Down On The Chinese Farm -- Property Rights/Privatization Redux
China law does not allow for private ownership of land, though there has been much talk over the years of changing this. Currently, urban land can be leased for 70 years and rural land for 30. There is constant talk of granting privatizing China's farmland to alleviate rural poverty, but, as expected since such reforms are like daggers to the heart of Communist ideals, such reform talk creates much backlash.
Newsweek's just published international edition has a very thoughtful article, entitled, "Down on the Farm: A rural crisis is forcing Beijing to reconsider the idea of private property," on the role of private property in China's rural areas and in China's political arena. Written by Melinda Liu and Jonathan Ansfield, the article nicely analyzes how privatization of land in China will help its farmers, but will not be enough to solve China's problem of far too little farmland per farmer, no matter who owns it. The article also points out the various dilemmas the Chinese government faces in privatizing China's rural land.
My own view is that Beijing is (as is frequently the case) torn between wanting to continue mollifying its rural party apparatchiks who form the backbone of Communist Party support and wanting to do right by its peasants so as to calm their anger and stave off potentially massive political problems. Privatizing farmland will reduce the power of the China's rural Party cadres, but it will also win friends among the farmers themselves, who as this article so aptly notes, are the ones who "propelled Mao Zedong's peasant armies to power in 1949." Obviously difficult questions, but my sense is that Beijing is going to wait until things get worse before finally deciding farmland privatization is necessary to make things better.
The Economist's View Blog and Kruse Kronicle Blog have interesting posts on the privatization of rural land.
Comments (9)
Read through and enter the discussion by using the form at the endJoseph Wang - May 14, 2006 8:53 AM
IMHO, privatizing rural land is a horrible idea.
Right now, if you have a rural residency certificate, you have a legal right to a portion of village land. What this means is that if the village government takes land out of the village pool, all the villagers are affected, and if the compensation is not high enough, you get a riot.
If you divide the village land into freehold plots, then what can happen is that the local government can use divide-and-conquer tactics to gain control of the plots one at a time. The other problem is that right now, a peasant can move to the city, and if things don't work out, they can move back and reclaim their land. This serves as a social safety net.
If you change things to a system of freehold estates, then you create a class of landless proletariat, and you need to create some sort of alternate social safety net for them.
One other thing is that there isn't much desire on the part of farmers for freehold estates. The riots have been about the level of compensation as rural land has been turned over to industry. Also, the riots have tended to occur in richer provinces. In the poorer provinces, rural land isn't worth very much, and changing things to freehold estates will cause the peasants to lose control of the land while it is still very cheap.
peterpaul - May 14, 2006 4:54 PM
I second you J.W. Without a social safety net the farmers will end up in an even more severe situation.
The urban poor can rely on the state for some form of compensation. I believe it is in the 300 rmb range in Shanghai - not much, but enough to keep from starving.
The peasants must have their own "safety net". As most villages could probably not afford cash payouts, land remains the only option (the only thing that lasts?). I believe that any action that removes their last line of defense without other proper safeguards is going to end badly. A group of poorly educated people with few rights and no land have the potential to create real trouble as they would have little to lose...
China Law Blog - May 14, 2006 10:27 PM
Mr. Wang/PeterPaul --
Thank you both for checking in.
I do not know this issue well enough even to have a position on whether China ought to privitize its farmland. I generally favor privatization, but I am also well aware of how destructive privitization can be if done too soon or too badly, as in Russia.
But, my question for the two of you is how will the privatization of rural land in China increase the need for a rural safety net?
Duncan - May 15, 2006 3:31 AM
Seems to me the key problem is not "ownership" but the fact that rights to land usage are not currently well defined, are non-transferable, and are prone to sudden and unpredictable readjustment (for example redistribution exercises that are exercises designed to ensure all migrant workers away from the village lose their shares). With reliable and transferable "usage" rights privatisation would not need to take place - just think of places like London where very few people own their homes outright, but buy usage rights via long term leaseholds.
China Law Blog - May 15, 2006 7:06 AM
Duncan --
Thanks for checking in. I like your asessment, but I would also mention that an additional problem with Chinese rural land rights is that so many of the rural leaseholders are unaware of their rights and so many local government officials like it that way.
peterpaul - May 15, 2006 8:57 AM
Let me also state that I am a firm believer in private property rights. One should have the right to own land and improve on it so long as one does not violate certain community laws and regulations (I don't agree with all of the community regs/laws I have read about, but one has to draw a line in the sand somewhere!).
That said, I think there is a huge need for a social safety net in the countryside. The population is largely undereducated and unaware of its rights. To make matters worse, the spectre of supporting the older generation, increasing school and medical costs, low income and chances for advancement, and the limited nature of farming small plots all help to conspire to make the peasants situation more than difficult.
It is with this in mind that I believe a social safety net is necessary - and for cash strapped local governments land is the only thing of value. Cities have some extra cash from an expanded tax base to pay some sort of welfare for those in need. There is no such (or very little such) payment for most of the peasants in rural areas - there is no economic activity capable of paying enough to the government to cover basic expenses. But the countryside does have land. It can provide food to those willing to work or a small profit to those willing to rent out their long term (30 year) land contracts.
Privitization will increase the need for a rural safety net in that it will attack the very basis of the government social safety net in the countryside - the land! If people are capable of selling their land they can part with the only plank (aside from family or begging) they have left to stand on. And it is my belief that there are a great many fools who would sell their land and be left with nothing. As an American I have had a portion of my wages taken away and set aside by the government for my retirement for sometime. While I feel I could invest that money better myself I am willing to let it be taken in a show of support for a system that aims to protect the vunerable and poor - which is exactly the function the land provides in the countryside.While people can rely on family in times of need (as reliable as that can be) the government has a duty, obligation, and debt to those it serves to help protect.
China Law Blog - May 15, 2006 9:22 AM
Peterpaul -- Thanks for explicitly drawing the linkage between the land being held by the rural governments and the impact that has on the safety net. I suspected this was what you and Mr. Wang were getting at, but I just wasn't sure.
Joseph Wang - May 15, 2006 11:22 AM
The connection between land and safety nets is that right now if a rural migrant goes to the city and things work out badly for him or her, he or she has the option of going back home and farming again. As long as they have a rural residency permit they are legally entitled to a piece of farmland that they can farm. They won't get rich farming, but they won't starve.
If you get rid of this and you don't introduce something in its place, then things can get very bad. Rural peasant goes to the city, can't find work, and then they are stuck in some shanty-town with no place to go.
(Ever wonder why Beijing and Shanghai don't have those huge shanty-towns of unemployed typical of Latin America? It's because people who don't find work in the cities, go home because they have something to go back to.)
I should note that I don't know of anyone in China that is in favor of privatization of rural farmland. The arguments about privatization are over industrial assets, which is different. Also helping peasants secure more rights over land and make them more aware of the rights they have is something that does have a lot of support.
The standard argument for privatization is that it makes things more efficient, but in the case of Chinese agriculture, too much efficiency causes some huge problems.
China Law Blog - May 15, 2006 4:19 PM
Mr. Wang --
I had never thought about the lack of shantytowns, but now that I have, what you say makes sense.