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Beijing unveils land reform
policy
By Jayanthi Iyengar
NEW DELHI - Recent events in
Beijing indicate that while the world has warned China to
pay attention to the growing unrest among rural laborers
and urban unemployed throughout the country, in its silence
it was not ignoring the problems. It was trying to
formulate a stratagem with which to face them.
For the past four years, China has been under
continuous attack from the commentators and scholars for
the growing labor unrest in the country. It has also
received countless doomsday predictions that this unrest
would prove to be the Middle Kingdom's undoing. The
Chinese government took some concrete steps last week
toward addressing the problem partially, by
strengthening the land use rights of its farmers.
Unlike other Asian neighbors, such as India and
Hong Kong, which went about their budget announcements
during the same period with such fanfare, the Chinese
went about their task quietly, leaving it only to
discerning China watchers to note the changes.
According to the steps taken by the Chinese
government, contractors (the rural authorities) would
find it difficult to displace farmers during the tenure
of a contract. Under China's existing land ownership
structure, the rural authorities contract arable land to
the collective. The collective is often a village. The
collective in turn distributes the land awarded to it to
individual households.
Thus, the ownership of
the land remains with the collective, but the rights to
use the land are awarded to the farmer for a specified
period of time. At the moment, this time period is 30
years, which means that a farmer within a collective
literally gets the ownership of a piece of land for a
30-year period.
This norm has been in place
since August 1998, when the Chinese government passed
the Land Management Law. The law specifically provided
that the farmers should be given written contracts to
cover the time period they were granted ownership of the
land-use rights. However, the rights of the farmer
existed more on paper than in reality in many places. A
substantial number of farmers were not given their
contracts. Some local authorities tended to revise the
ownership of the land-use rights during the period of
the contract and redistributed it to others through
administrative decrees. Disputes over the land use in
some provinces resulted in violence.
The law
passed last week addresses some of these issues. It
provides that the ownership of the land-use rights would
remain with the farmer for a 30-year period, the local
authorities can neither revise the contract nor reclaim
the land awarded during the course of the contract.
Further, it empowers farmers to transfer, re-contract,
enter into share-holding ventures, and exchange the
rights of land use with each other. Also, women, whether
married or unmarried, would enjoy equal rights with
respect to land distribution.
Clearly, these
changes have been made with the intent of quelling
rebellion and calming disgruntled farmers in the rural
areas of the country. This is clear from the statements
made by various senior Chinese government functionaries
soon after the passage of the new law.
Speaking
to China Daily soon after the announcement, Professor
Dong Fureng of the Chinese Academy of Social Science
said, "This law gives farmers more freedom to use their
land. It is beneficial to social stability in rural
areas, where the per capita area of land distribution is
relatively small."
Dong's views were echoed by
China's top legislator Li Peng and Vice Premier Wen
Jiabao. "The law has great significance for the
protection of farmers' fundamental interests, the
promotion of agricultural development and the
maintenance of social stability in rural areas," Peng
noted.
"The land is the basic productive
material of farmers. Only a long-term and guaranteed
right to use the land can give farmers the security they
deserve so that they can increase the investment in
their land," Wen said.
To understand the
significance of the steps taken by the Chinese
government last week, one needs to understand the
Chinese system of land allocation and redistribution.
Experts divide the Chinese agrarian reforms broadly into
two phases.
The first phase began with the
introduction of the Household Responsibility System in
the early 1980s. Under this system, the transition was
made from communal farms to family farms. The farmland
remained under collective ownership, but nearly all such
land had been allocated to individual households for
use.
The Household Responsibility System
suffered from certain weaknesses. The allocation of the
land to the individual household was covered under an
oral arrangement and was not legal and binding.
Besides, the new system also armed the Communist
Party with a tool to establish an egalitarian society
through equitable redistribution of land. This tool was
known as land readjustment and it contributed
substantially to the unhappiness of farmers, leading to
regular disputes and periodic riots.
Under land
readjustment, the collective leadership often reacquired
the land from the farmers and redistributed it among
others to accommodate changes in the size of the
household. Land readjustment was built around the
principle of a larger household being given a larger
piece of land to till, while a smaller household
received a smaller piece. Readjustment was sometimes
complete, sometimes partial.
Under complete land readjustment, the landholdings
of all the households within the collective were
acquired and handed over to the collective for
redistribution. As a result, a household often ended up
losing the piece of land it had been tilling until then,
but was instead allocated a new piece of land, depending
on the size of the household.
Under partial readjustment, land was taken away from
households, which had lost a member, only to be given to
another, which had gained a head.
Land
readjustment was widespread, occurring in more than 80
percent of China's villages. As Brian Schwarzwalder
noted in Transition, the World Bank's newsletter for on
reforming economies, "Land readjustment indeed allowed
China to maintain an extremely egalitarian distribution
of land within villages, but the uncertainty they have
created represents the single greatest obstacle to
long-term rural land tenure security in China."
