Implementing China’s New Land Law:

Evidence and Policy Lessons

Klaus Deininger, World Bank Washington DC1

Songqing Jin, World Bank Washington DC

Xian Zude, National Bureau of Statistics, Beijing China

Scott Rozelle, Stanford University, Stanford, CA

April 2004

1 1818 H St. NW, Washington DC, 20433; Tel 202 4730430, fax 202 522 1151, email kdeininger@worldbank.org.

We would like to thank the China National Statistical Bureau for their cooperation in providing the data. Financial support for the work done in this paper was provided by the Knowledge for Change Trust Fund and the Norwegian ESSD Trust Fund. The paper has benefited greatly from discussions with and legal advice from Brian Schwarzwalder, Li Ping, and Tim Hanstad.

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Implementing China’s new Land Law: Evidence and Policy Lessons

Abstract: Increasing population pressure and non-agricultural demand for land have far-reaching implications for the way in which land rights are defined and access to land is regulated with a society. Unless clear and enforceable legal provisions are in place to impose constraints on the behavior of individual actors, this process may hurt the poor and/or have undesirable impacts on productivity. However, many countries, especially in Africa, have found it difficult to bring about legal change. Using the 2003 Rural Land Contracting Law as a point of departure, we describe recent changes of land relations in China, assess how legal provisions relate to practice, and describe progress in implementing the law. We find surprisingly rapid progress in implementation which is driven by a combination of centrally sponsored dissemination and democratic control at the local level. Issues for future research are identified. Keywords: China, Land Tenure, Rural Development, Property Rights,

1. Background and motivation

Based on increasing awareness about the importance of property rights and secure access to land for

sustainable economic growth, a large number of developing countries have recently revised their land

legislations (Alden-Wily 2002). In addition to equity considerations, the legal changes were motivated by

the desire to provide a more appropriate basis for private investment and increased productivity of land

use, to overcome the legacy of colonial laws, to reduce the potential for conflict, and to empower local

governments and establish a basis for effective decentralization. Although there are wide differences in

the details of the specifics of laws and regulations, one characteristic common to the countries concerned

the starting point was a rather legalistic one, with emphasis on trying to develop an “ideal” or ”perfect”

law (McAuslan 1998). Compared to a strong legal emphasis, less attention was paid to land policy, the

practices prevailing on the ground, and public debate and agreement with major stakeholders.

In many of the countries, the process of legal change turned out to be rather slow, progress with

implementation has been negligible, and evidence on the impact of the changed legal provisions on

household behavior is limited.1 This is of concern as it runs the risk of disappointing the high expectations

which many stakeholders have put into new land legislation and as it could lead to a co-existence of “old”

and new structures that can itself become a source of confusion, if not conflict. In fact, the institutional

vacuums created by prolonged processes of legal deliberation with scant dissemination have in some

1 For example, Tanzania established a Presidential Commission in January 1991. Results were made available publicly 4 years later (Jan. 1995), but it took another four years for a law to be approved by parliament (May 1999), two more years for this law to come into force, and as of Sept. 2003, little had been happened in terms of implementation (Alden-Wily 2003). In Uganda, land was to be dealt with the constitution in 1995 but the deadline was missed and a Land Act was finally approved in 1998. However, the resource requirements for implementing this Act vastly exceeded what was available, requiring a complete re-writing in the form of a Land Sector Strategic Plan which now forms the basis for the Government to formulate a land policy (Bosworth 2002).

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cases rendered excellent legal provisions largely irrelevant in practice. A growing literature demonstrates

that this can have negative consequences in a number of respects: Without an accepted and enforceable

property rights legislation, increasing land scarcity may set in motion a dynamic that exacerbates pre-

existing inequalities of land access and puts the poor at a systematic disadvantage (Woodhouse 2003) and

forces them to take recourse to informal means (Mathieu 2002). Lack of policy direction and institutional

capacity also exacerbate the situation of vulnerable groups who see their livelihood threatened by many

other factors, including the impact of malnutrition and disease (Drimie 2003) and increases the level of

unresolved disputes, with negative impacts on productivity (Deininger and Castagnini 2004). This runs

counter to attempts to improve the performance of the agricultural sectors in developing countries which

are increasingly recognized to be critical for sustained poverty reduction in this region (Dorosh and

Haggblade 2003, Thirtle et al. 2003). Difficulties associated with obtaining land that should, in principle,

have been dealt with by existing legislation, also make it difficult for local entrepreneurs to start up

businesses, increases the transaction costs for foreign investors (Emery 2000), and undermine governance

and efforts at decentralization (Bell 2002).

