China land: losing the plot

As long as the sale of rural land remains illegal, how realistic is it to expect radical reform?

Among Communist China’s holy pilgrimage sites, Xiaogang village stands out. The tiny place is a living shrine to villagers who defied the party to dismantle disastrous communal farms that left more than 30m dead from hunger during Mao Zedong’s reign.

Almost 40 years on, the tiny community is again in the spotlight, acting as a Petri dish for competing visions of China’s agricultural future.

A concrete gate rising from orchards and wheat fields proclaims “China’s No. 1 Rural Reform Village” as a straight, perfectly paved road sweeps towards what was once one of the poorest places on earth. Tour groups pose behind giant Communist party flags outside a museum dedicated to the dangers of communal land ownership.

When President Xi Jinping visited the village this spring, his message was telling. He endorsed the transfer of rural land to create modern state farms but he also upheld collective ownership of land, a remnant from Mao’s era. The apparent contradiction goes to the heart of China’s fraught land policy.

The countryside today is at a crossroads. Communal farming ended three decades ago but land is still owned by the state. Some 700m Chinese have traded subsistence farming for the cities, leaving behind ageing parents tilling millions of tiny plots — often by hand.

China needs fewer but younger farmers and fewer but bigger farms to feed a modern economy of 1.3bn people. It also needs to support tens of millions of rural elderly. Xiaogang village is home to dramatically different models of how to achieve those goals. “In 20 or 30 years, who is going to farm?” says Zheng Fengtian, a professor of agricultural economics at Renmin University. “In another decade, no one will.”

The party and some older migrants view access to land as a financial cushion should city jobs sour, but that idea is already outdated. Farmers have no protection against land seizures by cash-strapped local governments seeking to resell to property developers, factory owners or even agribusiness. After China’s rapid industrial revolution up to 120m migrants have no land to return to. Most migrants under 35 have never farmed.

“Without the land an old peasant’s heart has nowhere to rest,” says one former farmer. “But my son is a totally different story. He doesn’t even know which crops grow where.”

Even as the Communist party lauds Xiaogang villagers for dividing their fields, it has refused to legalise rural land ownership. Farmers can neither buy nor sell at will. Some argue the restrictions are in place because too many farmers would sell if they could, potentially unleashing millions of rootless people upon the cities.

“It is not an economic question, it is political,” Mr Zheng says. “The Chinese Communist party came to power in large part because during the civil war [1927-49], large tracts of land were sold and landless peasants had nothing to fall back on.”

Planting rebels

Xiaogang’s fabled past survives behind a beaming smile: Yan Jinchang, proud owner of a tourist restaurant, was one of 18 men who in 1978 secretly divided up communal land — risking imprisonment or worse — to farm it themselves.

For more than three decades the 73-year old Mr Yan has told his story to visiting dignitaries. He was a teenager when Mao’s decision to force peasants into communal farms and jump-start rapid industrialisation caused the national famine. In Xiaogang, a third of the 170 villagers died. Mr Yan “ate his own harvest” during a brief political relaxation in the 1960s, but then the Cultural Revolution hit.

By 1978 drought had wiped out the meagre harvest. Mr Yan had five children and no food. Desperate villagers signed a secret pact to divide the land by lots. They pledged to raise each other’s children if any of them were jailed or killed.

“We had no choice but to rescue ourselves,” Mr Yan recalls. “What peasant doesn’t know how to grow food? So we knew it was a political problem.”

The scheme was soon revealed and commune leaders tried to starve out the rebels by cutting off their supply of seed. But with reformers gaining the upper hand nationally the county chief turned a blind eye.

Deng Xiaoping, the architect of economic reform in the country, ultimately endorsed the Xiaogang experiment, allowing millions of peasants to farm their own plots. Factory and construction jobs in booming cities lured away young adults, while Mr Yan’s land — along with that of many other farmers — disappeared under various projects.

In 2014 the Xiaogang villagers nearly set off a second revolution in Chinese land rights when they decided to rebuild a shrine — destroyed by Communists in the 1950s — to the earth god. The few square metres the shrine had occupied were on one farmer’s land, so they tried to buy it from him. It would have been the first outright purchase of rural land in 67 years. Instead, someone reported the plan and the villagers were fined.

“It demonstrated that buying and selling land is [still] not allowed,” says Mr Yan waving his hand and laughing. “We liberated labour from communal farming. But the status of the land didn’t change. There’s no way.”

Business minded

Yang Yubing was one of those who moved away from Xiaogang to work in factories along the coast. After six years he “got tired of it” and moved back. He embodies one model for China’s future land consolidation.

Rural land is legally owned by the village collective, except for large swaths of reclaimed “wasteland” belonging to enormous state farms. The collective land is contracted to households. They get 30-year rights to an average 6-10 mu (1-1.5 acres) of land, usually divided into five or more separate plots.

