Posted September 1999

Land reform in rural China since the mid-1980s, Part 1

La réforme agraire en Chine rurale depuis la moitié des années 80 Cet article analyse les principaux aspects de la réforme agraire en Chine rurale depuis la moitié des années 80. Il explique le système chinois actuel de responsabilité du ménage en insistant notamment sur ses faiblesses institutionnelles, et expose les hypothèses quant à la nature et à la direction d'une réforme agraire plus poussée avancées par les économistes chinois. L'article analyse en particulier quatre modèles de réforme représentatifs et expérimentaux mis en oeuvre depuis cette période. Enfin, des leçons sont tirées du passé en vue de façonner la réforme à court et à moyen termes. Reforma agraria en la China rural desde mediados de los años ochenta En el presente artículo se examinan los principales aspectos de la reforma agraria en la China rural desde mediados de los años ochenta. Se expone el sistema actual de responsabilidad familiar de China, describiendo sobre todo su debilidad institucional, así como los debates teóricos sobre el carácter y las orientaciones de la ulterior reforma agraria entre los economistas chinos. Se analizan en particular cuatro modelos representativos de reforma experimental desde mediados de los años sesenta, ilustrando sus comienzos, funciones y resultados primarios. Por último, se extraen algunas enseñanzas del pasado para definir la reforma futura a corto y medio plazo.

Land reforms are currently being pursued in socialist countries as well as in the independent States of the former Soviet Union and Central and Eastern Europe (CEE). However, the reforms differ from country to country. Typically, China's land reform has concentrated on land use rights reform, while in the former Soviet Union and CEE countries farmland privatization has generally been seen as a crucial component in economic transition. Although abundant literature deals with agrarian restructuring in the former Soviet Union and CEE countries (e. g. Csaki, 1990; Csaki and Lerman, 1994, 1996; Brooks and Lerman, 1993, 1994, 1995), comparatively little has been published about the reform taking place in China, particularly in the past decade. By any standard, there are many good reasons for watching closely over China's farmland reform.

This article reviews the major issues of land reform in rural China since the mid-1980s and in particular examines four experimental reform models. Given China's huge size and its diversity in natural endowment and economic development, it is very difficult to carry out an inclusive study. Thus this paper restricts the analysis to some of the main issues and cases to shed light on the current approaches. As institutional innovation is being driven by the weaknesses of the existing agrarian system, an overview of the current household responsibility system is given, focusing mainly on its institutional weaknesses. Bringing about further reforms is bound to be a difficult and contentious task. The range of ideas and suggestions has been extensive. As theoretical studies generally precede changes in practice, a section examines the debates and controversy on the nature and directions of agrarian reform among Chinese economists. This is followed by an analysis of four recently initiated local reform cases which, in the authors' view, represent the main approaches to China's agrarian reform since the mid-1980s. The paper concludes with a discussion of the lessons from past reforms that might help to shape future measures.

Limitations of the household responsibility system

To reach this target, China carried out its second land reform, a campaign of collectivization in the mid-1950s. During the process individual farmers were compelled to join collectives. The collectivization finally developed an institution called the People's Commune. With centrally controlled property rights and a misapplied egalitarian principle of distribution, the communes destroyed farmers' operational freedom and their enthusiasm for production. Much literature illustrates the poor performance of the commune system (e. g. Stavis, 1982; Lin, 1982; Lin, 1987; Chen, 1994).

At the end of the 1970s China launched an economic reform, pioneered by rural reform. China broke with the Soviet doctrine, introducing a family-based contract system, the so-called household responsibility system. Since then, household responsibility has been the nationwide statutory pattern of agricultural land tenure [1]. Honoured as the third land revolution in China, the household responsibility system has proved a great success. There is no doubt that the system generates incentives for production by giving farmers freedom of land use rights and decision-making, linking rewards closely with their performance. As a result, China's agriculture has been dramatically revived. After 30 years of stagnation, growth in agricultural output in the first half of the 1980s accelerated to a rate several times the previous long-term average. Between 1978 and 1984, output of the three main crops, namely grain, cotton and oil-bearing crops, increased at annual rates of 4.8 percent, 7.7 percent and 13.8 percent, respectively, compared with the average rates of increase of 2.4 percent, 1.0 percent and 0.8 percent per year from 1952 to 1978 (State Statistical Bureau, People's Republic of China, 1985). Production of grain, the most important farming product of the country, reached a peak of 407 million tonnes in 1984, which represented a net increase of more than 100 million tonnes within only six years. The fundamental problem of feeding the giant population, which had been a great pressure in China for several centuries, was basically solved. However, a big drop in grain output was witnessed in 1985, 6 percent off the previous year, followed by stagnation until the 1990s. It appeared that the household responsibility system had exhausted its benefits, although clearly neither the dramatic growth in the first half of the 1980s nor the stagnation in the second half was the sole result of land institutional reform. However, it did have an important role, alongside, for example, real grain price changes.

