Reform of ownership is needed to unleash all the benefits of agriculture

The rural land issue in China rarely makes the headlines, but although it is largely out of sight, it is a bitterly contested area.

Every suggestion on further liberalizing the rigid system is quickly dismissed as basically a knee-jerk reaction.

Thus, 37 years after the major reform that allowed Chinese farmers to work the land on a household basis, progress is limited.

Zou Lixing, vice-president of the research institute under the China Development Bank, was reluctant to take a stand on the issue. But he has some bold ideas, at least by the standards of Chinese bureaucracy.

Like most of his peers, he believes that agriculture and farmers are still the backbone of the economy and society, even though the sector generates just 5.5 percent of GDP.

The country's modernization is unsustainable without the concurrent modernization of the agricultural sector, he said.

For that reason, he gave his new English-language book the title of China Base: County-Level Economy and Society.

He forecast that even at the end of this century, agriculture will remain the economy's pillar by some measures, with this sector employing 20 to 30 percent of the working population.

"China is not going to be like the United States, where agriculture sector workers account for just 2 percent of the population. China, with its land constraints, will not be like the US where large-scale farming prevails," he said.

That long-term projection leads to his foundational argument: land rights should belong to the tillers. The "tillers" are not necessarily individual farmers but also professional planters, farming cooperatives and agricultural corporations. Whatever they are, they should focus on farming, not real estate development, for instance.

But while those views seem self-evident elsewhere in the world, they are not the reality in China. The constitution still defines rural land as "collectively owned", which in reality, according to Zou, equates to "township government owned".

Farmers, though having a 30-year contract to plow the small plots assigned by the government, are not able to transfer, collateralize or sell those plots freely. In Zou's words, farmers' "usage rights" to the land are hollow. Local governments retain real control over the land, which they can "expropriate" as "State-owned construction land" and sell to developers at an astonishing premium.

The long-term solution, he said, is the "actualization" of tillers' usage rights. Privatization of the "collectively owned" land remains a political taboo in this socialist country, but the "usage rights" could be separated from the "ownership", with its legal status fully enshrined in the laws.

The status, he argued, should at least be equal to "ownership", so that under this protection farmers can transfer rights to other "tillers" as they wish, as long as the land is used for farming.

"After getting clearly defined rights to exploit the land, is there somewhere they can take it?" Zou asked, suggesting that the government has nothing to fear.

The problem with the "land expropriation" system, he argued, is that land is sold on a one-off basis, while the State loses the ensuing added-value permanently.

He said that to better exercise the "ownership" of the State, the central government should transfer or rent the "usage rights" of the land to developers, and use the compensation to set up a "national land provision fund".

Meanwhile, a certain portion of land could be demarcated as provincial-and county-owned land, just like in the United States where federal, state and county land coexists with private land.

Local governments in China can rely on these lands to set up their own "land funds", which could openly trade options with the national fund.

"In the old system, all local governments covet State-owned land and they expropriate the land as much as they can. The new design would allow local governments to treasure their own land while the national fund serves to ensure ensuing benefits of the land and also balance regional disparities," he said.

In summary, policymakers should have a long-term vision when making short-term policy. To modernize the rural sector, empowering the 620 million farmers with "actual usage rights" is a prerequisite.