OREANDA-NEWS.  Rural workers in the fields in Mengcheng county, Anhui province, which operates the land rights transfer system. 
When Shi Quan arrived in Fengyang, Anhui province in 2006, he immediately sensed a business opportunity.

Shi realized that the system whereby farmers worked scattered plots of often unproductive land was outdated, so he set about changing it.

The recent graduate persuaded a group of farmers in Dawangfu, a village in Fengyang county, to rent him the rights to their adjoining fields and began growing greenhouse vegetables, flowers and garden plants on an extended scale. His intensive regime and his increased use of new technology proved far more efficient than the old system, increasing output by as much as 500 percent.

"Modern agriculture requires the integration of resources and management of scale," he said. "And land is the most important resource of all."

The idea quickly caught on. Within a short time, businesspeople and some of the more enlightened villagers started renting the rights to forgotten or fragmented pieces of land in the village, located 500 kilometers southwest of Shanghai.

Shi and his fellow entrepreneurs were pioneers. A pilot program was launched later in some parts of Anhui and a number of other provinces that allowed farmers to swap, rent out or subcontract work on their land.

In 2008, the authorities in Fengyang set up the Fengyang Rural Land Transfer Trading Center to facilitate the transfer of land-use rights and legitimize those that had already taken place. Yiwu in Zhejiang province, the Pinggu district of Beijing and the Wuqing district in Tianjin followed in Fengyang's footsteps and established similar agencies.

The program is now regarded as a potential major reform in the agricultural sector and is seen by some as a successor to the "household contract responsibility system", which began in Xiaogang - also in Fengyang county - in the late 1970s and was quickly adopted nationwide.

The household contract responsibility system allowed families to run farms independently, even though the land remained in the ownership of the rural collective. But as time goes by, the once efficient system has proved it's not perfect. The farming practice based on individual households has low efficiency and cannot meet the demands of modern agricultural development. Farmers working individually on a small plot they contract fail to compete with big professional rural groups that work on large pieces of land.

Urban-rural divide

The booming urban property market has been one of the main engines of China's rapid economic development, but the rules governing ownership of rural land have remained unchanged for decades, a state of affairs that has hampered development in the countryside.

On Nov 12, Anhui issued a detailed directive that pledged to extend the pilot program across its 20 counties and districts to establish a unified rural land market.

The directive came at the same time that a 60-point decision paper was approved at the Third Plenum of the 18th Communist Party of China Central Committee. The decision promised to accelerate the building of a new system of agricultural operation, based on a mix of farms run by families, collectives, cooperatives and businesses. No timetable has been disclosed, but farmers will be given greater property rights and a market for the trade in those rights will be established.

"The decision can be seen as one of the most progressive moves to develop the rural economy and close the widening urban-rural wealth gap in the 35 years since the third plenary session in 1978," said Zhao Kun, a senior official at the Department of Rural Economic System and Management at the Ministry of Agriculture.

"Under Chinese law, all urban land is owned by the State, while rural land is under collective ownership. That means farmers have the right to use the land, but no right to sell or develop it. The dual nature of the urban-rural structure is one of the main obstacles to integrated development and every effort must be made to allow farmers to participate in China's modernization," he said.

Zheng Fengtain, vice-dean of the School of Agricultural Economics and Rural Development at Renmin University of China, told China Economic Weekly in November, "Land is a farmer's biggest asset, but the restrictions that prevent the market transfer of rural land have not only damaged farmers' rights, but also resulted in problems in land acquisition and sent the prices of land and property soaring."

According to Zheng, the productivity of land is a fundamental factor in a country's overall economic development.

"If rural land under collective ownership were put on the transfer market, it would definitely bring abundant business opportunities to the rural areas and related industries. But the precondition is that we have to understand how to divide the interests fairly and transparently and provide a safeguard against the abuse of local government power," Zheng said.

Double income

Guo Zefeng, deputy chief of Fengyang's land and resources bureau, said it's crucial that the land-rights transfer system is adopted soon to aid the development of the agricultural sector. His department has encouraged the transfer of rights from farmers to professional farming companies.

"The rights to some 2,533 hectares of farmland have been transferred since the Fengyang Rural Land Transfer Trading Center was established. The center provides information on both the demand for, and supply of, land and helps to standardize the transfer process. That can prevent the sorts of disputes that can arise from oral consent or unofficial agreements," he said.

The nonprofit center, which offers its services to farmers free of charge, also provides accurate geodetic surveys of land to be transferred and ensures that the new rights holders do not use it for non-agricultural purposes.

The initiative has seen a large number of competitive groups spring up in Fengyang, according to Guo. The Huiyuan cooperative, which rents the rights to 87 hectares of land from 285 rural households in Guantang township, grows marigolds for sale in the nation's flower markets and employs around 400 local people. Meanwhile, the Xinke cooperative plants Chinese herbs on the land it rents from 31 households in Fengyang's Wudian township, earning annual revenue of 5 million yuan (USD 815,000) and employing 150 workers.

The program has already proved beneficial to some rural residents. Wang Jiayi, 61, a Dawangfu resident, is one of the main breadwinners for his family of five. He lives with his wife and a grandson in the village, while his son and daughter-in-law are migrant workers who live and work in a nearby city.

Several years ago, Wang leased the rights to 0.065 hectares to a cooperative, which specializes in greenhouse vegetables, for about 600 yuan per year, and earns an extra 1,000 yuan a month tending broccoli, peppers and other vegetables for the cooperative. He and his wife also work 0.2 hectares of land independently and can earn as much as 3,600 yuan a year by cultivating wheat and rice.

Land as collateral

"More farmers will benefit from the rural land reform and their incomes and standard of living will improve hugely," said Qin Fu, director of the Institute of Agricultural Economics and Development at the Chinese Academy of Agricultural Sciences.

"The decision on rural land reform is an attempt by the central government to protect farmers' property rights and raise their incomes," he said.

Qin explained that although the annual growth rate of rural residents' incomes has overtaken that of urban residents in recent years, the low base from which they started means that the increase hasn't narrowed the income gap between the two groups. Instead, that gap is continuing to grow.

"When farming doesn't provide farmers with a higher income, the money they can make from their property becomes crucial to their survival. The decision to allow land-rights transfers is an attempt to increase farmers' incomes by allowing the sale, lease and demutualization of rural land," said Qin. He added that moves are underway to establish the identities of all land rights holders nationwide, a task that should be completed by 2015.

He warned that the reform should be carried out gradually, because the relationship between existing rural land and property rights is complex and it will take time to iron out the discrepancies between them.

While farmers outside the pilot areas are not allowed to trade their land, the law allows local governments to acquire the land for public use after paying compensation to the rights holders. The governments can then legally change the definition of the land use and transfer the title to real estate developers at a substantial profit. The practice has become a major source of revenue for some local governments.

"We need to listen to the farmers' opinions about land reform, but that will take time. Also, more pilot programs should be established in some provinces so the authorities can gain experience of operating them and reduce the obstacles to their implementation nationwide," said Qin.

Currently, in some land-transfer pilot areas, each mu (0.067 hectares) of arable land can be used as collateral for a loan of 1,000 yuan.

Zhao Kun said that although the third plenum approved the practice, many farmers are concerned that the banks will confiscate their land if they cannot service their loan repayments on time.

"Support policies need to be formulated quickly, such as ensuring that local governments put a cap on the amount of land that can be used as collateral to ensure that the farmers benefit from the policy but don't end up losing their homes," he said.