Photo: Reuters
Hu Shuli
Hu Shuli

Without land reform, China cannot meet its policy goal of urbanisation

Hu Shuli says the restrictions placed on farmers' rights to their own land can no longer be justified, and sets out steps necessary for an overhaul

The deaths of three farmers in Henan , Hubei and Sichuan - killed separately while protesting against the requisition of their land - have made the central government sit up. On May 13, the Ministry of Land and Resources warned officials to enforce the rule against illegal land grabs. Meanwhile, officials in Guangdong and Chongqing are working to create a market for land collectively owned by farmers.

There is an urgent need for land reform. The new leadership has earmarked urbanisation as a key policy goal, and it cannot proceed without an overhaul of China's outdated system of land rights.

With no right to trade or benefit from their land, rural residents who move to the city live precariously

China currently uses a dual rights system: all urban land is owned by the state, while rural land is collectively owned by farmers. But while farmers have a right to use their land, they have no right to sell or develop it.

Unsurprisingly, this system has created a host of problems. With no right to trade or benefit from their land, rural residents who move to the city live precariously, and hardly contribute to domestic demand. Such a system also breeds resentment, as residents are cut off from sharing the gains of rising land prices. Moreover, restricting the trade of such a key factor of production leads only to inefficiencies.

What this means is that while farmland becomes urbanised, farmers don't. Policymakers are aware of the problems. Premier Li Keqiang , for one, has repeatedly said urbanisation should cater to people's needs. Now the government has to act on its pledge.

China must urbanise if it is to become modern. And land ownership reform holds the key to successful urbanisation. This means easing restrictions on land development; it means reforming rules for land requisition, and standardising registration for land ownership to give farmers full rights to their land. This will allow land to be freely traded in the market.

First, land requisition reform. As early as a decade ago, the government said it planned to reduce the areas of land eligible for requisition, raise the compensation for requisitioned land and allow farmers to share in any asset gain. But progress has been hobbled by the complicated fiscal and financial relationship between the central and local governments.

The government should, in line with directions set in the third plenary session of the 17th Central Committee, give farmers permanent rights to their contracted land, including the right to sell it or use it as collateral. Secure land ownership is the foundation of China's long-term stability.

Second, urban and rural land should be equally valued, allowing their free trade in a single market. This was a point made by the 17th Central Committee. The authorities should learn from the experiences of pilot projects to create a market for farmland in places such as Guangdong, Chengdu and Beijing, and allow collectively owned rural land to be developed for industries, services and housing.

If farmers are given a stake in their land's development, including some say in setting the price and other terms of trade, it would mean more stringent oversight of the use of the land. And protecting people's land rights would help reduce the number of their land disputes with local authorities, thus fostering social harmony. The proceeds from land sales could also become capital to fund the farmers' move to the city.

Moreover, having more land on the market would mean more choices available for industrialisation. It would also encourage the use of idle land.

Besides, such reform is good for an overhaul of fiscal management. As land becomes more expensive to requisition, local governments will be forced to rely less on revenues from land sales and seek other sources of income.

Third, the law should be revised soon to allow a single registry for both urban and rural land.

The National People's Congress Standing Committee has put revision to the Land Management Law on its agenda. In fact, the revision was to have taken three years, but when the draft law was submitted to the NPC at the end of last year, it was returned for further revision as only minor changes were made.

No doubt any change would be contentious, given the fierce debate the exercise has aroused so far. But it's clear a major overhaul is in order, and the amended law should incorporate the lessons of the recent land reform initiatives of the various local governments.

The central government has made it clear that farmers' rights to contracted land should be registered and certified within five years, while the registration and certification of their right to their land of residence should be launched as soon as possible. The State Council's reform blueprint has also made it clear that all assets of land and property should come under a single registration system.

Now's the time to speed up reform. The government must strengthen safeguards for property rights, and overcome vested interests to lay the legal foundation for rural-urban migration.

This article appeared in the South China Morning Post print edition as: Without land reform, China cannot meet its policy goal of urbanisation