How to awaken the sleeping land and bring the soil back to life

The Central Rural Work Conference at the end of the year set the tone for 2016 to strengthen agricultural supply-side reform, improve the quality and efficiency of the agricultural supply system, make the quantity, variety and quality of agricultural product supply meet consumer needs, and truly form an effective supply of agricultural products with a rational structure and strong guarantees. It also once again emphasized that grain price reform and agricultural support policies should be tilted toward large-scale operating entities.

The policies involving rural reform in 2015 left all sectors overwhelmed.

Sorting out the path of policy changes over this year, the basic logic was to improve agricultural production efficiency and enhance the competitiveness of China's agriculture. This included the implementation and improvement of specific policies, the launch of pilot projects, and policy plans for planning the future direction of agricultural reform and doing top-level design. The 21st Century Macro Research Institute studied this year's agricultural reform from four aspects: property rights reform, management reform, price reform and urban-rural integration reform.

The Central Rural Work Conference at the end of the year set the tone for 2016 to strengthen agricultural supply-side reform, improve the quality and efficiency of the agricultural supply system, make the quantity, variety and quality of agricultural product supply meet consumer needs, and truly form an effective supply of agricultural products with a rational structure and strong guarantees. It also once again emphasized that grain price reform and agricultural support policies should be tilted toward large-scale operating entities.

At the industrial level, the 21st Century Macro Research Institute believes that future agricultural supply-side reform will show the following characteristics:

First, the land market has been given the greatest market expectations;

Second, rural finance is expected to be further revitalized;

Third, rural network infrastructure is improving, and rural e-commerce will still have great room for growth in the coming years.

Fourth, "buying a house after entering the city," its substantive impact on destocking real estate, and the corresponding supporting public services and jobs after entering the city, are all worth attention.

I. Property rights reform: pilot reform of the "three plots of land" launched

In terms of scope of impact and degree of market attention, the reform of the land-related property rights system has attracted the most attention from all sectors.

In the "three plots of land" reform, the basic idea of reforming the rural land expropriation system is: narrow the scope of land expropriation, standardize land expropriation procedures, improve the reasonable, standardized and diversified safeguard mechanism for farmers whose land is expropriated, establish a mechanism for distributing land value-added gains that takes into account the state, the collective and individuals, and reasonably increase individual gains.

The basic idea of reforming the system for collective operational construction land is: allow existing rural collective construction land whose use is determined by the overall land use plan and urban-rural planning for industrial and mining storage, commercial services and other operational purposes to enjoy the same rights as state-owned construction land, and, on the premise of complying with planning, use control and lawful acquisition, it may be transferred, leased or used as equity, while improving the market entry transaction rules, the service supervision system and the mechanism for reasonably distributing land value-added gains.

The basic idea of reforming the homestead system is: on the basis of safeguarding the usufructuary rights to homesteads lawfully obtained by farming households, reform and improve the rural homestead system, explore a new mechanism for farmers' housing security, clearly define farmers' property rights in housing, explore a paid-use system for homesteads and a voluntary paid exit mechanism, and explore effective ways to mortgage, guarantee and transfer farmers' property rights in housing.

Regarding property rights reform, the 21st Century Macro Research Institute believes:

1. Land reform affects the whole situation with a single move. Reform surrounding rural land has always been carried out according to the principle of small-scale pilot projects and steady progress, and there will probably be no major reform progress in the coming years;

2. In 2015 it was clearly mentioned that the pilot projects involve breaking through relevant legal provisions and require the State Council to request authorization from the Standing Committee of the National People's Congress, allowing pilot areas to suspend implementation of relevant legal provisions during the pilot period. Previously, some media reported that among the 33 reform pilot projects, 15 pilot plans had been approved. According to the documents, the pilots are to be completed by the end of 2017, which means that in 2016 all 33 pilot projects nationwide will be piloted simultaneously.

At the current stage, rural areas have as much as 250 million mu of existing construction land. How the pilots will revitalize rural land assets will stir the future land market.

II. Management reform: supporting policies for large-scale operation implemented

In 2015, reforms concerning agricultural management reform were mainly implementation documents for reforms to improve the intensification and planning level of agricultural management, making specific provisions respectively on the carriers of large-scale operation, new types of agricultural operating entities, and improving the supervision and risk prevention mechanisms for industrial and commercial capital leasing farmland.

At present, China's agriculture still lacks sufficient competitiveness of its own, and all parties have reached a consensus that developing various forms of appropriately scaled agricultural operation is the inevitable path to agricultural modernization.

This means it is necessary to focus on improving land output rate, resource utilization rate and labor productivity, accelerate the cultivation of family farms, specialized large households and other new types of agricultural operating entities, and raise the level of intensification and scale of agricultural operation.

The 21st Century Macro Research Institute found:

First, regarding the carrier of large-scale operation, the document proposed "using the construction of high-standard farmland as the carrier to promote appropriately scaled operation; using agricultural industrialized operation as the lever to promote appropriately scaled operation; among which it highlighted increasing support for new types of agricultural operating entities to build high-standard farmland." The Ministry of Finance document even more clearly provided fiscal support.

