China's farmers can bank on land
By Verna Yu

HONG KONG - Thirty years after the launch of economic reforms in China, the government will to all intents and purposes privatize farmland, making a last departure from the state monopoly of socialism.

The 17th Central Committee of the Chinese Communist Party (CCP) begins its four-day third plenary session today to endorse new policy principles about rural reforms with a focus on allowing the country's 800 to 900 million farmers to freely transfer their land-use rights - effectively letting them freely trade their farmland.
The major policy change was revealed ahead of the meeting of the party elite by President Hu Jintao, who is also general secretary of the CCP, on September 30 when visited Xiaogang village, in the eastern province of Anhui.

Hu was quoted by state media as saying that farmers will soon be allowed to transfer their land-use rights. "Not only must the current farmland contract system be kept stable and permanent, we must also grant farmers more rights and protect their rights to contract and manage land," Hu was quoted as saying. "At the same time, if farmers want to, we'll allow them to transfer land contracts and management rights through various means to appropriately develop larger-scale operations."

In plain language, farmers will be allowed to freely dispose of farmland they have contracted from the government, either re-contracting it to others or selling it.

Hu stopped short of using the term "trading" or "selling" to refer to the transfer of land-use rights because privatization of land is not permitted under the Chinese constitution, which stipulates all land resources are owned by the state. Because of this, the public ownership of land has been seen as the last symbol of socialism.

But this constitutional stipulation has been largely bypassed in cities. China began to privatize housing in cities in early 1990. One of the major obstacles was how to privatize land. In this regard, the colonial practice in Hong Kong was borrowed. There, all land belonged to the crown but the subjects could rent land from the crown for a certain period, say up to 99 years.

The practice continues after the handover in 1997 under the "one country, two systems" agreement between China and the UK, with the role of the crown replaced by the government of the Special Administrative Region (SAR). So in mainland Chinese cities today, the "buyer" of a house or an apartment only rents from the state the right to use the land on which the property is built for a certain period (for residential housing, normally 75 years). When the owner sells his house, he also transfers the land-use right to the new buyer. In this sense, urban land, or the rights to use it in legal terms, is tradable.

But farmers, who can contract land to farm for up to only 30 years, are not allowed to transfer their land-use rights or use them as collateral for loans. Local governments can at any time take back farmland "on behalf of the state". Requisition from farmers without adequate compensation has been the main cause of mass protests in recent years.

To enable the new policy to work in practice, the party policy-making meeting is expected to decide on whether to extend the period for a farmland contract, perhaps to 70 years. So, as long as a farmland contract is valid, the rights of the farmer concerned are fully protected. Under the new policy, whoever wants to acquire farmland must negotiate with the owner(s). In other words, farmers will enjoy the same rights to use their land as city residents.

It is by no means coincidental that He unveiled the new policy principle in a visit to Xiaogang village.

In early 1978, 18 farmers in Xiaogang village including local party members risked their lives to sign a secret agreement to divide People's Commune-owned farmland into pieces for families to farm. At that time, this could be seen as "counter-revolutionary" and undermining socialism - a serious criminal offence. Their move, however, was supported by paramount leader Deng Xiaoping, who had just made his third and final political comeback.

And at the end of that year, the CCP's then 11th Central Committee held its third plenum to endorse Deng's proposal to launch the economic reform and open-door policy. Xiaogang's experience was soon promoted to the whole country with all farmland contracted to peasant families under the so-called "family responsibility system".

Xiaogang thus is seen as being in the vanguard of economic reforms, and the secret agreement with the red finger prints of the 18 farmers is now in the Museum of the Chinese Revolution in Beijing.

Hu's decision to use the third plenum of the 17th Central Committee, in a year that marks the 30th anniversary of reform and opening up, to set the new land reform policy suggests he wants to show that a major breakthrough can be achieved to continue the endeavors started by Deng, analysts said. Politically, ideologically and economically speaking, the virtual privatization of farmland is certainly a breakthrough.

The current farmland management system has led to widespread social discontent. China's economic boom has fueled hunger for land for industrial and commerce use, and without secure land rights millions of farmers across the country have been evicted from their land to make way for roads, factories and luxury housing, often with very little or no compensation. Rural plots are often expropriated by local officials for lucrative sales to property developers.

China's leaders are well aware of the problem and have acknowledged that illegal land seizures are a major source of instability in the countryside. According to official statistics, there were 74,000 "mass incidents" or public protests in 2004, with 3.7 million people taking part. In 2005, the number of protests with at least 15 participants totaled 87,000, growing to 90,000 in 2006. Many such protests have been sparked off by unfair land requisitions.

The CCP realizes that, unless it acts to protect the rights of farmers, the legitimacy of its rule could be challenged, said Beijing-based historian Zhang Lifan, a former researcher with the Chinese Academy of Social Sciences (CASS).

"From a historical prospective, the rise and fall of every dynasty has been related to farmers and land," Zhang said. This policy "will be conducive towards stabilizing the countryside and winning the hearts of farmers".

Many Chinese have questioned the inequality that resulted from the economic reform over the past three decades - while bringing the country an unprecedented amount of wealth, it also created a vast rich-poor gap, especially between cities and the countryside.

Official data from 2007 showed China's Gini Coefficient, which measures the inequality of income distribution, has surpassed the warning level of 0.4. The poorest 20% of the population own 4.7 % of the country's wealth, while the richest 20 % possesses 50%, according to United Nations figures.

The new farmland policy will finally enable China's impoverished peasants to profit from their land, analysts say.

"The capitalization on farmland will ... let farmers benefit from their land's industrialization and urbanization," said Hu Xingdou, professor of economics at the Beijing Institute of Technology. "Profits from land have been going to property developers and officials, but [under this policy] the income would go to the farmers."

Uneven distribution of wealth between the cities and the countryside also means China has been unable to develop its rural economy and stimulate domestic demand for its goods. Lu Xueyi, a retired professor at CASS and an expert in rural issues, said the inefficient production methods in the countryside must be changed to revive internal demand.

"There is a lot of demand in the countryside but 70% of the population is too poor to afford things like television sets, clothes, and so forth," he said. "Only when reform is carried out and rural income is increased and development speeds up, will you generate internal demand."

Rural labor constituted 40.8% of the country's total workforce last year, yet agriculture accounted for only 11.3 % of the country's total gross domestic product (GDP) of 24.66 trillion yuan (US$3.61 trillion), he said.

With up to 900-million rural population sharing this 11.3% of national wealth, "how could peasants not be poor? How can they survive unless reform is implemented?" he asked.

Even so, analysts said the implementation of the new rural land reform policy will need new legislation and matching administrative measures to adjust the red tape that surrounds Chinese people concerning where they are born and work. Otherwise farmers would still be exploited and unable to benefit from their land.

For example, even if a farmer manages to sell his land in the countryside, if the household registration system does not give him the full rights to work and own property in the city he then lives in, he would still have no protection for any enterprise or investment he took part in using money released from his land rights.

"If the political and legal system offers no protection, I would doubt the [new policy's] effectiveness," said Zhang Lifan.

Verna Yu is a journalist based in Hong Kong.