Mr Yang grows grain on 28 acres via a deal to pay his neighbours to transfer their rights to him, a process Beijing legalised in 2008. Nearly half the land in Anhui province is “rented” this way, but Mr Yang says more acreage is needed to support mechanisation. “In the future, land needs to be consolidated in a few hands,” he says.

Reformers who favour land ownership believe farmers like Mr Yang will gradually scale up as their neighbours became too old to work. Just five per cent of farmers look after 20 per cent of land nationally, according to estimates by Huang Jikun, a rural expert from the Chinese Academy of Science.

But there is a catch. To farm more than 33 acres Mr Yang believes he would need to hire labourers and equipment, but his grip on the land is tenuous. His neighbours might rent their rights to someone else, or land might be redivided when the 30-year rights expire.

Transferred rights only cost about $92/acre each year, so the system allows Mr Yang and his neighbours to consolidate larger farms with less capital than if they bought the land.

That’s good, because they don’t have much capital. In principle farmers can borrow through rural co-operatives. A recent reform allows banks to lend against aggregated land rights. In practice, the small scale and a lack of formal business experience make banks reluctant to lend.

Zi Qingshun is a member of a new breed of Chinese farmer: the capitalist entrepreneur. His idea for building larger farms in China is the preferred route for impatient officials.

Mr Zi arrived in Xiaogang village in 2012. A former property developer, he contracted 167 acres of nearby collective land for $727/acre (half the price of land in his native Shandong province) and negotiated a government subsidy to cover more than half his rental cost. His company Shunten controls about 2,000 acres across three provinces, and hopes to reach 16,600 acres, an unprecedented scale for labour-intensive fruit farming in China.

He has invested Rmb200m ($30m) in greenhouses, peach trees and temperature-controlled rooms to grow hydroponic blueberry seedlings near Xiaogang. He hired about 20 full-time staff and offered locals Rmb60 daily wages at peak harvest times. For good measure he added a field of lavender with a fake windmill and Liberace-style white piano.

“Farmers need to be slowly driven out and become a source of labour,” says Mr Zi, explaining the case for businessmen like him in modernising Chinese agriculture. Instead of the elderly locals he leases from, he prefers “roving harvest teams” of rural labourers who cost extra per day, but often prove more skilled.

“China’s agricultural development has just started. It needs to be driven by companies, not by the state,” he says. “America’s yesterday or today is China’s tomorrow in terms of scale and planning.”

Socialist countryside

The “new socialist countryside” where capitalist entrepreneurs farm collective land meets the state’s goals of larger farms while providing a small but steady income for elderly villagers too frail to work.

A sculpture celebrating the 1978 agreement (right) that villagers drew up in Xiaogang village © Getty

Rental income, light work and the idea that “the land is still ours” won over Zhang Lichang, a Shunten employee whose deeply traditional parents happily signed over their land for Mr Zi’s blueberry farms. “It was an easy decision,” he recalls. “If it were about losing the land, it would be another question. It would be unthinkable.”

For now, entrepreneurs like Mr Zi can reach scale by negotiating multiyear contracts on larger tracts directly with the village collective. But in the longer term they are constrained by the inability to secure direct land rights, and the obligation to keep paying rent on thousands of tiny plots. Mr Zi says his peach trees are a 50-year investment, well beyond the 30-year expiration of the land rights he has contracted. “It makes me anxious,” he says.

He is not the only one. The brightly painted village of Luoxinzhuang in Huaiyuan county — just 100km from Xiaogang village — shows that the trend of contracting land away from villagers can still go wrong.

As in Xiaogang, the government contracted villagers’ rights to collective land to a Huaiyuan businessman who wanted to grow kale for export. He promised $909/acre for each of the first three years plus daily wages of Rmb60 for work in the fields — about the same as villagers earned farming themselves.

The first year, villagers were surprised when three-storey concrete dormitories arrived to house migrant workers from Guizhou, China’s poorest province. The people they called “tribesmen” toiled all day in the flat sunny fields. Elderly village women pitied them even as their own wages dwindled.

In the second year, land use payments arrived late amid rumours that the entrepreneur had to borrow money. By year three, the Guizhou workers were promised wages only after they returned from their new year holidays. But the payments dried up altogether and the “tribesmen” fled home.

When the FT visited Luoxinzhuang in June, the yellow dormitories were empty. The kale had gone to seed in the untended fields. Payments for the land had not arrived and villagers without children in the cities were drawing on savings to buy food.

“We don’t know if we can get our land back,” says one older farmer with calloused hands. “That’s the big question.”

Additional reporting by Luna Lin

Letter in response to this editorial:

Chinese government was wise to resist full privatisation of land / From Prof James Putzel

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