A necessary, but small step to land reform
The likely impact of the global financial crisis on China will loom large at this week's meeting of the Communist Party Central Committee. Agricultural reform, however, is ultimately more important to the country's long-term future. The committee is expected to review an amendment to the land management law that will grant farmers more freedom to transfer non-farming land. That does not represent a radical change from the principle of equitable distribution of land, but it marks a significant liberalisation of the small-plot, household-responsibility system that replaced collectivism 30 years ago under Deng Xiaopeng's economic reforms.
The success of the household system helped end the threat of starvation as a result of the failures of collectivism and the Cultural Revolution. But the success was short-lived because of monopolistic distribution systems and other policy failures, low mechanisation and poor economy of scale. The rural-urban income gap continues to widen and many farmers no longer earn enough to meet the soaring costs of medical care and education for their children. A surplus of rural labour is driving men and women into the cities.
Now the challenge is to maintain agricultural development and food security while reforming smallholding. The issue is politically fundamental. The Communist regime owed its rise to aggrieved peasants who joined the cause of the revolution to liberate themselves from the shackles of landlords. In that sense, the communists were no different from their dynastic predecessors; they are also mindful of the fact that dynastic cycles ended because of peasant revolt.
Compared with advanced economies, the mainland still has far too many of its people - some 70 per cent - engaged in agriculture, compared with just 5 per cent in the United States. A key factor holding peasants back is the land tenure system. Since the state effectively contracts land to farmers, they cannot sell it. This prevents the consolidation of farmland for economies of scale and the development of modern agriculture using advanced technology. But only economies of scale that support greater investment in biotechnology and information technology can overcome the problem of rural productivity and the challenges of global warming and decreasing land and water supply.
Industrialisation and urbanisation have been instrumental to the emergence of modern China. As these gather pace, how to get small, inefficient farmers off the land without compromising social stability and agricultural development is a key issue, and one that is far too complex to be solved by a mere amendment to the management law for non-farming land - though hopefully, it will be a well-crafted move that paves the way for more far-reaching reforms.