Both the importance of the issue and the apparent lack of progress suggest that the experience of countries

that have recently tried to implement major changes in land policy may be of interest to provide insights

and guidance on areas that might be of importance in achieving results on the ground. In this paper we

use the example of China to provide insight into a process of legal change which, starting from a

completely collective structure in the late 1970s, has gradually increased the security of property rights,

aiming to facilitate a higher level of land transactions and to limit arbitrary political interference. The goal

of doing so is to (i) describe the nature of legal change, comparing it to what is observed in other

countries; (ii) provide insights into the economic impact of such changes at the local level; and (iii) to

identify factors that have helped implementation to go forward.

The paper is structured as follows. Section two briefly reviews the evolution of China’s land legislation

and the main objectives of the 2003 Rural Land Contracting Law (RLCL) which are used to develop

hypotheses on transferability as well as implementation of and knowledge about the law. Section three

discusses nature and source of the 1,100-village survey conducted to obtain empirical evidence on these

issues, provides descriptive evidence on the economic characteristics, administrative and decentralized

land transactions, the rules governing land use and transfers, and leaders’ implementation and knowledge

of the RLCL. It also sets out the estimation strategy to be followed. Section four provides results from the

econometric analysis on the determinants of land transfers and the implementation activities undertaken at

the village level. Section five concludes with a number of policy recommendations for China as well as

other countries.

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2. Context and approach

To understand the challenges faced by China and the differences in approach to what is observed in other

developing countries, especially Africa, we discuss the evolution of land legislation in China, in particular

the challenges that prompted the passage of the RLCL. Building on this discussion, we develop a

conceptual framework, present the econometric approach to be used to assess the impact of legal

provisions on economic outcomes and to identify factors leading to implementation of the law.

2.1 China’s land legislation: Evolution and key issues

Before the revolution, most of China’s farmers were poor tenants in a semi-feudal system or owners of

small plots of land. After taking over, the communist government confiscated holdings owned by large

landlords, distributing individual land rights to households on an egalitarian basis (Prosterman et al.

1990). In the 1950s, under the influence of the Soviet system, the country adopted a policy of

collectivization that required farmers to surrender land to collectives, with disastrous consequences on

output and the welfare of the rural population, as illustrated especially in the famines of the 1958-60

period in which millions of rural dwellers perished (Putterman and Skillman 1993, Yao 1999, Lin and

Yang 2000).

From 1978, the Household Responsibility System (HRS) was adopted to increase food production and

security. In rural areas, households were made residual claimants to production by receiving land in return

for delivery of a certain amount of grain in kind (the quota) to the village.2 This award of individual use

rights to land contributed to tremendous increases in productivity and output (McMillan et al. 1989, Lin

1992). Output growth flattened in the late 1980s, something that is often attributed to a combination of

reduced grain prices, low profitability of agricultural production, and high taxes and quotas (Oi 1999).

During the 1990s, while growth resumed, its rate was significantly lower.

Three other factors related to property rights are perceived to have constrained agricultural productivity

(Ho and Lin 2003). First, households’ tenure security remained low, especially in the immediate post-

reform period. In 1984, villages were urged to contract land to farmers for 15 or more years. The rights

associated remained weak, however, because “contracts” often remained verbal and did not stop frequent

reallocations of land (Oi 1999, Rozelle et al. 2002). In the mid-1990s, upon expiry of the original 15-year

leases, collective land owners were exhorted to renew contracts for another 30 years, a policy that appears

not to have been widely implemented (Schwarzwalder et al. 2002).

2 In urban areas, land could either be allocated by the state or long term leases be acquired by private users upon payment of a conveyancing fee. Such acquisition provided considerable advantages by giving owners the ability to participate in the secondary market, use the land as mortgage, and rent it to others. It has led to a rapidly growing land market: Between 1993 and 1998 the amount transacted annually increased from about 11,000 to almost 1.1 million ha and the amount of land mortgaged rose from about 1,000 to 884,000 ha (Ho and Lin 2003).

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To provide evidence that can help clarify these issues and thus guide policy formulation, China’s

government encouraged provinces and counties to implement “land rights experiments” in a total of 18

national experiment zones for rural reform (Chen and Davis 1998). Two prominent examples relate to

making land available for large-scale exploitation and giving households more secure land rights.

