According to an article published on the Economist "urban land in China is owned by the state, and in the 1990s the state allowed a flourishing property market to develop in the cities. That went on to become a colossal engine of economic growth. But rural land, though no longer farmed collectively, as it was in Mao’s disastrous “people’s communes”, has stayed under collective ownership overseen by local party bosses. Farmers are not allowed to buy or sell the land they work or the homes they live in. That hobbles the rural economy, and the opportunities of the farmers who have migrated to the cities but live as second-class citizens there".
"On October 7th Mr Xi said the government was drawing up a “master plan” for not just more reform, but a “profound revolution”. Such talk is part of the preparations for a plenum of the Communist Party’s Central Committee which will begin on November 9th.
Mr Xi wants to be seen as a new strongman of similar calibre, one unafraid to take on big targets—as with his sweeping campaign against corruption—and willing to tear down the huge remaining barriers to China’s reincarnation as a market economy.
Although it will surely be discussed, land reform will not be the focus of the plenum: officials have indicated that, unusually, the party meeting is going to cover the whole spectrum of reform-related issues, rather than dwell on a single area.
What matters is unpicking the carefully crafted and coded pronouncements that ensue.
The policies for which this plenum will provide cover are going to reflect the party’s belief that China needs to change the way it is developing. From a investment and export led economy to
one driven by increasing productivity and consumer spending.
We have covered extensively in this blog several issues that must change in the economic front of the Chinese Economy, but one of the most important reforms is "the urgency of creating a rural property market, a reform that will change not just rural life, but city life, too".
In January last year the government announced that the urban population had reached 51% (up from less than 18% in 1978), exceeding the rural one for the first time. But this is misleading. About 270m (nearly 40%) of those included in the urban population are resident in urban areas, but still retain their official “household registration”, or hukou, in the countryside.This shuts many people out of property markets; unable to sell in the country, they cannot buy in the city. It means they are not entitled to the full welfare benefits of urban hukou holders. In Beijing, and some other big cities, many are not allowed to buy houses or cars, supposedly to limit demand. Officials admit that there is something very wrong with this and say it is now time for a “new type of urbanisation”.
Dismantling hukou restrictions should allow farmers living in the city to trade in their rural property for a more secure foothold on the urban ladder. It could also provide a big chunk of the boost in consumption that Mr Xi and his colleagues want to engineer. Migrants from the countryside save far more of their income than do holders of urbanhukou. They are thus a huge potential source of spending. But for this potential to be realised, they need a way to sell up in the countryside.
Though now much criticised by Chinese economic reformers, Hu Jintao, Mr Xi’s predecessor, paved the way for some level of rural land reform. A plenum in 2008, also the third in a cycle, upheld the Maoist notion of collective ownership of rural land—but at the same time called for the “gradual” establishment of a “unified urban and rural market” for construction land, which includes land used for rural housing and factories. And the plenum declared that individual farmers’ rights to farmland, hitherto restrained by investment-inhibiting 30-year leases, could be extended indefinitely. Lawmakers have been arguing ever since over revisions to the all-important Land Administration Law that would put reforms into place.
Here is the most important issue and step for reform, "remarkably, in a country that embraces so many other aspects of capitalism, ideology still matters in the countryside. The notion of collective ownership of rural land is enshrined in the constitution and officials are loth even to hint that it might be changed. Some of them see it as a badge of the “socialism with Chinese characteristics” that the party says it upholds".
