China to free up rigid land supply through local government land-use trade quotas

Policy aims to help reduce the waste of land during the country’s rapid urbanisation

PUBLISHED : Wednesday, 01 February, 2017, 10:13pm
UPDATED : Wednesday, 01 February, 2017, 10:13pm

China plans to free up its rigid land supply by allowing county-level or even provincial governments to trade land-use quotas, according to the latest directive from the State Council.

The central government has initiated a nationwide quota on construction land supply for years and allocated it to different regions so that a certain amount of rural land can be turned over to construction and industrial development.

By maintaining a nationwide quota, Beijing hopes to achieve its target of retaining a minimum area of 124.3 million hectares of arable land by 2020.

By allowing different places to trade land-use quotas, China aims to reduce land waste during the country’s rapid urbanisation.

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“The land balance policy will act as a remedy to China’s fast industrialisation and urbanisation,” deputy land minister Cao Weixing said last week.

“It is poised to force the high utilisation of land and change the [land-intensive] economic growth model.”

In the new guidelines, released by the State Council last week, city or county-level governments will be allowed to buy land quotas from neighbouring regions if they fail to achieve a local balance of arable land.

Provincial governments are responsible for managing the process and set a price after considering factors such as the cost of arable land, compensation and management fees.

Meanwhile, municipalities and some provinces whose arable land targets have been affected by the construction of important projects can apply to the central government to have quotas refilled, while the pricing terms will be laid out by the Ministry of Finance and the Ministry of Land and Resources.

“It will help solve the regional imbalance and increase the land supply in developed areas,” said Zhang Yiping, a macro analyst at China Merchants Securities in Shenzhen.

As China had long regarded grain safety as one of its top priorities, a large relaxation of land supply – especially those areas that were once used for crop growing – was unlikely unless agricultural productivity improved significantly enough to lower the dependence on the existing size of arable land, he said.

Beijing is now encouraging the transfer of family farmland leases so that larger-scale land use can be made possible, and also the transfer of rural housing land – much of which has lain idle – to increase construction land supply. But progress remains slow.

Three of China’s four municipalities, including Beijing, Shanghai and Tianjin, face an especially tight supply given their small jurisdictions, sprawling residential communities and fast-growing demand for business and industrial growth.

As the government has pledged to strictly preserve arable land the annual supply of construction land is decreasing. It means provinces are vying with one another for a greater share of construction land to support their various property, infrastructure and industrial projects and economic growth.

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The national construction land quota was lowered from 612,000 hectares in 2011 to 394,800 hectares in 2015.

“The guideline is intended to open up the land market a little bit, especially for those uses involving cross-regional projects,” Hua Ruxing, a professor of economics at Tsinghua University, said.

Farmland or rural collective land needs to be converted to construction land before it can be included in any land trade quotas.

Many farmers had yet to receive land certificate – the proof of their rights over the land – so the forced conversion of land by local governments usually led to low compensation levels and major conflicts, Hua said.