China announced a landmark economic reform aimed at raising incomes for over 700 million farmers by allowing them to "subcontract, lease, exchange or swap" land-use rights. By boosting rural incomes Beijing hopes to spur domestic consumption and offset a slowing economy.
The announcement coincided with the 30th anniversary of the first land reforms instituted by Deng Xiaoping, which helped spur China’s economic rise. Some analysts believe the new policy could potentially be of equal significance – though its implementation remains a daunting challenge.
By establishing a market for the exchange of land-use rights, farmers, in theory, would be allowed to expand plot sizes and also boost efficiency and agricultural productivity. In the future, farmers may even be able to use land as collateral for loans to raise investment capital.
Under the current laws, land is owned by the state or rural collectives and cannot be bought or sold by individuals. The vast majority of farmers have been given 30-year land-use contracts for small plots of land allocated by local officials. However, it is difficult to transfer those contracts and reform advocates say the current system is fraught with corruption.
Some analysts were expecting the move a week earlier, at the close of a four-day meeting of the Central Committee, after which President Hu Jintao announced a goal of doubling rural incomes by 2020. That no new land-use policy was announced at that time was viewed as a sign of disagreements within China’s leadership. Critics feared that reforms could create a wave of disenfranchised, landless farmers.
As part of the push to raise rural incomes, the government is also instituting a plan to create a "modern" rural financial system in which the number of rural banking institutions will rise to over 100 by the end of the year, from 61 at the end of August. The National Development and Reform Commission subsequently announced that China would increase the money it pays for grains for its national reserves as well as raise investment in food productivity.