What Is Land Transfer? Analyzing Its Relationship with Agricultural Investment

Since the beginning of this year, the theme of reform has consistently been a focus of market attention, and land transfer is an important part of that reform theme. Like other reform themes, policy momentum and expectations are closely tied to changes in the land transfer sector and individual stocks. In September 2013, benefiting from expectations of land reform and Hainan taking the lead in breaking new ground, land transfer and the Hainan sector became the market's biggest hot spots. Shenyin & Wanguo pointed out that for the new round of reform, mixed-ownership reform of urban state-owned enterprises, rural land transfer, and the new urbanization of county-level economies will be the three biggest highlights, and also where the reform dividends are concentrated.

Transfer of land use rights refers to farmers who hold land contract-management rights transferring the land management right (use right) to other farmers or economic organizations, that is, retaining the contract right while transferring the use right. By nature and use, China's land can be divided into three major categories: agricultural land, construction land, and unused land. Land transfer mainly involves agricultural land and rural collective construction land under construction land.

With the closing of the Third Plenary Session of the 18th Central Committee in November 2013, the land transfer policy officially marked its opening chapter. The "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform" adopted at the plenary session mainly involved two aspects of the concept of agricultural land transfer. On the one hand, accelerate the building of a new type of agricultural operating system; on the other hand, give farmers more property rights. Subsequently, the Anhui Provincial Government issued the "Guiding Opinions of the People's Government of Anhui Province on Deepening the Pilot Work of Comprehensive Rural Reform," deciding to carry out pilot work on comprehensive rural reform in 20 counties (districts) including Guoyang County and Yongqiao District. Affected by this, land transfer concept stocks rose sharply again, with related land transfer concept stocks in the Anhui region and the Hainan region performing especially prominently.

Since the beginning of this year, the pace of introducing policies related to land transfer has further accelerated. From the 2014 No. 1 Document "Several Opinions on Comprehensively Deepening Rural Reform and Accelerating Agricultural Modernization," to the "Notice on the Division of Relevant Policy Measures for Comprehensively Deepening Rural Reform and Accelerating Agricultural Modernization" issued in March, and then to the April "Notice of the State Council Approving and Transmitting the Opinions of the Development and Reform Commission on Key Tasks for Deepening Economic System Reform in 2014," a series of policies all reflect the determination at the policy level to advance reform of the rural land system. On August 11, 2014, the "Notice on Further Accelerating the Work of Confirming, Registering, and Issuing Certificates for the Use Rights of Homestead Land and Collective Construction Land" was issued, emphasizing acceleration of integrated confirmation, registration, and certification of rural housing and land, further clearing obstacles for advancing the land transfer policy.

Recently, some media reported that the "Pilot Plan for Agricultural Land Entering the Market," drafted by the Ministry of Land and Resources, the Ministry of Agriculture, the Central Bank, and others, is being prepared for submission to the Central Leading Group for Comprehensively Deepening Reform. Land use rights may be granted, leased, contributed as equity, transferred, and mortgaged, with the term of use equal to that of state-owned construction land use rights for the same purpose. At the end of October, the Ministry of Agriculture, leading the National Development and Reform Commission, the Ministry of Finance, the Development Research Center of the State Council, and others, will jointly convene a large conference themed on agricultural reclamation reform. While accepting reform opinions and suggestions from other ministries and commissions, the Ministry of Agriculture will deploy a deep-level reform within the national agricultural reclamation system. At present, the Ministry of Agriculture has already formulated an agricultural reclamation reform plan. The specific path is to focus on three major agricultural strategic industries, namely grain, natural rubber, and the dairy industry, and explore a plan to cultivate international major grain merchants. The development goal is that by 2020, the annual commercial grain produced on agricultural reclamation land should reach 100 billion jin, meeting about 35% of the staple food needs of the domestic urban population, while cultivating 2-3 agricultural enterprise groups to enter the Fortune Global 500. Among China's several major agricultural reclamation areas, Hainan Agricultural Reclamation is also relatively fast in "going global" and is worth close attention.

The reason land transfer is favored by the market is closely related to its positive significance for the economy. First, land transfer can improve the market's efficiency in allocating land, while meeting the growing demand for land from urbanization and industrialization and also effectively protecting arable land. Second, land transfer can also protect farmers' lawful rights and interests, enable them to obtain more land value-added gains, improve the income distribution structure, and raise the level of domestic demand. Finally, land transfer can also improve the comparative efficiency of agricultural production and is the necessary path to realizing agricultural modernization as soon as possible.

As reform expectations gradually heat up, the market's expectations for deepening the reform policies of the land transfer system have also recently risen further. On the basis of the 28 pilot areas for land transfer system reform at the end of last year, substantive breakthroughs are also expected in areas such as land (forest land) entering the market and securitization, mortgage of land management rights, and market-based trading policies for rural homestead land.