From Private to Collective Ownership
At the founding of the PRC in 1949, the People's Political Consultative Committee, then the supreme legislative organ, declared the "land to the tiller' principle in its "Joint Guidelines," which served as China's interim constitution.
Under this provision, hundreds of million of Chinese farmers were assigned plots of land and dwellings, according to the size of their household. They enjoyed full property rights over their land and house, the rights to farm, live on their land, buy and sell, transfer, and give away the property. No one was to infringe on these rights. The government issued an official document---"Certificate of Land and House Ownership"--- to each household in 1952. Some rural households have kept these yellowish certificates to this day, although they had been voided long ago.
Sadly, this honeymoon was short-lived. Starting from around 1953, the Communist Party launched a collectivization campaign in villages across the country. Farmers who had received their property only a few years before had to give up their land to "agricultural production cooperatives." In the beginning, farmers were forced to join "cooperatives" while still keeping their land rights. Then, as collective farming evolved, farmers gave their land use rights to these cooperatives. In 1956, the People's Congress in Beijing officially reclaimed all land rights from the farmers and turned them over to "collectives." Farmers, now stripped of their land, became "members of the collective."
The next step was to transform these cooperatives into people's communes, which were initiated in 1958. Farmers also gave their personal belongings, including kitchenware, to the commune. They stopped cooking at home, and dined at the commune's public canteens. Some people's communes even declared they had entered a "communist society."
But the de-privatization came at enormous costs. From 1949 to 1952, when farmers received new land rights, the output of grain rose by 50 percent, while farmers' purchasing power doubled. Since rural collectivization, however, agricultural production constantly declined, and farmers lived in poverty. In 1959, famine began spreading and tens of million of rural people died. It was one of the great human tragedies of the 20th century.
The Household-contracted Responsibility System (HRS)
Chinese farmers protested these disasters. From the very beginning of collectivization, they used every possible means to resist the authorities' collectivization policy. In 1956, when farmers' land rights were formally revoked, farmers in eight provinces, namely, Liaoning, Anhui, Zhejiang, Jianxi, Sichuan, Shanxi, Henan, and Hebei, spontaneously withdrew from the cooperatives and took their draft animals with them.
Some creative farmers found another way to challenge the policy within the existing regime, by inventing the "household-contracted responsibility system" (HRS) in the cooperative. Already in the second half of 1956, the authorities of Yongjia County, Zhejiang Province, knowing that the collective system lacked incentives for farmers, decided to subcontract collective land to individual households to encourage farmers to work harder. Under this system, collective land is allotted by a contract to individual households, each in principle assuming a certain amount of responsibility. In the beginning, this responsibility was tied to output: farmers promised to give a certain percentage of their gains back to the state and collectives, based on a calculation of how much a piece of land can produce on the average. This promise was made in exchange of management rights of a particular piece of land. Obviously, this was a contract that allowed farmers to keep additional gains for themselves and enabled them to earn more than ever before. Meanwhile, land ownership remained the same---it still belonged to the "collective;" farmers only had use rights over their allocated land under certain contractual terms.
The HRS soon spread to most rural areas of the country. Some 70 percent of the cooperatives in Gansu and Ninxia Provinces, and 85 percent of Anhui Province adopted the HRS in 1961. Although the HRS was popular and it boosted production and living standard, the farmers only received approval from the central government to adopt this system in late 1978. The supreme leader and his conservative followers in the ruling circle denounced this practice, labeling it as a "capitalist principle," and the local officials promoting it as "capitalist roaders." Many officials were demoted and even prosecuted. Nevertheless, the HRS did not disappear in some areas even during the harsh years of the Cultural Revolution.
In 1978, seventeen farmers of Xiaogang Village, Anhui Province, led by their village head, applied their signatures and fingerprints to a household-contracting document. They later were credited as champions of the country's new land reform. But there was no smooth sailing for this reform. Conservatives in the top leadership made every effort not to implement the HRS. In 1982, when Deng Xiaoping took power, the HRS had been applied to almost every corner of rural China.
The HRS experience showed that farmers' rights to collective land could also include contract agreements between farmer and collective. Chinese economist Zhou Qiren called it the "delineation of rights with Chinese characteristics." But it is only the right to use, not ownership.
Since the HRS was legitimized, the system was improved and upgraded from time to time. The authorities knew that uncertainties regarding the terms of the contract would increase its enforcement costs. The party's Central Committee's directives in the 1980s specified a 15-year term of land lease. It was extended to 30 years later. The responsibility of the contract was initially tied to output, while later it was tied to the value of the land.
