The separation of rural land into three rights falls into an awkward position, with the nature of the management right unclear
The central government has once again raised the "separation of three rights" and placed it at a historic height, which means that future land reform will be pushed forward in depth.
The General Office of the CPC Central Committee and the General Office of the State Council recently issued the "Opinions on Improving the Measures for Separating Ownership Rights, Contract Rights and Management Rights of Rural Land" (hereinafter referred to as the "Opinions"), which regards the parallel separation of rural land ownership rights, contract rights and management rights (hereinafter referred to as the "three rights") as another major institutional innovation in rural reform after the household contract responsibility system.
Industry evaluations say that this is a very major reform in the land system reform of recent years, and also a further confirmation of the previous land reform approach. The next step will be to continue revising land-related laws. Although the "separation of three rights" is an institutional arrangement that is more advanced than in the past, it is still necessary to face up to the difficulties beyond institutional innovation.
Two separations of land rights
Over the nearly forty years since reform and opening up, rural China has formed a basic management system of "a two-tier management system based on household contract management and combining unified and separate management," and the "household contract responsibility system" or "household contract management" has also been formally written into the Constitution. During this period, there were two separations of land rights.
Compared with the people's commune's "everyone eating from the same big pot," the labor distribution method of "hand over enough to the state, retain enough for the collective, and the rest is your own" was obviously more attractive to farmers. The first separation of rights was to separate land contract management rights from collective land ownership rights, realizing "one right becoming two rights." Previously, Ye Xingqing, director of the Rural Economy Research Department of the Development Research Center of the State Council, said in an exclusive interview with a reporter from China Business News that the essential significance of "fixing farm output quotas for each household" was to adjust the income distribution relationship among farmers, collectives and the state.
After the "separation of two rights," because the land contract management entity and the actual operator were highly unified, the drawbacks did not become exposed. However, with the in-depth development of industrialization and urbanization, large numbers of farmers have moved away, and the contract entity and the operating entity have continuously separated, making innovation in the agricultural management system increasingly urgent. In order to better adapt to the objective trend of the continuous separation of the contract entity and the operating entity, it became necessary to turn "two rights into three rights," that is, the second separation of rights, the separation of land contract rights and management rights. After a third party obtains the land management right, it only obtains the right to engage in agricultural production and operation, while the contract right is still enjoyed by the original members of the collective economic organization. The object of mortgage, guarantee and transfer is only the management right, not the contract right.
Ye Xingqing said that previously there had been relatively cautious attitudes toward land transfer. Elevating the "separation of three rights" to the level of national policy is in fact a recognition of reality and a response to future trends.
The mismatch of agricultural subsidies
Starting in 1998, the first round of contracting in various places successively expired, and the central government decided to grant farmers long-term and stable land contract rights, deciding to extend the original 15-year contract period by another 30 years.
Ye Xingqing believes that the state has already given a considerable part of the disposal rights to farmers, such as leasing, subcontracting and transferring, all of which are specific forms of disposal rights. The Third Plenary Session of the 18th Central Committee further granted farmers the power to mortgage and guarantee land contract management rights. However, the right of inheritance and the right of transaction have still not been granted to farmers.
From this, one can see a very obvious policy thread over the past 30-plus years, namely that the division of agricultural land property rights has continuously tilted from collective ownership rights toward farmers' contract management rights. Farmers' land contract rights have always been emphasized by central policies, but excessive emphasis can also cause many negative effects. For example, the central government provides large subsidies every year for "agriculture, rural areas and farmers," and these subsidies are distributed to farmers who enjoy land contract rights. This means that people who contract land but do not farm it will receive subsidies, while those who farm the land instead cannot get them. Ultimately, China's agricultural modernization needs to rely on operators, especially tenant farmers who rent land.
Ye Xingqing said that this does not conform to the original intent of subsidy policy. Subsidies must take into account the balance of interests between contractors and operators. This is because subsidies are meant to subsidize advanced productive forces and to stimulate farmers' enthusiasm for growing grain.