Regarding the first, even though a number of studies suggested benefits from cultivating larger plots,

attempts to introduce “scale farming” generated rather disappointing results and the experiment was more

or less abandoned (Lin et al. 1998, Chen and Brown 2001). Attempts to introduce longer-term land rights

and prohibit redistribution in Guizhou province showed more promising results even though a number of

other factors have to be considered as well (Kung 2002a). Building on the outcomes of these experiments,

the Chinese Government revised the 1986 Land Management Law in 1998 in order to improve tenure

security. This revision requires that all farmers receive written 30-year land use contracts and that the

scope for readjustments is either circumscribed or completely eliminated.

Second, even though population change and diversification of the livelihood of rural households led to

demands for adjustment of land holdings to changing circumstances, such demand was initially expected

to be met by administrative reallocation rather than more decentralized mechanisms (Kung and Liu 1997).

Administrative reallocations, unlike market transactions between rentors and rentees, are shifts of land

among households that are arranged by village leaders, typically on a periodic basis for a variety of

reasons. In fact, even exchanges of land within the village were prohibited until legalized under the 1986

Land Management Law. Transfers to outsiders remained technically illegal, or at least not officially

recognized, until it was allowed in the 1998 revision of this law, albeit without clarifying the specific

modalities to be followed by such transfers. Partly as a result, and often linked to the emergence of

migrant labor markets, decentralized mechanisms to transfer land have gained strength, starting to

complement, and in some instances even overtake, administrative land transfers (Benjamin and Brandt

2002, Kung 2002b, Deininger et al. 2004).

Third, rapid economic growth has made it more urgent to find mechanisms for transferring land to non-

economic uses (Li 2003). Despite considerable demand for land conversion from agricultural to non-

agricultural uses, the fact that the land owner (i.e. the village) was also supposed to regulate such

conversion led to large-scale expropriation of the land of poor farmers, widespread corruption, and

conflict of interest (Turner et al. 1998). As normally about 90% of the proceeds from such conversion

went to different levels of government, this was highly inequitable and could leave villagers without a

safety net even though reports suggest that large part of the expropriated land could not be put to proper

use (Xie et al. 2002).3 Initial efforts to curb this practice proved ineffective, leading to the establishment

3 Reports indicate that, in 1996, 1.74 million mu had been converted to non-agricultural uses but could not be properly utilized (Cai 2003).

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of a cap on conversions and the requirement of provincial or national approval for such conversion (Ho

and Lin 2003).4

While all of these changes should, in principle, have gone a long way to remedy shortcomings identified

in earlier legislation, empirical evidence suggests that, similar to what is observed in African and other

developing countries, shortcomings in implementation may have limited the impact on the ground. A

recent survey found that, although 60% of households are estimated to have held written land tenure

contracts, only 13% of these contracts rule out further land readjustments, 25% explicitly allow for re-

adjustments, and the remainder contain unclear or contradictory provisions (Schwarzwalder et al. 2002).

As a consequence, only 12% of farmers were confident that there will be no more adjustments, implying

that the impact of these provisions on farmers subjective tenure security has been limited and that further

legal action was required to ensure that the desired objectives be achieved. Similarly, high non-

agricultural demands for land continue to be met in way that is often non-transparent, inequitable, and

fiscally unsustainable (Ding 2004).

2.2 Main goals and provisions of the RLCL

To provide an answer to these challenges, the RLCL was adopted by the Party’s Standing Committee in

August of 2002, to become effective in March 2003. As the first land tenure-law since the 1950 law on

land, and based on a 3-year process of development and drafting, the RLCL provides a secure legal basis

for farm household property rights. Rural land is defined to include arable, grass, forest, as well as waste

and other land. The first three (arable, grass, and forests) are subject to household contracting whereby the

collective owner represented by the village signs written land use contracts with individual households.5

The duration of contracts is stipulated to be 30 years for arable land, 30 to 50 years for grassland, and 30

to 70 years for forestland.6 The law insists that these contracts be written and include, in addition to the

names of the parties involved, specific details on location, area, quality, and use of the contracted land,

the rights and obligations of both parties, the contract term, and liabilities in case of contract violation. To

prevent alteration of contract terms or unilateral “cancellation” by village leaders if there is need for land,

e.g. for industrial projects, contracts are supposed to be registered by the county or provincial government

which keeps copies that can be called upon in case of loss or dispute. In addition to such procedural

provisions, the RLCL provides a legal basis for issues relating to tenure security, marketability, and

4 Any conversion requires government approval at the provincial level and reporting to the State Council and the expropriation of any primary farmland, any cultivated land greater then 35 ha, and other land in excess of 70 ha requires approval by the state council. 5 Waste and other “land not suitable for household contracting” may be contracted through auction, competitive bidding, or public negotiation with priority to be given to collective members. In this case, a written contract is requir ed and the rights obtained can be transacted, mortgaged, and inherited during contract term. 6 Art. 62 indicates that in cases where arrangements in line with these provisions have already been made, no new contracting will be needed but that right certificates should be issued in cases where this has not been done yet. Also note that contracting periods that are longer than those envisaged under the RLCL can be implemented contingent on approval by the State Council.

