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Land – the traditional asset but potential new aide of poverty reduction for Chinese farmers ? (Part I)

With only an average per capita of 0.07 hectare farmland, farmers in rural China are not in a favorable condition of getting better off – an ultimate objective of the central government in the short and medium term.   It is even fair to say impossible by relying on such small slot of land for attainment of the objective.

Of course there are various favorable central policies that divert subsidies to agriculture, a scale never had before in the Chinese history. Yet direct subsidy to household may help for a while, but does not address the root cause of limited self-development capacity of farmers, especially poor farmers. There are not lack of fortunate farmers who succeeded because of their entrepreneurship and having harnessed various commercial opportunities.  But making money from commercial opportunities require investment, small holder farmers may not have the ability to accumulate the required initial investment even with their life-long savings.  Many potential farmers may have not been able to demonstrate their ability due to lack of investment.

Investment comes basically from two sources: from financial support such as credit, or from selling their assets.  Land and farmer house or homesteads are the two most valuable asset of farmers.  But contrast to the sky surging property price of urban areas, farmers’ land and house only worth a penny.  Why such a difference ?  the cause is due to the policy of the government which prohibits the freely transfer of land and houses of farmers.  The Chinese law says that: farmer’s houses are not allowed to be sold to urban residents, rural land is not owned by farmer individuals, rather by the local community collectively, and is not allowed for transaction, for changing the land use purpose. Understandably the high prices of land and houses in cities have nothing to do with farmers.  

What if land is used as collateral for obtaining loans from banks ? well, due to the low value of house and land as consequences of restriction circulation, not much loan can be obtained from the Bank. In many areas the collateral only worth the crop value the land produces every year.  Worse however, the local government has the authority to take back the land through land acquisition by compensating farmers with cash equivalent to certain years of crop value or other in-kind returns. By selling acquired land to developers and for industrial purpose, local government can increase the land value significantly, such profit margin is retained by the government. For farmers, a luckier situation is that he/she got basic social security and sometimes jumped to being urban residents, but not always the case. Various unrest and social discontent reported or non-disclosed always have to do with government’s much accused land acquisition policy. 

Unless farmer’s land is allowed to transfer freely, land – the main asset of farmers will not likely be a substantial contributor to help farmers to substantially get rid of poverty.

New Developments

But there are positive developments favoring the farmers. Since 2008, the government has been testing the reform to land tenure. The basic thought was to entitle the land to individual household and create a mechanism for transfer of land under the condition of maintaining land use purpose unchanged.  The pilot in Chongqing was even more radical by linking urban land market with rural land via a warrant like certificate called “Di Piao” (land ticket), thus bring rural land to urban market in a way of quota. In Xinyang of Henan where IFAD operates a poverty reduction program, small farm land slots were combined so have removed the ridges and spaces between the individual land, thus created additional land. In Chengdu, farmers land were undergoing explicit entitlement to prepare for next stage of tenure reform. In some of the coastal more developed areas such as Jiangsu, farmers homesteads were removed to make room for more land, while farmers were given apartments in concentrated residential areas plus social secuirty coverage and basic monthly subsidy. More is ongoing with land tenure in China that appear to favor farmers...

(to be continued)

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