The Transfer and Trading of Land (Tudi Liuzhuan)
In the late 20th and early 21st centuries, China's rapid economic growth produced an explosive expansion of urban areas and their rising demand for land. Meanwhile, more farmers migrated to the cities and left huge amounts of collective land idle. Obviously, the outdated, rigid land system could no longer meet the challenges of the country's modernization programs.
Again, many farmers began inventing new ways to use their land rights within the boundaries of the existing law. As early as in 1992, farmers in rural Nanhai of Guangdong Province created their new version of the cooperative. By pooling their contracted land, farmers priced each piece of land and took certain land shares to be used in a collectively planned and managed business. It was the first form of the so-called "transfer and trading of land" (tudi liuzhuan) system. Despite much criticism, the practice soon spread across the country. The transfer and trading of land use rights helped increase the supply of much-needed land for China to become the ever-growing "world's factory".
At the turn of the new century, the transfer and trading of land use rights took new forms. Some farmers established shareholding businesses or new collective farms with their land as stakes; others rented the land left by migrant farm workers and combined pieces of land into a farm. This has enabled the creation of larger, more efficient farms that could increase output and bolster lagging incomes in the Chinese countryside. According to the Law of Land Contract in Rural Areas passed by the People's Congress in 2002, the entire rights of use, revenue and transfer of farmland are contracted to farmers' households for the long term. Meanwhile the collective still is the legal owner of farmland.
These examples of multiple land ownership forms soon evolved from merely leasing and subcontracting to joining into shareholding cooperatives or agribusinesses. In Xinyang County, Henan Province, for example, a village transferred its entire land into a shareholding company to develop ecological farming. Other forms of transfer and trading included land trust, swaps, setting-up of land credit cooperative, etc. Many local governments allowed and promoted the transfer and trading of land to achieve higher efficiency of land use; agricultural industrialization and urbanization, provided that the ownership and use of the land (for farming only) remains unchanged. The parties involved in transfer and trading should conclude a written contract specifying the size, location, use, term, price and responsibilities. In some places profit is being distributed between businesses and farmers on a 51:49 ratio.
An Incomplete Land Reform
Another unresolved issue is the legal status of farmers' homesteads. In recent years, more and more farmers have built houses on their homestead and sold them to urban dwellers, especially during a housing price boom. Oddly enough, according to law, the homestead is owned by the collective and cannot be leased or sold, but farmers can enjoy full right of ownership over the house built on it. But without ownership certificates issued by the Ministry of Construction, farmers can only trade with buyers on a private basis. As economist Li Yining has pointed out, as long as farmers do not own and trade the country's rural homestead, in total valued at US$ 2.9 trillion, it is a dead asset. But if it were allowed to be used as collateral, farmers could use the money to set up chicken farms or any other businesses. Scholars have also strongly suggested that farmers' homesteads and houses should be regarded as capital and have free access to the land market.
More and more scholars call for the "same land, same price, and same right." At least collectively owned land should be treated as equal to state-owned land, enjoying the right to transfer, lease and mortgage. Simply put, what the government needs to do is to return all land to its original owner---farmers. That step would inject vitality into rural development and help boost domestic consumption, a major driving force for economic growth while the current global financial crisis continues.
The root cause of this conundrum of the land rights problem, as many scholars argue, is the structure of state governance. The whole rural land system is designed not for free disposition of land by farmers, or for achieving maximum income from land. Instead, the government and urban inhabitants have shared most of the added value of land. Since the 1950s, a dualist urban-rural household registration structure, the collective land ownership, and tight state control have led to deep separation between the countryside and cities.
China again stands at the crossroads of choices for reform: Should the country return land to farmers and establish a land primary market, or just fix the existing system to adopt a limited reform? Most farmers and experts advocate distributing land ownership to each farmer equally, granting farmers the same equal political and economic rights that urban inhabitants have been enjoying.
The encouraging element in the decision of the last party plenum was the following: it admitted that "The urban-rural dualist structure is a great contradiction," and pledged to "break this structure by integrating urban-rural socio-economic development." It also will implement the rectification and registration necessary to issue titles for rural land use rights. People now ponder what China's legislature should do next: revise the related laws such as the Land Administration Law and the Property Law, and remove the many restrictions imposed on peoples' rights to their rural land.