To address the failings of the Household
Responsibility System, China introduced the Land
Management Law in August 1998. This legislation is
considered a watershed in China's effort to strengthen
long-term rural land tenure security and it marks the
second phase in China's agricultural reforms.
The Land Management Law made three major
provisions:
The collectively owned arable land had to be
contracted to the collective members for a 30-year
period.
The land awarded had to be covered by proper
contracts.
Land readjustment was restricted, though not
abandoned.
Last week's reform measures address
the first part of the problems that dog the Chinese
today. It provides a guaranteed access to the land
awarded to the farmer for use for a 30-year period. It
provides flexibility to the farmer to transfer and trade
ownership of the land use rights held by him, within the
existing format of the land ownership remaining with the
collective. Since a 30-year guaranteed ownership is now
being promised, the Chinese authorities hope that larger
investments will flow into agriculture. The new law,
however, fails to touch the prickly issue of land
readjustment, though this has been the cause for strikes
and strife in the past. It also fails to address issues
like the local authorities refusing to abide by the
terms of the contract or refusing to give the contract
at all, as has been the case until now in many
provinces.
China's labor and agricultural
reforms are being watched with interest by the rest of
the world as estimates peg the displacement of more than
30 million to 40 million Chinese farmers annually over
the next five years as the country accedes to the World
Trade Organization (WTO) and fully integrates with the
global trading community. There are forecasts that these
farmers will find their way to the cities, clogging
facilities and adding to the urban stress and strife.
Many China-watchers, including India, believe
that the Middle Kingdom has prepared "intelligently" for
its accession to the WTO by deciding to forgo
agricultural access in favor of industrial access to the
global markets.
With this goal in mind, the
Chinese have also been accused of blatantly turning the
terms of trade against agriculture, which means that
unlike countries such as India, the Chinese farmer ends
up subsidizing the industrial worker. This automatically
shrinks farm incomes and takes the purchasing power out
of the hands of the Chinese farmers, while enriching the
urban industrial worker.
D Gale Johnson from the
Chinese Economies Research Center, in a working paper
titled "China's Rural and Agricultural Reforms:
Successes and Failures", notes: "The reforms have failed
to reduce the significant income inequalities that have
long existed in China - between rural and urban areas
and regionally. In fact, both types of inequality are
now greater than they were when the communes existed or
even before 1949." He adds that the regional inequality
has grown primarily in response to economic
opportunities while the growing urban-rural inequality
has been due to "deliberate" policy decisions. "The
urban bias in China is very strong and, unfortunately,
there is no indication that it is decreasing or is
likely to do so in the future." he states.
A
similar note has been struck by the Organization of
Economic Cooperation and Development in a report on
China and the agricultural reforms needed after its
accession to the WTO. The report, released by the OECD
last September, makes the point that while poverty in
rural China has been reduced over the past 20 years and
incomes have grown - with an estimated upswing last year
of 4.2 percent, the gap between rural and urban incomes
has widened. In 1985, rural incomes were 54 percent of
the level of their urban counterparts: today, they are
less than one-third. "This is largely due to
economy-wide policies, which put agriculture and rural
areas at a disadvantage," it states.
It further
adds that even within the agricultural sector, policy
priorities have shifted from a focus on maximizing
production to increasing farmers' incomes and improving
product quality, while seeking to exploit China's
comparative advantage in labor-intensive products. In
parallel, China is seeking to improve the international
competitiveness of its agricultural products and to
absorb excess rural labor by the development of small
townships with diversified economic activities. "The
precise effects of agricultural policies on rural
incomes in China remain uncertain. This is due to
numerous price distortions and the lack of reliable
official data, as well as institutional and systemic
problems."
The report further calls for an array
of measures to help the rural population adapt to the
new conditions. These include fiscal reform to alleviate
disproportionately high taxes and fees imposed on
farmers by local authorities; a relaxation of labor
migration restrictions; better access to education to
provide the rural population with the skills needed to
compete on urban labor markets; and greater access to
social benefits.
Today, there is every
indication that the Chinese have taken the calculated
risk of empowering urban workers, as opposed to
agricultural workers, in anticipation of taking on the
competition ahead. However, despite such planning,
downsizing, privatization, competition and globalization
are expected to spur the sporadic industrial strikes
being witnessed at this point to greater heights.
Unemployment figures for the country are being
pegged anywhere between 3.6 and 20 percent, depending on
whether the source of the statistics is pro- or
anti-China. Demographically, the Chinese are an aging
people, with one out of every 10 over the age of 60.
Discrimination against women is known to be rampant.
Labor conditions are considered to be well below
international standards, and urban unemployed, unheard
of in Maoist China, is a growing problem, as
demonstrated by long queues of job hunters waiting
outside factories.
All this has led several
China watchers to predict that this is one bubble
waiting to burst. For foreign investors who have pumped
in substantial sums of money into the country in
anticipation of returns, China's fate remains a matter
of concern.
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