Now for the agricultural revolution

October 25, 2008

Wang Gui Shan, a 60-year-old farmer, has modern China's complicated history of land ownership in a drawer. Carefully wrapped up in an old cloth are the deeds and titles documenting his family's claim to land they have farmed for generations, through war, invasions and revolutions.

The documents span the first grant of land to Wang's family from the short-lived republican government that took over in 1911 after the fall of China's last imperial dynasty to 2002's official green book, acknowledging his rights to use the land where he grows apricots and corn. They include a colourful certificate depicting a young Mao Zedong framed with corn stalks and fragile rice-papers inked in traditional Chinese characters.

Over the years, Wang's plot of land has waxed and waned in size from two to 15 mu (about one hectare).

Like other farmers in Yanqing county, a relatively prosperous farming area 90 minutes' drive west of Beijing, Wang hadn't heard of what state media has billed as China's most radical land reforms in 30 years when the Herald visited this week. He is not alone. The implications of the Government's announcement that it will give rural residents a greater say in what can be done with their land are potentially enormous but so too are the challenges the reforms seek to address.

Under the Chinese constitution, rural land is owned by village collectives but farmers have 30-year contracts giving them the right to farm the land and keep the income. They cannot sell their plots outright, use them as collateral for bank loans or technically lease them to other parties. They have largely been locked out of a fair share of the wealth generated by China's rapid urbanisation, which has depended on the conversion of farmland into industrial and commercial uses and the mass migration of peasants into cities.

The government of Hu Jintao, anxious about continuing unrest from the nation's estimated 750 million farmers, who have been left behind as China has become the world's third-biggest economy, has unveiled reforms that give rural residents greater rights to lease or otherwise trade their land, effectively ending the monopoly enjoyed by village and local government officials.

State-run media compared the decision to the truly profound reforms of about 30 years ago, when Deng Xiaoping broke up the disastrous communes and returned responsibility for farming small plots to individual farming families, the so-called "household responsibility system", which restored agricultural productivity and allowed China to feed itself again.

The new reforms seek to improve agricultural efficiency by encouraging larger farms that can be mechanised. Farmers could use the profits from leasing their land to others to set up their own small businesses or free them to seek work in China's rapidly growing cities. The Government has pledged to double rural per capita disposable income to $US1200 ($1850) by 2020 and relax controls that at present deny farmers who migrate to cities access to health, education and other social security benefits.

Last year's landmark Property Law, which put private property on the same footing as state-owned property, sought to reassure China's millions of newly affluent urban residents, who have flocked to buy high-rise apartments since an urban real estate market was created in the late 1990s, that the state would protect their assets.

This new land decision is aimed at another potentially destabilising factor - quelling seething social unrest within the countryside, much of it caused by land disputes in which corrupt officials, in collusion with business people, have seized farmers' land without fair compensation. China's stellar growth over the past 30 years has lifted millions out of poverty but has also created the biggest gap between rich and poor since 1949, with rural residents the biggest losers.

Professor Andrew Watson, of the University of Adelaide's School of Economics, said previously farmland owned by village collectives (on behalf of farmers) had to be converted to state-ownership before it could be legally onsold for non-farming purposes. Because the compensation payable to farmers was capped by law, usually at 30 times' average annual farming income, village leaders and other local officials could effectively gain control of farmers' land cheaply and then sell it to developers at a huge profit. He cites the Central Party School economist Zhou Tianyong as estimating that about 9 trillion yuan ($2 trillion) of value has been accumulated by the industrial and commercial sectors from farmers through this mechanism.

"Not surprisingly, the [old] policy has been under debate for some time. The World Bank, AusAID and others have been supporting work on this land issue; there is a need to make it fairer [and] more transparent," he said.

Dr Sally Sargeson, of the Australian National University's Contemporary China Centre, said the latest decision was of great significance: "At the moment most of the capital has been captured by lower levels of government, to the detriment of villagers who haven't been in a position to negotiate a fair price."

Sargeson said that in 2002 in the Jianggan district of Hangzhou city, one of China's second-tier cities near Shanghai, villagers were receiving what at first seemed a remarkably high level of compensation - 200,000 yuan per mu of land, whereas farmers in more remote areas of Zhejiang province were receiving just 8000 yuan per mu.

Even 200,000 yuan was hardly a fair return to farmers, as the final sale price of the land, once it had been reclassified as state land and made available for non-agricultural purposes, was several million yuan a mu - with the government officials and the developers reaping the biggest share of the profits.

Watson and Sargeson said concerns that farmers could lose their land and be left with no means of support were legitimate. But they said that under the present system an estimated 40 million farmers had already lost their land due to corruption and other abuses. "So it is very, very significant in terms of changing the political dynamic between local government and farmers," Sargeson said.

Li Zhiying, a rural activist involved with several recent land protests on behalf of farmers, also welcomed the reforms but warned there was much more to be done. He said reformists within the Government had won this round against conservatives who oppose any weakening of collective ownership, successfully arguing that the abuse of the old system "gravely threatens the relationship between the Communist Party and civilians". Li said Beijing was also hoping that by empowering farmers, they could help central government better control local corruption and boost domestic consumption, especially given the global economic slowdown, by giving farmers a fairer share of the profits.

"Basically it is a victory but it could just be a victory on paper if these people do not continue efforts to carry out the policy. Unlike in democratic societies where [where] when parliaments pass laws it is done, in China you need also to make big efforts to implement the law," Li said.

"In terms of organised power, farmers can't compare to these powerful interest groups. Even in rural areas where farmers' use-rights are clear, their rights have sometimes been violated. Officials or developers will find new ways to cheat farmers."