Second, regarding agricultural operating entities, almost all documents emphasized the role of new types of agricultural operating entities in developing modern agriculture, including farmers' cooperatives, family farms, specialized large households, leading enterprises and so on; this is very obvious in the notices issued successively this year on encouraging migrant workers to return home and start businesses.

In addition, the Central Rural Work Conference at the end of the year also mentioned that it is necessary to fully give play to the leading role of various forms of appropriately scaled agricultural operation in structural reform, and that agricultural support policies should be tilted toward large-scale operating entities.

Over the past year, at the policy level, documents encouraging the development of rural e-commerce were issued successively; at the capital level, capital giants such as Alibaba and JD.com entered rural areas, and the purchase and sales models of agricultural materials and agricultural products also changed, providing many employment and entrepreneurial opportunities for rural youth groups such as returning migrant workers and rural college students.

This also shows that China's new agricultural entities are also taking shape, and may improve the situation in which the main rural labor force is the "3861 force."

Third, opportunities in rural finance are increasing. The development of rural finance has always been very weak, for reasons including lack of credit records, lack of collateral, and difficulty controlling risks.

Regarding the detailed rules for pilot projects on mortgage loans for rural land contractual management rights and mortgage loans for farmers' property rights in housing, it mentioned that "when it is necessary to realize the mortgage right because the borrower fails to perform due debts or circumstances agreed by the parties occur, financial institutions are allowed, on the premise of ensuring farmers' contractual rights and basic housing rights, to dispose of the collateral in multiple ways according to law. In addition, improve collateral disposal measures to ensure that when the borrower fails to perform due debts or circumstances agreed by the parties occur, the lending bank can smoothly realize the mortgage right."

After investigation, the 21st Century Macro Research Institute found that some provinces had already seen multiple cases of the above-mentioned mortgage loan risks. After the risks occurred, the collateral was difficult to liquidate in the market, making it a "hot potato" for financial institutions. After the release of these detailed rules, risks for financial institutions will be reduced, and perhaps their enthusiasm for issuing such loans can also be relatively increased.

Fourth, at the end of 2015, after 24 years, the central government once again issued a special document comprehensively guiding the reform and development of agricultural reclamation, doing top-level design for reshaping agriculture's "national team" in the new era. Agricultural reclamation is also called the last fortress of the planned economy, and at the same time possesses abundant resources. Its 540 million mu of land resources and more than 1 trillion in state-owned enterprise assets are awaiting reform to release value to a greater extent. 2015 is called the first year of China's agricultural reclamation reform, and in 2016, a series of reform measures will be implemented.

III. Price reform: marketization of grain prices

In 2015, what probably affected farmers most directly was grain price reform. The main content of the reform was "separating price from subsidy," improving the market-based pricing system.

The 21st Century Macro Research Institute believes that, according to the current core thinking of grain price reform, in the future the methods of regulating the agricultural product market will continue to be improved, excessive government intervention will be reduced, and future grain prices will also become increasingly close to the market. The situation in which Chinese agricultural product prices are comprehensively higher than the international market may be broken.

At the end of December, the Central Rural Work Conference was held, setting the tone for agricultural supply-side reform. The meeting emphasized that efforts should be made to strengthen structural reform of the agricultural supply side, improve the quality and efficiency of the agricultural supply system, make the quantity, variety and quality of agricultural product supply meet consumer needs, and truly form an effective supply of agricultural products with a rational structure and strong guarantees.

Price is the most effective means of regulating the supply and demand of agricultural products, which further explains that China's current grain prices will be adjusted in the direction of marketization.

IV. Urban-rural integration reform: migrant workers entering the city is the biggest suspense

The last key reform closely related to rural areas and even the national macroeconomic situation is urbanization.

At the end of 2015, the annual Central Economic Work Conference proposed that, in accordance with the requirements of accelerating the increase in the urbanization rate of the registered population and deepening reform of the housing system, by accelerating the citizenization of migrant workers, expanding effective demand, opening up supply and demand channels, destocking, and stabilizing the real estate market.

Resolving real estate inventory is also one of the "four annihilation battles" of supply-side reform. In fact, in 2015, many cities in China had already issued policies encouraging migrant workers to buy houses in the city and subsidizing them with real money, including Henan, Anhui and other places.

But can migrant workers become one of the "receivers" who solve the urban real estate inventory? This is the biggest suspense in this year's agricultural policy. From the current point of view, migrant workers' willingness to enter the city is not great. The Chinese Academy of Social Sciences conducted a survey showing that the vast majority of rural migrant floating population are unwilling to convert to non-agricultural household registration; if required to hand back contracted land, only about 10% are willing to convert to non-agricultural household registration.

The 21st Century Macro Research Institute believes that the reasons affecting migrant workers entering the city mainly include whether there are sufficient jobs, whether they can enjoy urban public services such as education and medical care, whether they can bear high urban housing prices and high prices, and whether they need to withdraw from rural contracted land. If migrant workers are to be encouraged to buy houses in the city, in 2016 the state still needs to issue a series of supporting urbanization policies.

Among them, preferential policies encouraging farmers to buy houses in the city, similar to those issued in Henan, Anhui and other places, will be introduced successively; at the national level, specific policies to advance urbanization, including education, medical care and social security, will also be reflected successively.