But under a one-year trial, eight rich municipalities and provinces, namely Guangdong, Zhejiang, Jiangsu Beijing, Tianjin, Shanghai, Anhui, and Chongqing, will also be allowed to use “permanent arable land” for development.

Local authorities, though, are still subject to annual quotas for land use and farmland protection.

“This is undoubtedly a very important reform,” said Yao Wei, chief China economist from French Bank Societe Generale. “The intention, first and foremost, is to improve the efficiency of land uses … and one of the outcomes would be more land supply [for urban development].”

In China, all land is publicly owned, but in reality, local municipal authorities control urban land resources, while farmland is collectively owned by farmers.

China officially requires 120 million hectares (297 million acres) of arable land to allow the country to be self-sufficient, but the rigid land management system is seen as increasingly out of touch.

In China’s more affluent areas, including Shenzhen and Shanghai, where land for new factories and office buildings is increasingly scarce, they still must maintain a significant area of land for farming. Shenzhen, for example, must maintain at least 4,288 hectares (10,600 acres) of farmland, including 2,000 hectares of permanent arable land.

Millions of Chinese farmers are believed to have lost their land, willingly or unwillingly, as part of China’s urbanisation, according to reviews of government data.

Qiao Shitong, a professor of property and urban law at the University of Hong Kong, found that local governments “illegally” took away land from 100,000 to 500,000 farmers every year between 2005 to 2015.

“Land use control has always been an important policy tool in China’s economic system, as important as monetary policy,” Qiao said.

The latest relaxation of the restrictions could help local government to realise their infrastructure spending plans, with at least 20 provinces having already published details of projects with a combined value of 7.5 trillion yuan (US$1 billion) for 2020.

Previously, the land management system also treated all areas the same, leading to inefficient land distribution between coastal and inland provinces, with the new policy indicating a strategic change in China’s view of urbanisation.

After 2003, Beijing distributed more land to the poor middle and western provinces, while tightening the supply in the east cost to achieve a balanced growth across China. But the policy only led to the creation of ghost towns and industrial estates in less developed inland provinces and surging house prices in wealthier areas in the east.

“My concern is that this policy could encourage places particularly those that have net outflows of people to overbuild to boost fixed asset investment and local [gross domestic product]. If that happens, it could lead to a wave of wasted buildings again,” said Lu Ming, an economics professor from Shanghai Jiao Tong University.

A study, led by Tsinghua University using mapping data from Baidu, China’s search engine, found that from 2016 to 2018, the population of a third of more than 3,000 cities – defined by economic concentrations not by administrative boundaries – dropped.