In the view of Gui Hua, associate researcher at the China Rural Governance Research Center of Huazhong University of Science and Technology, over many years this series of reforms has produced an absurd phenomenon, namely "finally confirming land rights into the hands of people who do not farm." In an interview with a reporter from China Business News, he said that the original intention of land system reform was "those who farm the land should own the land," and only in this way could "the land be fully utilized and things be put to full use." However, urbanization has brought about the separation of people and land, and the absurd phenomenon that people who own land no longer farm it is widespread, causing land either to be left abandoned or transferred to new types of agricultural operators. This runs counter to the original intention of the reform.
He said that people who truly farm the land do not control land resources, and people who truly farm the land do not possess land rights. This is the dilemma faced by innovation in the agricultural management system.
Difficulties faced by the "separation of three rights"
The contract right and management right, which emerged from contract management rights, in fact face awkwardness in law and in academic theory. The Property Law promulgated in 2007 defined land contract management rights as usufructuary rights, but whether the separated management right should be regarded at the legal level as a real right or as a creditor's right has not yet been clarified.
Liao Hongle, a researcher at the Rural Economy Research Center of the Ministry of Agriculture, told this newspaper that this is a very big problem, but there is not yet a unified understanding in theory.
Gui Hua also mentioned that the unclear nature of the management right is a very large institutional obstacle. Contract management rights and management rights are essentially both meant to solve the problem of use rights. If the management right is still a real right, then one thing has one right, and two real rights cannot be established on one thing. The original purpose of the reform was to allocate resources to producers, but what producers now possess is only a creditor's right, and in practice they still face the problem of lacking enthusiasm for investment, and creditor's rights are prone to default.
Gui Hua believes that this is a defect of the system. Moreover, the "Opinions" did not solve this problem and may resolve it in future revisions of relevant laws.
In addition, the "Opinions" mention that promoting the "separation of three rights" must respect farmers' wishes, not resort to coercive orders, not impose a one-size-fits-all approach, and leave the choice to farmers. But in practice, there are great differences among places. Gui Hua said that land management rights move from dispersion to concentration through the land property rights trading market and are transferred to new types of agricultural operators, but the cost of doing so is very high.
He gave an example, saying that in a village there are always those who want to farm and those who do not want to farm, and the land property rights trading market cannot unify everyone's wishes and transfer the land to large households. As a result, situations arise in which the village party secretary does work on the farmers, and there may even be forced land transfer. Otherwise, if large households are left to negotiate individually with so many farmers, they may face repeated obstruction, leading to very high transaction costs. The land property rights trading market should be free, but in reality it may not necessarily be so. Fan Ming, a professor at Henan University of Economics and Law, organized a team to conduct research and found that small-scale and small-range land transfer is generally realized by farmers through spontaneous negotiation, while large-scale and relatively large-range land transfer generally involves intervention by local governments, or at least coordination by village committees.
Regarding the problem of high transaction costs, he said that according to the team's survey, the current average contracted land per farmer household is 7 mu, divided into about 4 plots. To achieve large-scale land operation, on the one hand large farming households must negotiate lease agreements with numerous farmers, and on the other hand, because the lease term is at most the remaining land contract period, such negotiations must often be carried out. Higher transaction costs naturally limit farmers' large-scale operations. Large-scale leasing is generally intervened in by the government or village committees, but this also makes it difficult to avoid a certain degree of compulsion in land transfer, which may harm farmers' interests. If one further considers that a lease contract may be torn up by either party at any time, the difficulty becomes even greater.
In addition, it is also necessary to guard against the emergence of "new landlords." Fan Ming said that according to the institutional design, farmers who transfer their land out may already have settled in towns and cities but still enjoy contract rights, while farmers who take in transferred land will pay land rent or other benefits to these "landlords" every year. When this kind of tenancy relationship appears, farmers are also divided into two classes with opposing interests: farmers who farm the land and so-called "farmers" who do not farm the land. The question is, how should this tenancy system be evaluated, and whose interests should be protected?