The good earth

Amid a blaze of publicity in late September, Chinese President Hu Jintao visited the village in Anhui province where rural reforms began 30 years ago and announced one of the most fundamental rural reforms of the last 20 years. He told farmers that they could soon sell or transfer their land rights.

This was the latest step in a movement that began in the 1980s, when the Communist Party first awarded individual households usage rights over fields that had been communized in the 1950s. It started with a term of 15 years and was exteded to 30 years in 1993. But there was no right of transfer.

Details of the reforms were supposed to come following the plenary session of the party’s Central Committee, a couple weeks after the president’s visit to Anhui. But the meeting ended without a word on the topic. A vague announcement was later issued, merely saying famers could sell or transfer land leases.

The delay and the lack of detail are indications of how ideologically controversial the reform is. But, if it works out as suggested, the change should prove a good one. Chinese farms tend to be postage stamp-sized plots of land – labor-intensive and inefficient. Farmers who stay on their land would be able to consolidate these tiny parcels, boosting productivity and income. Meanwhile, those who do decide to cash out can do so in the knowledge that the existing informal system of land transfers has now been legitimized, hopefully making it less open to abuse. This may even see a swell in the flow of peasants following the path to the China’s cities.

This route is not without potholes, however. Will poor, uneducated farmers be pressured into selling their leases? And what about those farmers who blow their cash windfalls, find no work in the cities and have no land to which they can return?

Although these are questions that must be answered, neither the government nor the farmers are likely to move quickly regarding land reform. For now, the major immediate effect of the reform is that it could strengthen the bond between farmers and "their" land. The very existence of the transfer option means farmers are able to look on their tiny plots as an asset that can be monetized, not merely patches of dirt on long-term loan.

This bond would become even tighter if, as one report suggests, China’s leaders extend rural land-use contracts to 70 years, the same as urban residents now enjoy.

The situation becomes more difficult to predict as the stakes are raised – the precedent-setting power of alterations to rural leasehold periods would have a massive impact on China’s real estate sector as a whole. 

City dwellers, many of whom have seen the value of their homes escalate in the last 20 years, still don’t know what will happen when the leases end. Could they bequeath properties to their children or will the government take back the land or charge a higher rate for a new lease? It is in the party’s interests to prevaricate on these issues. China’s leadership needs more time before it shows its hand.