Chinese land transfer rules to shape long-term ag market

China’s efforts to standardise the transfer of rural land rights from farmers to corporate entities could play a key role in shaping the country’s agricultural market, including a potential boost to local row crop production, market participants told Agri Investor. 

Under the current decades-old system, land is owned by rural collectives and contracted to individual farmers. But a recent white paper from the Chinese government suggested a separation of rural land ownership rights, contract rights and operating rights that could put more farms into the hands of corporations.

“Currently, there are no really big corporate farming entities inside China,” said Proterra Investment Partners managing director Tai Lin. “With this change, if it all gets executed and implemented and people have time to invest in western technology, I would expect that the local production of big crops increases.”

A commentary published by state-run news agency Xinhua said the proposed changes come in response to calls from farmers to standardise the transfer rights and could raise efficiency. China’s Minister of Agriculture Han Changfu reportedly said earlier this month that such a system was necessary for the development of “appropriate-scale agricultural operations”.

The proposal could also set the stage for agriculture to play a larger role in ongoing bilateral trade negotiations between China and the US, and they could increase demand for American agricultural products and technologies, said David Dollar, a former World Bank country director in China and current senior fellow at the Brookings Institution.

The proposal paves the way for large transactions involving global players, but sources noted that Chinese farmers have already been renting their land out to companies as people from rural areas migrate to cities, and that the new rules would “legalise what already takes place”.

It could also take years for local, provincial, county level government officials interpret and implement the white paper, they said. In addition, the suggested reforms fall short of expectations for some farmers, said Center for Strategic and International Studies fellow Scott Kennedy.

“They did take a significant step to allow farmers in villages to more easily transfer land management rights to companies,” he said. “[But] they didn’t go as far as genuinely privatising the land and giving genuine ownership rights, which some had suggested. At the end of the day, the land is still owned by the Communist Party.”