What are the current risk factors in rural land transfer?
The shift of rural land management in China from intensive to dispersed operation was once a tremendous historical advance; the household contract responsibility system with remuneration linked to output activated the enormous productive forces of the countryside. With the comprehensive progress and development of society, dispersed land management gave rise to problems such as low efficiency in resource allocation, and moderate-scale land management instead became the inevitable path for developing modern agriculture. Against this background, the shift of land from dispersed to intensive operation has become the prevailing trend.
By the end of 2014, the area of contracted cultivated land transferred nationwide reached 403 million mu, 6.3 times that at the end of 2007, with the transfer ratio reaching 30.4%, up 25.2 percentage points from the end of 2007. Correspondingly, on the premise that the national basic land policy remains unchanged, diversified transfer has become an effective way to once again consolidate dispersed land. In fact, rural land transfer has never stopped since the introduction of the household contract responsibility system. From small-scale spontaneous transfers among farming households to large-scale advancement under the orderly guidance of national law, more than 30 years of experience have been accumulated. However, rural land transfer is a systematic project involving every aspect of the "three rural" issues (agriculture, rural areas and farmers), bearing on the vital interests of the vast number of farmers and on the stability of society as a whole; treating it prudently and cultivating a strong awareness of risk are considerations that should be inherent in land transfer work. Judging from current practice of land transfer across the country, most land transfers have produced relatively good results, but some risk factors still warrant vigilance; if handled improperly, they may even become systemic problems.
Substituting customary practices for law, with poor standardization of transfer conduct
The land system is the basic economic system of the state. Not only does the state have strict regulatory rules for land, especially rural cultivated land, but local governments and the villages and groups where the land is located also have complex and detailed management requirements. For example, "where transfer is carried out by subcontracting, leasing, exchange or other means, the contractor shall promptly file a record with the party issuing the contract; where transfer is carried out by assignment, the contractor shall first submit an application for assignment to the party issuing the contract." In practice, the forms of land transfer have also diversified. According to the summary by scholar Cai Zhirong, there are at least 12 forms by which land transfer can be realized: subcontracting, assignment, leasing, exchange, shareholding, commissioned cultivation, auction, mortgage, land trust, leaseback and reverse subcontracting, inheritance, and gift. Diversified forms of land transfer inevitably exhibit diversified characteristics of rights and obligations. In addition, as agricultural land is an important means of production for farming households, and transfer is the exercise of an important right of disposal bearing on the disposition of major family interests, there should be sufficient evidence to prove the interests at stake. Therefore, for both the transferor and the transferee of land, apart from the statutory factual ground of inheritance, specifying in written form the important rights and obligations of both parties to the land transfer is both a mandatory requirement of law and a practical necessity for reducing disputes. However, in practice it has been found that a large number of land transfer acts are carried out merely on the basis of private oral agreements between farming households. A scholar's investigation found that in Liandu District, Lishui City, Zhejiang Province, "of all land transfers in the district, only 49% of the total area involved signed transfer contracts and written agreements, with most limited to oral agreements between the transferring parties," which is fairly representative. Situations in which no record has been filed with the party issuing the contract or the content of the written agreement is incomplete are also quite common; in some cases the agreed content is even illegal and void, a relatively common example being an agreement stipulating a land lease contract with a term exceeding 20 years. Using customary oral agreements in place of statutory standardized transfer contracts as the main method of land transfer leaves hidden dangers for contract performance and can very easily lead to disputes. When such behavior becomes a widespread phenomenon, it will, on the whole, hinder the development and improvement of the land transfer market and will also become a fuse for rural social conflicts.