Table 1 Area and fragmentation of household land

Year	Cultivated area per household (ha)	Number of plots per household	Average size per plot (ha)
1986	0.446	5.85	0.080
1988	0.466	0.078	5.67
1990	0.420	5.52	0.076
1992	0.466	3.16	0.148
Source: Ministry of Agriculture of China, 1993.

Although the household responsibility system was a great success, as an institutional innovation it could not address everything. Several years of practice have exposed a number of limitations and weaknesses inherent in the system. First, tiny and fragmented farming units emerged as farmland was distributed to individual households that would farm it independently. The principle of land distribution was derived directly from collective ownership. Farmland in a village was owned by all of its members collectively. As a result, every member had equal claim on land property rights, and the norm for distributing land was based on the size of the peasant family. Given the abundant population and limited land, the amount distributed to each household was very small. Moreover, farmland differed from parcel to parcel in terms of soil fertility, irrigation conditions, location and so forth. A household had to obtain parcels from each of the grades. Thus, the total was not only insufficient but also fragmented and scattered around villages. Large areas of cultivated land were wasted in the form of paths and boundaries separating households' holdings. A survey conducted by the Chinese Ministry of Agriculture indicated that in 1986, among 7  983 sample villages from 29 provinces, average cultivated area per household was 0.466 ha (7 mu), [2] fragmented into 5.85 plots, each plot on average 0.08 ha (1.2 mu) (Ministry of Agriculture of China, 1993) (see Table 1). This fragmented structure of family farming has remained largely unchanged and has arrested the possibilities of using relatively advanced mechanical equipment and agricultural infrastructures.

Second, farmers were shortsighted in action. According to the system, a person's eligibility for land depended only on his or her villager status, no matter when this was obtained. On the one hand, babies and villagers' newly married spouses from other villages were all eligible claimants, having equal rights to share equal amounts of land; on the other, when a villager died, his or her right would automatically disappear. As population increased, villages had to readjust the distribution structure, which further subdivided the farmland [3]. The endless redistribution of farmland resulted in many problems:

• the situation of a small and fragmented farming structure further deteriorated;

• worried about the risk of losing their land as well as investment, farmers had no incentives to improve land conservation and agricultural infrastructure - irrigated land, one of the most important components of agricultural infrastructure in China, remained almost unchanged during the 1980s;

• farmers overexploited the soil to pursue short-term returns;

• the process of land redistribution itself was costly, requiring much labour and time in organization and implementation.

Third, farmland was generally poorly endowed with the necessary human capital. Under the household responsibility system, egalitarianism was generally the leading principle guiding land distribution, with little consideration given to interfamily differences such as labour capability, education and individual preference [4]. As a result, some large households with a limited labour force could have too much land to work, while other smaller households, particularly those specialized in agriculture, could have insufficient land for full employment. This kind of problem was much worse in areas experiencing rapid rural industrialization and urbanization. In these areas there was a general deterioration in the agricultural labour force as the most able workers tended to leave the villages. Adding to the problem was the fact that those finding off-farm work did not renounce their right to farm but retained a part-time involvement. Many did not give priority to cultivation and at times even let the land lie idle. Thus, the scarcest resource was underutilized [5]. To sum up, the household responsibility system maintained egalitarianism but was less successful in terms of economic efficiency. As for the unsolved problems, the negative aspects of the household responsibility system will inevitably become more and more of a constraint on the further development of China's agriculture. China faces a challenge once again.

Theoretical debate on further reform

In the early stages, discussions mainly focused on whether collective ownership should be maintained and what form of property rights could be adopted. Two divergent ideas drew much academic attention. One group of economists advocated farmland nationalization. Their central idea was that State ownership of farmland with individual lifelong possession could be the best solution. They argued that collective ownership of farmland did not exist in practice in rural China: rural collectives never had exclusive property rights on land under the so-called collective system. During the commune era, collectives were prohibited from selling the land they owned (except to the State) or from buying land from other owners. Farm products could only be sold to State commercial institutions at administratively low prices; thus farmers were denied the right to benefit from farming. Farmers' land use rights such as production decisions were also weakened by the rigid State procurement system. Under the household responsibility system, farmers still failed to have complete rights on land. They lacked the right to transfer their contract land, and their rights to use and benefit from the land were further weakened by administrative interference and continued State procurement. As a result of these infringements of property rights, the State was the real landowner - the biggest landlord in rural China (Din and Cheng, 1994). These economists argued that if public ownership was a kind of dogma, it would be better to abandon the name "collective" and institute State ownership instead, in order to live up to the letter and spirit of the system. Through nationalization of farmland, farmers would be granted permanent land use rights. They could buy, sell, mortgage and bequeath their rights. Although peasants would not be landowners, lifelong tenancy in effect could be as efficient as owner cultivation (Din and Cheng, 1994).

Although these arguments are persuasive, the idea of farmland nationalization was not seen as likely to find public acceptance. The first objection of opponents was financial. They asked if the State would need to pay to effect the transfer of land. Although the ownership of collective farmland is ambiguous, it was unlikely that the State could get the land free; it would have to pay at least part of the price. The government would then have to consider social and political risks. An agreement to pay would entail financial embarrassment. In addition, opponents wondered whether the State would be able to manage farmland as well as collectives do. Some economists bitterly criticized the idea of land nationalization as intending a return to the abolished commune system; others viewed it as a kind of quasi-private ownership. Given the strong objections, farmland nationalization is unlikely to be put into practice.

A second group of economists was willing to accept the critique of collective ownership; however, instead of farmland nationalization, they advocated individual ownership. They argued that only under individual farmland ownership would it be possible to overcome the above problems. To defend themselves against criticism for advocating privatization, they tried to find theoretical support. They argued, by the theory of Karl Marx, the founder of socialist thought, that socialism would rebuild the society on the basis of socialized individual ownership. Accordingly, some took the view that the vital difference between socialism and capitalism is whether the main production means are owned by all individuals or by a small number of individuals - the former case being socialism. They argued for a break with the theoretical doctrine that socialist ownership could only be through State and collective ownership (Li and Li, 1989; Lin, 1989).

Table 2. Peasants' attitudes towards land privatization

Village income level	Agree with land privatization? (%)
	Yes	No	Unknown
Lowest	23.1	73.1	3.8
Lower	9.6	86.5	3.9
Middle	12.8	79.1	8.1
Higher	13.3	77.9	8.8
Highest	13.9	74.4	11.7
All villages	13.5	79.0	7.5
Source: Xia, 1992.

The idea of farmland individualization was presented as a rebellion against tradition and orthodox theory. However, it is likely to be very problematic in practice. Beyond its current political impossibility, several objections need to be answered. First, the question of whether individualized landownership is really a new concept of socialism or rather capitalism by another name is a source of much controversy; there is certainly no consensus on this point, and many would disagree with the above-mentioned "modern" interpretation of socialist ownership. Second, most economists do not consider land individualization or privatization an appropriate solution to existing land problems in China. Bearing in mind the Chinese historical experience, they argue that under private ownership land fragmentation could be further worsened. Third, although the private sector was eliminated immediately by decree, its re-creation would require very careful consideration and planning: hasty transition would entail social and economic risks. The unfortunate problems encountered in rapid agrarian privatization in the countries of the former Soviet Union and Eastern Europe are well documented (Nikonov, 1992; Novoselov et al., 1993; Brooks and Lerman, 1995; Peters, 1995). Moreover, a 1991 survey indicated that Chinese peasants did not show much enthusiasm for land privatization (Xia, 1992). Only 13.5 percent of the sampled peasants agreed with the idea, 79 percent expressed a negative attitude, and the remainder did not specify their ideas (Table 2). The reason might be that for several centuries most Chinese peasants greatly suffered from a lack of land. They may wish to avoid the perceived risks associated with privatization. However, there is probably also a feeling of ambivalence: they prefer at the moment to opt for a collective form of ownership although they are unhappy with aspects of the current system. There is clearly a need for a more up-to-date review of peasants' attitudes on this issue.

