The adoption of a revised Land Management Law on August 29 1998 represented a watershed in the reform process. The new law requires that collectively owned arable land be contracted to collective members for a term of 30 years, and that a written contract be executed detailing the rights and obligations of both parties. The law also restricts land readjustments.

Land readjustments have occurred in about 80 percent of rural villages in China since the introduction of the Household Responsibility System. Under this practice, the collective leadership periodically (in some cases once a year) redistributed village land to reflect changes in household population size since the previous land allocation.

Land readjustments have indeed allowed China to maintain an extremely egalitarian distribution of land within villages, but the uncertainty they have created represents the single greatest obstacle to long-term rural land tenure security in China.

Shortly after the adoption of the Land Management Law, the Central Committee of the Chinese Communist Party, during its Third Plenary Session in October 1998, issued the "Resolution of the CPC Central Committee on Several Major Issues Concerning Agriculture and Rural Work". According to this important expression of central policy goals, China must "staunchly and unwaveringly carry out the policy of extending the land contracting period to 30 years while at the same time firmly establishing laws and regulations that confirm and protect the long-term stability of rural land contract relations, giving farmers long-term, assured land use rights".

To date, however, neither policies nor laws have definitively addressed the issue of land readjustments. The impact of a "non-readjustment" rule on agricultural productivity and rural living standards remains the subject of much debate among researchers, policymakers, and legislative drafters within China. Forthcoming legislation will once again provide the opportunity to address this crucial issue. The decision as to whether to prohibit, or merely continue to restrict, land readjustments will have a profound impact on China’s rural land system for decades to come.

The debate concerning land readjustments has taken on increased significance in light of the April 1999 US-China Agreement on Agricultural Cooperation and China’s impending accession to the World Trade Organization. China’s ability to compete in world agricultural markets will depend greatly on its ability to cultivate crops for which it maintains a comparative advantage—high value, labor-intensive crops such as fruits and vegetables. Many of these crops will require farmers to make investments in capital, know-how, or labor that were not necessary to produce grain crops. Farmers’ perceptions of their long-term land tenure security is likely to be an important factor in determining their willingness to make such investments, and therefore in the success of this important transition.

The central government called for full implementation of 30-year land use rights by the end of 1999. To assess the extent and nature of implementation, and to inform the process of drafting additional legislation related to rural land tenure, the Seattle-based Rural Development Institute and Professor Ye Jianping of Renmin University conducted a random sample survey of 1,621 farm households in 17 of China’s major agricultural provinces in August 1999. The survey results revealed the following:

Extrapolating these results to the 197 million rural households in China suggests that significant progress towards implementation of 30-year rights had been achieved by August 1999, with as many as 75 million rural households receiving 30-year land use contracts.

The survey’s findings related to the nature of implementation, however, were less encouraging. Previous research by the Rural Development Institute (including a 1,080—household sample survey conducted in China in 1996) and others had indicated that farmers are much more likely to make long-term, productivity enhancing investments in their land if their land rights were relatively long-term and not subject to readjustments.

To gauge farmers’ confidence in the new rights, the August 1999 survey asked whether or not they expected land readjustments to continue during the 30-year land use term. Only 36 percent of farmer interviewees exhibited a high degree of confidence that there would not be land readjustments during the 30-year land use term, while fifty percent of farmers expressed low confidence in their tenure security. The remaining 14 percent were uncertain what to expect concerning tenure security.

Further analysis of the survey results showed that farmers possess relatively higher confidence where:

What effect would increased confidence have upon agricultural productivity and land management practices of Chinese farmers, including both the decision to make long-term productivity-enhancing investments, and the decision to shift from grain production to the production of high-value crops such as fruits and vegetables? Located on the East China Plain in Anhui Province, Fuyang City encompasses a largely agricultural area, with 83 percent of its 12.1 million residents being farmers.

Having implemented a policy of 30-year rural land use rights combined with a strict prohibition on land readjustments in 1994, Fuyang provided an ideal opportunity for researchers from Rural Development Institute and the Ministry of Agriculture’s Research Center for Rural Economy to observe and assess the impacts of a "non-readjustment" rule. Using Rapid Rural Appraisal techniques, senior researchers from the two organizations jointly conducted 25 detailed farm household interviews in May and June 2000.

The interviews found that farmers in Fuyang appear not only to strongly support the 30-year, no-readjustment policy, but also that they possess a high degree of confidence that readjustments will not occur. Eighteen of the 23 farmers we interviewed on this issue were highly confident that their land use rights would not be readjusted during the 30-year term. Only one farmer believed that land readjustments would definitely occur during the 30-year term. This apparently high degree of confidence is especially striking given the fact that land readjustments had been conducted in this area prior to 1994, when they had uniformly stopped.

High confidence levels appeared to contribute directly to increased long-term investments in land. Despite the relative lack of long-term investment opportunities—land is already level, soil quality is high, drainage doesn’t represent a significant problem, and water for irrigation is readily and cheaply accessible—farmers have made substantial long-term investments since 1994. The interviews made it clear that the security provided by the 30-year no-readjustment policy was an important factor in those investment-related decisions.

Eight of the 23 farmers we asked about long-term investments related to 30-year land use rights reported that they had made such investments themselves. The specific investments made by farmer-interviewees included the introduction of long-term crops such as apples or grapes, digging of irrigation wells at substantial cost, making significant drainage improvements where necessary, introducing or increasing the use of organic fertilizer, buying electric pumps for existing wells, and building fixed greenhouses.

Seven farmers further reported that many other farmers in their village had made similar long-term investments related to 30-year land use rights. Many interviewees told us that farmers had been unwilling to make similar investments under Fuyang’s previous land management system, which included periodic land readjustments.

Providing farmers with long-term land tenure security alone may be insufficient to ensure the success of China’s ongoing agricultural transition. Indeed, a variety of factors, including agricultural product prices, land quality, and access to extension and marketing information, will influence farmers’ willingness to make productivity-enhancing and diversification-related investments in their land. The experience of farmers in Fuyang and the results of numerous other studies, however, strongly support the hypothesis that land tenure security directly influences farmers’ willingness to make long-term investments on their land.

Fuyang’s experience and the results of our larger sample survey suggest that continuing legislative reforms could address farmers’ lack of confidence in their 30-year land use rights by: