China is pursuing an unworkable project of layering a space-age agricultural sector on top of a medieval collective land ownership system. Today, a dwindling cadre of aging villagers "own" the land, leasing it out on a short-term basis to a separate class of business entities that do the farming. Conflicting interests and uncertainty about the future breed a short-sighted approach to land management that undermines the long-term investments needed to put China's agriculture on an upward trajectory.
This year's communist party "Document No. 1" on rural policy included a directive to upgrade the quality of arable land, apparently the inspiration for a law on protecting and improving arable land drafted and approved last month by China's State Council. The day after it was approved, an essay in State-run Economic Daily decried the unresolved degradation of farmland, including thinning and hardening of top soil, formation of gullies in the rich black soil region of the northeast, acidification in some regions, accumulation of salts in the soil elsewhere, and loss of organic matter. In a country where billions of dollars flow into giant pig and poultry farming companies, why is there no comparable investment in farmland? Will a law improve land quality if there is no incentive to invest in it?
China's "high standard farmland construction program" is the primary means of implementing the land quality law according to an explanation in State media. The program is universally hailed by propagandists as the centerpiece of China's food security policy, raising productivity and reducing vulnerability to drought and floods. It has been expanded over the years, including this year's goal to upgrade all "basic farmland" to "high standard" land by 2035.
 |
| High standard farmland demonstration zone in Shandong Province. Source: Xinhua. |
The success of the high standard farmland program is rarely questioned, yet there have been continual tweaks of the program to address mismanagement, substandard construction, corruption, underfunding, and incomplete or fraudulent projects as discussed in an earlier post. The solutions are always more government funding, stronger scrutiny of projects, threats of prosecution, and now "a stronger sense of responsibility" in the State media discussion of the new land quality law.
A few brave Chinese scholars in the hinterland have dared to investigate deep-seated conflicts inherent in the land system that undermine the high standard farmland scheme. They point out conflicts over the program's implementation that are largely kept hidden.
| China's rural land system was set up 2 generations ago when the countryside was teeming with peasants living off the land. All farmland surrounding a village is "owned" by a collective composed of families residing in the village. Land was divided up into hundreds of plots that are contracted out to be managed by each family for 30 years. Land was distributed on an egalitarian basis according to family size, number of laborers or other factors. Each family typically is given multiple plots of differing quality and accessibility, i.e. everyone got a strip of land in the most productive location and other plots in a swamp or on a hillside. A villager can lease out the rights to farm the land for a fixed term, but the land can only be permanently transferred by the village collective organization. |
The Geosciences University authors reported that some projects are built with roads or irrigation canals that dead-end at the boundary of plots belonging to villagers who did not participate in the program. The authors observed that villagers' objections resulted in perpetuation of fragmented plots of land. In some cases, land was left abandoned. The authors asserted that these problems discourage many village collectives from taking on high standard farmland construction projects.
The authors recommended arrangements undertaken by several model villages in Guangdong, Guangxi, and Anhui provinces where leaders encouraged consolidation of land plots. However, they fail to acknowledge the high costs of discussing and arranging such reallocations. While they claim the arrangements are voluntary, it sounds like some coercion is involved.
 |
| High standard farmland construction involves earth moving equipment that obliterates old field boundaries and creates new fields. Source: Xinhua. |
The high costs of reallocating farmland, misaligned incentives and the government's fallback on coercive measures were themes of an article last month in a Chinese academic journal by Sichuan academy of social sciences scholars who took a more elegant and abstract approach to criticize the implementation of the high-standard farmland construction program. Warning that the program has reached a point where old problems fester as new ones arise, this article's authors argued that implementation of the program needs to consider root causes of disputes over property rights and misaligned incentives that impede the success of the farmland construction program and potentially harm farmers' interests. While China's collective land ownership system has evolved over the years to accommodate the outmigration of villagers and demands for scaled-up farming, the authors raised concerns that high transaction costs and misaligned incentives inherent in the system undermine private investment, perpetuate the fragmentation of farmland, and result in idle fields.
These authors argue that high transaction costs prevent reallocation of land to the most efficient users, perpetuating fragmented property rights. A disconnect between managers and operators of land leads to short-sighted land use. Farmland becomes vulnerable to a "tragedy of the commons" phenomenon of stakeholders extracting benefits from land to maximize current returns, degrading its long-term productivity. The authors point out that the upcoming extension of rural land contracts for another 30-year period in 2027-28 overlaps with the high standard farmland construction plan and may solidify fragmentation of farmland plots. They argue that a "reasonable" allocation of property rights is necessary to prevent the overexploitation of farmland, but they offer few specifics of what should be done.
 |
| Decisions about farmland have to be decided by village organizations. |
The Sichuan authors noted that farmers, village collectives, local governments, and construction companies engaged in high standard farmland projects all have differing interests. They point out that the high-standard farmland program is a national food security program imposed from the top down by the central government. The central government requires that high standard farmland be operated by scaled-up farmers producing only grain, conflicting with villagers' interest in preserving their rights to farmland and maximizing its value. Local governments in farming regions responsible for implementing the programs are mostly short of money, have a narrow tax base, and do not benefit from grain output that generates no profits, tax revenue, or prestige. Central authorities have resorted to "responsibility systems", statistical quotas and threats of career derailment to force local officials to implement this program and other food security measures.
Construction companies have no interest in the long-term success of farmland construction projects, so the construction is often shoddy and substandard. The authors note that roads are often too narrow for agricultural machinery and cannot be widened due to poor planning. There is little coordination or information sharing between departments responsible for water, electricity, roads and internet access. The authors say difficulty of building irrigation facilities in hilly or mountainous areas remains a serious challenge (this became an issue when drought impacted wheat crops in the first half of 2025). There is little or no maintenance of facilities since responsibility for managing roads, electric lines, canals and pipes devolves to township governments who pass it down to village collectives.
According to the Sichuan authors, officials envisioned private investment playing a major role in financing farmland construction, but government investment dominates. The authors point to a 2021-23 campaign in Inner Mongolia in which less than 5% of financing came from the private sector. During the 2016-20 five-year plan the central government sent down 300 billion yuan to support farmland construction. The latest solution is debt. The current push to construct high standard farmland relies on 125.4 billion yuan (about $16 billion) in special government bonds and much larger amounts of loans from State-owned banks. The authors note that Jiangxi Province issued about $3 billion of special bonds during 2021-23 for farmland construction and now faces the challenge of raising new funds while having difficulty repaying the existing debt. The government subsidizes most of the construction cost, but one-third must be financed locally--usually by local governments. The authors cited an audit showing 2,761 agricultural infrastructure projects with investment equal to nearly $1 billion were idle or unfinished in 2023.
Given that farmers and local officials have little interest in investing in farmland officials have resorted to compulsion by passing a "law" requiring the improvement of farmland quality, as noted above. The article about the July 31 State Council farmland quality law included legalism--demanding "strict implementation of all regulations"--as well as a moral appeal--emphasizing the "need for a stronger sense of responsibility for protecting arable land."
 |
| Chinese officials envision high tech agriculture that can be run like a video game. "High standard fields" are a first step in that direction. Source: Zhejiang Top Cloud Agricultural Technology Co. |
As in most aspects of modern China, improvisation and constant tweaking of outdated institutions have created an inscrutable rat's nest of tangled interests in the countryside that is mostly invisible to the outside world. China aspires to be the leader of high-tech farming, yet its farmland is locked up in an outdated ownership and management system. The answers are always more science, more technology, more planning, without daring to look at the incentives that affect human behavior.
In assessing the big picture of China's agriculture, we are left with an enigma. Villages populated by a shrinking population of aging peasants squabbling over tiny plots of land are hard to reconcile with photos of neat green fields, reports of record harvests, the lowest grain prices in 5 years, and plunging grain imports over the past 12 months. China somehow is able to muddle through these problems...until they can't.
But one might ask, how is it that billions of dollars flow into China's pig and poultry farming companies, feed mills and soybean crushing plants, while the country's farmland remains starved of investment?