As the theoretical debate developed, a third group of Chinese economists took the view that it was more feasible to improve land use rights than to change ownership of land. They argued that both approaches, i. e. nationalization and individualization, were still strongly trammelled by the previous doctrine where the concept of ownership was overstressed and taken as the sole key point of property rights. Following modern theory they believed that ownership was, on the contrary, just one of the components of property rights. Other components include the rights to consume, to obtain income from and to alienate assets (Barzel, 1989). The purpose of property rights is to define interests and obligations among participants sharing an asset. Without the clarification of property rights, participants could shoulder burdens for others and this could generate problems such as moral hazard and free riders. According to the theory of property rights, the ownership of land in rural China is clear, but the property rights of farmers are very incomplete. Land is owned by farmers collectively rather than individually, but the land use right is granted to farmers as individuals. In theory, farmers should have an exclusive use right which should mean the freedom to consume, to obtain income from and to alienate the use right at their will. In practice, however, farmers' land use rights are insufficient. Their rights to consume and to obtain income from land are weakened by the State procurement system and distorted prices. Furthermore, farmers are prohibited from transferring their land use rights. These drawbacks, in combination with the problem of frequent land redistribution, lead farmers to feel that they are only nominal owners. As a result of the ambiguous status of land use rights, farmers' incentives to take care of their land are considerably weakened. In addition, as land use rights are not tradable, it is difficult for land markets to develop. Thus, the problem of land fragmentation remains highly intractable. If there is no possibility of changing landownership, there exists, nevertheless, vast scope for improving the land use rights system. At present, therefore, the most important thing is to clarify farmers' property rights so as to foster their production incentives and prevent further farmland fragmentation.

From the above brief review, it is clear that Chinese economists all agree about the need for further clarification of land property rights, but they hold different views on how this should be done. In the absence of a universally accepted approach, recent land reform initiatives have been guided mainly by the ideas of the third group of economists, which are seen to be less socially and politically risky and more easily accepted by the central government. Under the principle of adhering to collective ownership of farmland and reforming land use rights, the government has issued a number of policies and measures. For instance, in 1983, households were allowed to exchange their labour with others and to employ limited amounts of labour for farm work. For the purpose of providing better incentives for soil conservation and investment, leaseholds were extended to 15 years in 1984, and then to 30 years in 1995. In the late 1980s, rural households engaged in non-farm business were allowed to sublease their land to other villagers in order to prevent land from being left idle. Meanwhile the central government also encouraged more flexible measures to be carried out at the local level. Experimental land reform models were initiated in selected locations of various provinces in the mid-to late 1980s. Thus, China is actively pursuing appropriate models to guide further land reforms.

New models and rudimentary achievements

Meitan: fixed responsibility farmland within a contract term

The initial local government response was to make another distribution and then to fix the structure for 20 years. However, most peasants disagreed with this idea. An investigation among 510 peasant households showed that 64.7 percent wanted to stop redistribution at once. Therefore, a local policy, extending the tenure term to 20 years (originally 15 years) and fixing contract land within this period irrespective of births or deaths of household members, was initiated in December 1987. After careful trial in two villages the policy was extended to all rural areas of the county. Following adoption of the policy, farmers were granted inheritance rights on their land and the ability to exchange land with one another, to subrent, to pool land and to mortgage for credit. Meanwhile, the local government encouraged households to farm wasteland and to develop small family businesses such as processing and animal breeding, and surplus labour was encouraged to find work outside agriculture.

Several years after adoption of the policy some rudimentary effects can be seen. First, most local farmers have welcomed the policy. According to an investigation, only 10 percent of households asked for land readjustment; they complained that the original land distribution in the early 1980s had been unfair, rather than the policy itself. Second, farmers had greater incentives for land investment and conservation. By 1993, 100  000 ha of new land were developed (average 0.03 ha per caput), which represented one-third of the per caput farmland of the county in 1978. Land fertility grades were advanced and farmers increased their purchases of fixed means of production. Third, land fragmentation was to a large extent brought under control. In 1991, the area occupied by paths and boundaries between plots was almost the same as it had been in 1987. Land subdivision now took place mainly within households as children matured, instead of being redistributed among the households of a village. In addition, farmers' attitudes towards increasing family size changed. Traditional Chinese culture equates more children with more happiness. However, under the new land system, as new babies are not able to get land during the contract term, 41.4 percent of the sampled households showed a negative attitude towards having more children.

In 1993, the policy of fixing contract land was formally legislated as the provincial land management law and applied in all rural areas of the province. In 1995, when the Chinese Government issued the new land policy, in advance of the first 15 years' tenure coming due, Meitan's experiment was included in the central government document. Although the document just suggests that appropriate villages should consider the policy, its inclusion shows that after eight years of experimentation in a small local county, the policy of fixing land is gradually becoming integrated into national institutional arrangements. This is indeed a significant change.

To: Land reform in rural China since the mid-1980s, Part 2