China's fragmented farm units have long been cited as the core stumbling block in the country’s efforts to supply safe food and meet export market demands for consistent quality. Under the existing system, each of China’s 800m farmers is allocated their own patch of land by local authorities under 30-year leases, but they have no legal title and they cannot transfer the land, even if they move away. This has given rise to a patchwork of tiny plots across the country. The miniscule size of these land-holdings, often less than 0.67ha, means farmers can only grow a very small volume of product, making it hard to run them profitability. To maximise production, farmers must swap chunks of land to be held in common by the village, meaning there are fewer incentives for them to make improvements. The system also renders it very challenging to source consistent lines of produce for export, since product for one container load may come from scores of farmers. And it certainly helps to explain the food safety problems that continue to plague China’s international image, most recently with the scandal over melamine in infant formula.
In this context, the Communist Party’s October announcement that it will give rural residents the right to transfer or lease their land seems like a radical and timely overhaul. While stopping short of privatisation, it enables farmers to convert their 30-year land leases into money, which can be invested into new businesses. Supporters of the move suggest it will spur investment in rural areas and foster the development of large-scale and efficient farming.
As ever, though, such a transformation is not as straightforward as it sounds. Some pundits note that the latest announcement essentially marks a re-statement of previous reforms unveiled in 2003, and that many farmers are already informally renting or swapping their land. These observations suggest the move would have a negligible impact, but other analysts predict that it would spur a mass migration to cities as farmers sell off their plots to seek better-paying work in the cities. From that point of view, the reforms could actually threaten food security and put pressure on urban infrastructure. The government has, however, stipulated conditions on land use rights to prevent this urban influx. Either way, there are valid concerns that the move towards a privatised system exposes uneducated farmers to exploitation by a landlord class, and could leave them to drift into the cities rootless and impoverished. Such complications hint at the huge challenges to implementing the plan, which are only exacerbated by internal discord in the Communist Party over the extent of the reforms. Indeed, a big question mark hangs over whether the government will go ahead with the plan at all.
The fact remains, however, that China must do something radical to enrich the countryside in order to close the massive income gap between the rural and urban populace, and to stimulate an economy that is coming under pressure from the global downturn. With two-thirds of the population living in rural areas, getting these farmers to spend a little more money could go a long way to making up for the loss of manufacturing export trade into the US and Europe. Indeed, the potential to grow internal consumption, coupled with the modernisation that may result from the rural reforms, underlines China’s untapped potential for the global fresh produce trade, both in terms of procurement and market opportunities.
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