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Land reform for efficiency
2003-11-18
China Business Weekly
Both land reform and government support are crucial if China's farmers are going to escape poverty -- permanently.
Land reform will increase the efficiency of rural production, and will make it easier for farmers to become urban workers.
Government support is necessary to ensure equality and social stability during the land-reform process.
Even though land reform and government support are complementary, they are too often regarded by many economists and scholars as magnets that repel each other.
Many economists argue China's current rural land-contract system -- farmers have the right to use, but do not own, their land -- should be improved.
In China, farmers do not own the property rights of their rural land. All rural land, though legally belongs to farmers' collective organizations such as villages, is in fact controlled by the State.
Economists also contend farmers should be granted ownership of the plots of land they use, and that Chinese authorities should establish a free land-transaction system.
Under such an arrangement, many farmers -- using the money from the sales of their properties as capital -- could leave rural China to start businesses in cities.
The result in rural areas will be increased efficiency, as the land will eventually be concentrated in the hands of the best farmers.
Critics argue, however, the system is unrealistic, as China has 900-million-plus farmers compared with 400 million urban residents.
It would be impossible, they contend, to create enough jobs for farmers who sell their land.
Even though 90 million farmers work in factories in towns or cities, given China's limited arable land resources, there are at least 150 million to 180 million surplus labourers in rural China.
The migrant rural population poses a threat, of sorts, to China. Even now, excluding the massive inflow of farmers into urban areas, China's cities are coping with rising unemployment.
In addition, the nation's farmers are saddled with excessive fees and heavy taxes.
As a result, farming in most regions has become a break-even, at best, business.
The land is also considered a form of social insurance for the farmers. Unlike urban residents, farmers in most of China's provinces do not receive social insurance, and, therefore, must rely on their land and products for survival.
For that reason, land-reform opponents -- including scholars, economists, sociologists and historians -- counter free transactions of land could imperil China's farmers.
Both groups' arguments are tenable -- and incomplete.
It is true China's cities and towns, at present, cannot offer enough jobs for the millions of farmers flowing out of the rural areas.
Over the long term, however, the influx of rural residents into China's cities and towns will result in massive demand for goods and services. Hence, jobs will be created.
There are two reasons why that has not already happened.
First, the farmers still hold the rights to use their land, so they refuse to consider relocating to the cities.
If they could sell their land -- legally -- they might move into the cities and, in turn, increase demand for goods and services.
Second, and possibly far more important, China's farmers, unlike urban residents, do not receive social insurance when they work in cities.
As a result, they hold on to their land-use rights -- for security in case they lose their jobs in the cities -- when they migrate to the urban areas.
It is imperative, therefore, that the government -- while allowing farmers to sell land to raise capital to relocate to the cities -- must help farmers obtain social insurance and new skills.
At the same time, the government must eliminate practices -- such as DNM? or the registered permanent residence system -- that discriminate against migrant workers and prevent them from moving to the cities.
Government assistance could be costly, and maybe beyond the nation's current budgetary and funding capabilities. But the central government can raise money by selling off State-owned enterprises (SOEs).
SOEs, legally, are owned by all Chinese, therefore, any money raised by selling them off must be enjoyed by all citizens, not just urban workers.
The government can also collect some money to support social insurance system by imposing land transaction tax in rural areas.
Land reform can be completed gradually to prevent social instability.
While helping migrant workers in the cities, the government should offer farmers training, so they will be capable and have the confidence to work in the cities.
If the government does allow farmers to sell land, that will not necessarily result in a massive concentration of land in a few hands. Such situations in the past resulted in farmer revolts.
Rather, the government can adjust the time it takes to complete land transactions, in accordance with factual situations, by modulating relevant tax rates.
The government can also provide farmers with low-interest and short-term loans so they can afford to live, work and educate their children in the countryside.
But there are some preconditions: Rural governments must be clean and responsible, and they must ease the financial burdens -- taxes and fees -- imposed on farmers.
Safeguards must be put in place to ensure rural government officials do not become big, powerful landowners.
It is also important that the number of employees in grass-roots governments' offices be trimmed. That is one reason why heavy taxes are being imposed on farmers.
To accomplish that, rural democracy must be improved. Grass-roots officials must be selected directly by the farmers. That will guarantee farmers' rights are protected.
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