Four major aspects of land system reform worth watching

Recently, Zhou Qiren, a professor at Peking University's National School of Development, said while attending the 38th quarterly report meeting of “CMRC China Economic Observation” hosted by the school that four aspects of the new round of land system reform are worth watching.

Zhou Qiren summarized several findings from his research on the land system in recent years.

First, this round of rural land system reform originated in the cities. After urbanization, land prices rose, and demand for land rose. Under such circumstances, the relative prices of factors of production have undergone major changes, and the corresponding laws, customs and traditions must also change. In the past, China's reforms were rural areas surrounding the cities, such as the household contract responsibility system and the reform of the unified purchase and sale of grain. This round of land reform, by contrast, comes from the cities and aims to activate rural resources; the driving force and the source of financial resources are in the cities.

Second, land tickets, large linkages, small linkages, joint construction, and exchanging housing land for housing go by a bewildering variety of names, but what they have in common is “transfer rights.” After decades of collective economy, farmers finally redefined land property rights in the late 1970s and early 1980s: ownership belongs to the collective, while use rights, operating rights and income rights belong to farming households. What is very important in this wave of land reform is the demand for transfer rights. If I do not use some resource, I can transfer it to others, and the longer the radius of the transfer distance is extended, the larger the scope of potential resource use becomes. The transfer price discovered through competition will be more efficient, and therefore more favorable to farmers.

Third, explore a mechanism for sharing the gains from urbanization. The principle that increases in land prices should be returned to the public was summarized by Sun Yat-sen. The basic consideration is that the reason the market price of farmland near cities rises sharply is that the government has built a large amount of infrastructure and urbanization has brought a large concentration of population, which has nothing to do with the farmers who own the land. Through practice in Shenzhen and many other places, it can be seen that increases in land prices can be shared. If they are returned entirely to the public, farmers will not bring out their land, and it will also create social tension. This is also what the Third Plenary Session said: for land price increases in the process of urbanization, we should explore a mechanism for the state, intermediary organizations and farmers to share them together. We should patiently seek a balancing mechanism in the diverse practices of various places, and then elevate it into formal laws and policies. Reform should, to the greatest possible extent, bring the economic activities and interest demands of the majority into the legal framework.

Fourth, the government should provide a lawful framework for the establishment of the market. The government's “visible hand” can play a certain role in creating markets. But in real life, what the government does may diverge in terms of economic rationality: the government may become more and more addicted to doing things, bringing all resources into the visible hand to keep playing the game.

Establishing an effective market is inseparable from a lawful framework, which includes both the support of legal texts and the guidance of administrative power; at the same time, it is necessary to respect the laws of urbanization and economic development themselves, rationally and pragmatically face the interest demands arising from them, and distill the methods of resolving contradictions contained in grassroots and local practice into new norms of legitimacy. A lawful framework can give all parties more stable expectations.