Government exercising power on behalf of farming households, belittling farmers' individual property rights
The parties with a direct stake in contracted land are the farming households; transfer is merely the way in which farming households exercise their own property rights and belongs to the private-law domain of autonomy of will. Neither village committees nor grassroots governments have any lawful reason to compel or covertly compel farmers to passively transfer land. However, some local governments or grassroots organizations, in the name of attracting investment, increasing farmers' incomes, and developing large-scale agriculture, directly intervene in the process of land consolidation and, disregarding farmers' actual demands, covertly compel farmers to passively transfer land. This not only infringes on farmers' property autonomy as a whole, but also neglects the interests of some individualized farming households that are heavily dependent on land in the process of land consolidation. Such crude, overreaching practices not only fail to better protect farmers' land rights and interests, but are also highly likely to lead to conflicts at the grassroots level; once farmers' rights and interests come to nothing, the blame will also be pinned on the government, aggravating government responsibility. As early as the end of 2014, the "Opinions on Guiding the Orderly Transfer of Rural Land Management Rights and Developing Moderate-Scale Agricultural Operations" issued by the General Office of the CPC Central Committee and the General Office of the State Council pointed out that land transfer must "adhere to lawfulness, voluntariness and compensation, with farmers as the main body," and "must not violate the wishes of contracted farming households, and must not harm farmers' rights and interests," which amounts to a warning about this type of problem.
Excessively high concentration of land transfer transferees, with poor capacity to disperse risk
One main purpose of land transfer is to achieve intensive management of land, and intensification itself is also one of the risk factors. As a method of land transfer, land trusts have seen thousands upon thousands of mu transferred across the country since the issuance of a land trust in Yongqiao District, Suzhou, Anhui, in 2013. However, the land acquired through trust transfer is not directly managed by the trust company itself; it is often leased to agricultural enterprises for operation, and land rent becomes the trust income of the land transferor, thereby completing the process of capitalizing farmers' land. In practice, the land acquired by agricultural enterprises through transfer is in fact the consolidation of the land of numerous farming households, or even the concentrated transfer of land from entire villages or townships. This means that the land income of a large number of farming households is concentrated on one or a small number of agricultural enterprises, and these agricultural enterprises' obligation to pay land rent generally relies mainly on credit, with no other guarantee. For massive land transfer projects led mainly by governments or grassroots organizations, the leaders of the projects are not the actual stakeholders; once there is a lack of professional and meticulous assessment of the credit standing, debt-servicing capacity, and risk-diversification measures of the agricultural enterprises directly operating the land, or once defects of the land user are deliberately blurred in order to achieve political performance, relatively large debt-servicing risks will arise. When an agricultural enterprise encounters operational obstacles leading to cash-flow strain, or when its sustainability is compromised by other factors, the expectable interests of numerous farming households will be exposed to the risk of default. Once land rent defaults on a large scale, mass disputes among land-losing farmers will follow. Given that agriculture itself carries relatively high risks, transfer of massive areas of land should be approached with extreme caution. Concentrating transferred land in a single agricultural enterprise, regardless of its debt-servicing capacity, is equivalent to putting all of a farming household's eggs in one basket, which is itself a high-risk behavior.
Blind pursuit of scale, with deviations in government incentive orientation
The rapid advancement of land transfer across the country has mostly been carried out under government encouragement and guidance, among which fiscal subsidies are one of the more common incentive measures. However, current government subsidies display two phenomena: first, subsidies are mainly directed to land transferees, especially subsidies to ultra-large-scale enterprises, and rarely to land contractors; second, subsidy policies mostly adopt a one-off approach. This has led to some undesirable policy consequences. First, the scale of transferred land has grown larger and larger, and mega-sized agricultural enterprises receive obvious encouragement. But research shows that agricultural efficiency and productivity cannot remain positively correlated with scale indefinitely; moderate-scale agricultural production efficiency is what is optimal. Blindly pursuing ultra-large scale is not advisable. Second, although one-off subsidy measures achieve the effect of policy encouragement and play a good role in promoting investment attraction, they give rise to short-sighted behavior among agricultural producers. The purpose of some enterprises in taking in massive amounts of land is precisely to capture government subsidies and quickly lock them in. A scientific subsidy approach should be based on the enterprise's actual operating conditions, flowing steadily like a thin stream, and it is more reasonable to continuously release subsidy funds as the enterprise grows. In addition, in some places local government subsidies are advanced layer by layer, and when grassroots governments provide subsidies first they receive even larger subsidies from higher-level governments, so that grassroots governments instead benefit from the subsidies, strengthening their motive to expand the scale of land transfer. These behaviors will undoubtedly aggravate the overall risk of agricultural operations.