Land Transfers on a Slow Rise

Everybody knows that Chinese farmers have been moving to cities in greater numbers and renting out their land to others in recent years. But nobody really knows the extent of renting out land. A short article by Wu Zhigang published in the annual report of China's Research Center for Rural Economy (RCRE) provides a good set of statistics on land renting from a large national sample of rural households. Better yet, they survey more or less the same farmers every year, so the data can show us whether farmers are increasing their rental of land.

From 2003 to 2008, more and more farm households transferred land. About 8% of all rural households subcontracted land to others in 2003. That share fell in 2004 (coinciding with the introduction of farm subsidies that year), but it rose to over 8% again in 2006-07 and reached 9.8% in 2008. The rise reflects increasing departure from agriculture.

The share of all rural households who subcontract land from others has been fairly steady at about 6%. More households rent out land than rent in and the difference is widening, reflecting a modest concentration of land operation. Subcontracting land from others is becoming more common among those actually engaged in farming. The share of households who cultivate land that subcontracted land from others rose from 10.7% in 2003 to 12.5% in 2008.

The average amount of land operated and subcontracted by farm households has changed at a slower pace. The average cultivated land area operated by rural households in 2003 was just under 7 mu (1.14 acres) in 2003. It rose to 7.33 mu in 2004 (consistent with the decline in subcontracting that year) and then gradually declined to 7.25 mu in 2008. The average number of plots per household fell from 4.9 in 2003 to 4.2 in 2008.

The survey shows that about 12% of farmland is subcontracted now. On average, farmers who operated land in 2003 subcontracted .64 mu from others--9.3% of land operated was subcontracted. Subcontracted land peaked at .88 mu per household in 2007 (12.1% of land operated) and fell slightly to .85 mu (11.8% of land operated) in 2008. Doing a similar calculation shows that 58% of U.S. farmland is rented.

The average amount of land subcontracted from others exceeds the average land subcontracted to others, reflecting a slight concentration of land operation.

Modes of land transfer include subcontract, transfer of contract, exchange, rent, and other modes. A 2008 special survey by RCRE shows that subcontracting is used by 89% of rural households who transfer land to others. Eleven percent "permanently" transferred their use rights by transferring their land contract (zhuan rang). This method is used mainly by households in which all members have gone out to work.
A few households exchanged land with another household and some lease land to village collectives which then lease it to other farmers. This is generally mobile/flexible land (ji dong di), or land on mountains or riverbanks for which the use rights are auctioned to villagers or land contracted to the collective or other economic organizations for a fixed rent

From the survey we can see there are two main effects of land transfer:

(1) A trend of large farmers accumulating farmland is emerging. Of the households who operate land, those who subcontracted land operated an average of 13.15 mu, of which 3.69 mu was subcontracted from others. This is much higher than the overall average of 7.25 mu operated.

(2) There is an adjustment of production structure. In 2008, grain accounted for 71.6% of cultivated area for all households, but just 62.8% of subcontracted land was planted in grain. Farmers who subcontract land plant a higher proportion of it in cash crops, vegetables, fruit trees, fish ponds, and nonagricultural uses.

Most contracting is between relatives and neighbors. Of households who subcontracted to others, relatives got 38.2%, neighbors 30.2%, and 31.6% to collectives and economic organizations.

The survey shows that land subcontracted mostly comes from within the village. However, 25% of those subcontracting land dealt with people outside the village, including 12.5% who subcontracted to someone outside their county.

Most subcontracts of land are informal arms-length agreements, not for a fixed period, nor with a clear written contract. Only 22.1% of households who subcontracted other peoples’ land signed a contract. Of those who subcontracted to others, 32.7% signed a contract. Many places have established land transfer accounts, have no contract. The contracts are not enforceable. There are all kinds. The lessor and lessee’s rights are not clearly specified, leading to many needless disputes.