Transfer of collectively-owned rural land revisited

As the Third Plenum of the 18th CPC Central Committee approaches, the transfer of collectively-owned rural land has once again come under the spotlight. It was reported in early Sept. that China would soon lift restrictions on the transfer of collectively-owned rural land and allow certain provinces and cities to launch pilot programs, a claim immediately denied by the Ministry of Land and Resources (MLR).

The central government is worried that the transfer of collectively-owned land may lead to social instability as it could render a large number of farmers landless. Most local governments strongly oppose free transfer of collectively-owned land, which is bound to undermine their dominance in the domestic land transfer market.

Guangdong Province, in particular the Pearl River Delta region, has been a trailblazer in exploring new land transfer practices since China's reform and opening-up. The Pearl River Delta region has pursued a dual-track approach in advancing urbanization. Alongside a government-led urbanization drive featuring land acquisition and urban expansion, local farmers have also contributed to the cause of urbanization by developing collectively-owned land and renting out buildings they constructed.

Collective ownership of rural land was established in the mid-1950s, as China worked to maintain its firm grip on land by restricting the transfer of collectively-owned land. Despite tighter regulation, local township enterprises were allowed to use collectively-owned land, which soon led to the springing up of a large number of township enterprises focused on developing and renting collectively-owned land in the Pearl River Delta region.

An underground market for collectively-owned land was thus created in the Pearl River Delta region, which fueled the region's industrialization and urbanization for over three decades, and accommodated the industrial shift from Hong Kong and Taiwan and tens of millions of migrants that accompanied it.

Villages, which benefited considerably from their land development rights, soon became a major supplier of land in the Pearl River Delta region and played a key role in the region's industrialization drive. Moreover, massive gains from the underground market enabled villages to assume social management and certain administrative functions, which turned them into powerful "baronies."

The underground market for collectively-owned land was outlawed by the revised Land Administration Law promulgated in 1998. The law stipulated that collectively-owned rural land shall not be sold, transferred, or rented to be used for non-agricultural purposes. It also stated that land acquisition is the only way to transform collectively-owned land into state-owned land which can then be used for various construction projects.

However, the outlawed market continued to prosper despite government bans and crackdowns, and now makes up half the land sales in the Pearl River Delta region. Nonetheless, redevelopment of land and industrial upgrading in the region is hindered by the fact that collectively-owned land cannot be mortgaged.

The Pearl River Delta region, which started exploring new land transfer practices 10 years ago to make better use of its land resources, is now running short of undeveloped land. Local governments in the region are striving to win central government support and get banks to accept collectively-owned land as guarantees, as part of their efforts to ensure that collectively-owned land enjoy the same rights as state-owned land, and therefore can fetch the same prices.

An official at Shenzhen's Urban Planning and Land Resources Commission said the current land management system is not in line with the reality of the Pearl River Delta region. Local governments in the region have acquiesced to local villages' role as land developers, and the mechanism of land acquisition is routinely circumvented. Rules, no matter how cleverly designed, are of no use if most people do not want to play by them, said the source.

Local officials and land experts say a breakthrough is impossible unless a consensus is reached on how to distribute revenue generated from the selling of collectively-owned land. They suggest local governments be left out of the selling process and instead get a piece of the action through taxation.