Red light for rural land reform

After a number of signs over the years that China’s rural land tenure system would be reformed to match its urban land tenure system, China’s leadership has apparently had a change of heart.

In a document jointly issued by the Party Central Committee and the State Council and released on February 23rd [Chinese | English] (the “Rural Reform Opinion”), China announced what amounts to a significant slowing of, and perhaps even a halt to, reforms to the rural land tenure system that were still being promised quite recently.

The following discussion necessarily oversimplifies, but here is some background in a nutshell. From virtually the very start of the PRC’s history, urban and rural land have been under two quite different legal regimes. Since the 1990s, it has been possible to acquire long-term leaseholds in urban land (up to 70 years for residential use) that are freely marketable and in almost all respects mimic ownership as we think of it in the US. (I’ve written about that here.) But rural land is still under the same basic regime that has prevailed since the late 1950s: it is formally “owned” by “collectives”, which in most cases means the administrative village.

Formal ownership is just a label and need not matter much; China has a robust urban housing market even though formal “ownership” remains with the state. That ownership, once the land has been leased out for 70 years, has virtually no economic or control value. (The state can of course regulate land use in its capacity as state.) But urban land reforms have not extended to the countryside; one cannot acquire the same kind of long-term leasehold that one can acquire in urban land. In other words, the marketability of rural land use rights, no matter how labeled, is still quite restricted.

There are many reasons for this hesitancy in rural land policy. In the Party’s self-image, it rode to power on a wave of peasant discontent over land, and so rural land tenure is an extremely sensitive issue that it doesn’t want to mess with other than with the utmost caution. There’s also an idea among policymakers that as long as the village owns the land inalienably, village members can rely on it as a source of income if things go bad in the urban economy (where most of the young men and women are these days) and they have to come back home. In other words, it’s a form of social insurance. Finally, there is the near-intractable question of which specific human beings would be entitled to the revenue from land transfers.

In spite of these problems, significant reform was being promised as recently as the Third Plenum in July 2024 [English | Chinese], which stated, “We will develop a unified market for urban and rural land designated for construction” (构建城乡统一的建设用地市场), with a target date of 2029. A unified market would mean a market in which rural land, just like urban land, could be acquired in the form of long-term leaseholds of up to 70 years in the case of residential use. In other words, the distinction between urban and rural land would be abolished. (I wrote about this decision and its impact on rural land tenure here.)

That policy now seems dead. The Rural Reform Opinion states as the new policy goal “Prohibit[ing] urban residents from purchasing rural houses and homesteads, and prohibit[ing] retired officials from occupying rural land for house construction” (不允许城镇居民到农村购买农房、宅基地，不允许退休干部到农村占地建房). If urban residents can’t buy rural land use rights, that’s a pretty big crimp in the market and certainly contrary to the earlier-stated policy goal of unifying urban and rural land markets. I suspect the policy stems at least in part from fears that urban sharpies will take advantage of the simple but honest farmers to cheat them in land deals, or that the farmers will take their money and immediately squander it on gambling or fancy weddings and funerals, but neither of those concerns seems well founded in view of the experience of farmers in other countries and at other times in China.

In any case, whereas the general direction of rural land tenure reform seemed clear less than a year ago, it’s now been thrown into a state of uncertainty again. Stay tuned.