversion of land use. This is the so-called doctrine that "planning authority" is higher than "ownership." A strict land planning system is also an important means of protecting land ownership. Imagine, if there were no strict land planning system and a chemical plant were built inside a residential area, the consequences would cause major losses to the rights and interests of all land owners.

Originally, rural land and non-agricultural land are not the same market, and this basically holds true in all countries. I simply do not understand how, as the 17 experts say, a unified urban-rural land market could be established. If rural land can easily be converted to non-agricultural use, apart from having a major impact on China's food security, the impact on both the non-agricultural and agricultural land markets would be enormous.

(Part Two)

China's rural land issue has been the focus of social economy throughout thousands of years of history. The land system is not only an economic issue, but also a political issue, closely tied to the foundation of political power.

After the Third Plenary Session of the 18th Central Committee of the Communist Party of China, the central government clearly set the reform direction for the rural land system as "encouraging the separation of collective land ownership, contract rights, and management rights, stabilizing contract rights, invigorating management rights, and regulating the circulation of land contract management rights." I think such an institutional design is the optimal design suited to China's rural land system.

Many people cannot understand why China designs a land system so complexly, with contract rights and management rights derived from ownership. I believe this is determined by China's reality and is an inevitable choice of history.

Such a land system, apart from ensuring agricultural production and safeguarding China's food security, more importantly safeguards the political stability of the entire society.

China is a country with many people and little land, and this is the fundamental reason determining China's existing rural land system. According to the latest statistics, the total area of cultivated land is 2.003 billion mu, China's total population is 1.37 billion, and the rural registered population is about 800 million. Rural per capita cultivated land is only 2.5 mu. In the eastern coastal areas, rural per capita cultivated land is less than 1 mu. With such a small amount of per capita cultivated land, from an economic perspective, it can only provide subsistence and is fundamentally insufficient for getting rich; therefore, land cannot become a means for farmers to get rich.

From a commercial perspective, "planting" houses on land will certainly yield greater returns than growing crops. This is also the underlying economic driving factor behind the arguments mentioned above.

However, rural residents in China have not yet established a sound social security and old-age pension system. Implementing equal distribution of land in China's rural areas has played the role of social security and old-age insurance for rural residents. When the urban economy is sluggish and large numbers of migrant workers lose their jobs, it can serve as a social buffer. This is the key to the problem. If the land system is changed and farmers completely lose their land, this economic buffer force will be gone. When an economic crisis occurs in the cities, hundreds of millions of migrant workers who have no land and no social security will be the first to lose their jobs. What can they do? Study the history before 1949 and you will know the answer.

In 2013, China's urbanization rate had already reached 53.7%; that is, 53.7% of the population lived in cities and towns. But people with urban household registration accounted for less than 35%. About 20% of the urban population are migrant workers without urban household registration, totaling about 270 million. If a crisis occurs among such a large group, with no land, no work, and no social security, the consequence is social unrest. If they have a piece of land in hand, at least they will not cause social unrest because of hunger.

Therefore, the existing land system emphasizes "stabilizing contract rights"; its purpose is to make farmers compulsorily retain contract rights and not be separated from the land. When an economic crisis occurs, these farmers can still take back the land, maintaining social stability.

Indeed, China has undergone 35 years of reform and opening up without a major economic crisis; but a market economy will inevitably produce economic crises. Being vigilant in times of peace is necessary for a country's long-term stable development.

(Part Three)

Analyzed from a historical perspective, the current Communist Party regime relied on the agrarian revolution and land reform to attract large amounts of peasant support and successfully seize power. From the agrarian revolution of 1927 to 1937, the Communist Party struck down local tyrants and distributed land in the base areas, satisfying farmers' land demands, and even Chiang Kai-shek's millions-strong army representing the urban bourgeoisie could not eliminate the Communist Party's army.

After the founding of New China in 1949, the Communist Party distributed the confiscated landlords' land to farmers who had no land or little land, laying a solid foundation for the Communist Party to stabilize its regime and for later industrialization.

In 1978, reform and opening up also began with rural land reform, implementing the allocation of land to households and the household contract responsibility system.

Even after 35 years have passed and times and circumstances have changed, land is still closely tied to the foundation of political power.

The existing land system is a choice of history. Although it may not be the optimal design economically, it is the system most suited to China, derived to safeguard food security and maintain social stability.

(Part Four)

To implement the capitalization of rural land or the free flow of rural land is not impossible; but a social security system for farmers identical to that of urban residents must first be established. Judging from the current decline in local government fiscal strength, the large amounts of debt owed, and the strained old-age insurance situations in various places, this will still be difficult to achieve in a short time. If a sound social security system is not established for farmers, then the capitalization of rural land should be out of the question.

At the same time, it must be pointed out that, according to some recent studies, the proportion of rural residents' non-agricultural income in total income has already exceeded 60%, and indeed agricultural income no longer occupies the main position in farmers' income. Maintaining the existing land system is not intended to confine farmers to the land, but rather for the land to give farmers a form of insurance. In the absence of social security, when the macroeconomy is sluggish, farmers have a minimum living guarantee. Only then will major social disorder not occur. If a sound social security system is not provided to farmers and the capitalization of rural land is rashly implemented, it is equivalent to planting a time bomb under the stability of the existing regime!