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enforcement of rural household land rights that had previously been dealt with only through

administrative means.

Tenure security: By giving a legal backing to secure 30-year rights and eliminating the scope for further

readjustment of land with two exceptions,7 the RLCL aims to promote investment, diversification, and

productivity. Land rights remain with the household even if some members change their registration

status and have to be surrendered only if the entire household moves to the city and changes to a non-

agricultural registration. The law also emphasizes equality of men and women, stipulating that in case of

marriage, divorce, or death of the husband, the rights to land of the spouses are supposed to be maintained

unless they receive a new land allocation in their new village.

Transferability: A second goal of the RLCL is to create a basis for more impersonal transfers of land.

Such transfers are of increased relevance to ensure adequate land utilization as, with migration or

development of the rural non-farm economy, households respond to non-farm opportunities. To this end,

the law allows land rights to be exchanged and to be leased, transferred, and assigned to others much

more than was possible before. In the case of transfers (zhuan bao) that leave the original contracting

relationship unchanged, the collective has to be notified but no approval is needed. Transactions with a

duration longer than one year require a written agreement and can be registered by the village on a

voluntary basis. In the case of reassignment that terminates the original contracting relationship (zhuan

rang), approval by the collective landowner is required.

Accountability: Given reports about rampant corruption associated with land takings and the conversion

of land to non-agricultural uses, a third challenge faced by the RLCL is to limit the scope for arbitrary

imposition of rules by village officials and to rein into the conflicts of interest that may arise from the fact

that there is little difference between the owner, regulator, and often also the first instance of arbitration.

The law clarifies that only contracting household have the right to decide whether to engage in

transactions and retain the proceeds and that the collective can not take back land during the duration of

the 30-year contract without paying adequate compensation. 8 To help implement these provisions,

mechanisms for dispute resolution, including consultation, mediation, and arbitration by a specialized

body (with a right to appeal to the People’s Court), and direct recourse to the People’s Court, are

established. Violations of farmer autonomy, illegal taking back or readjustment of land, re-contracting or

7 Two exceptions are the case of natural disasters which irreversibly damage contracted land and the possibility of making small readjustments that involve only a few families. Small readjustment is contingent on opportunities to use other land reserves (including originally reserved, newly exploited or land voluntarily returned by households) available to the village having been fully exhausted and requires approval by two thirds of the village assembly or the village representatives as well as approval by the township government and the county government administrative unit responsible for agriculture. 8 In fact, during the fieldwork undertaken to develop the instrument, village leaders complained about the much higher compensation payments required under the 30-year contracts.

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other interference with transactions, violation of women’s rights, or taking back land in return for debts

are all made punishable offenses.

2.3 Methodological framework and estimation strategy

Of course, implementation of the provisions above requires households to be aware of their rights and

enforce them. Our analysis aims to address empirically two sets of questions. First, we are interested to

know whether implementation of the provisions of the RLCL is justified economically, something which

we aim to demonstrate by showing that past interventions and regulations that run counter to the

provisions of this law have indeed had a negative impact on the level of land transactions. Second, even if

the RLCL enhances productivity, thereby benefiting individual households and central government,

giving more secure rights to households may encounter resistance as it detracts from the power wielded

by local cadres. We are interested to identify factors that are conducive to more effective implementation

of the law, defined as either village leaders knowing about its provisions or as the village having made

specific efforts to disseminate its content. In line with this reasoning, our main hypothesis is that both

pressure from above and demand from below will be required to ensure that implementation proceeds and

that the law can have an impact on actions on the ground.

Even though the lack of data on the two partners in land transactions precludes us from making direct

inferences on the productivity impact of land transfers, the literature, both internationally and in China,

suggests that, unless entering into contracts is associated with high transaction costs, transfers of land in

rental markets will increase productivity and household welfare (Lanjouw 1999, Deininger and Jin 2002,

Deininger et al. 2003). This tendency towards land rentals will increase with general economic growth,

migration, and diversification of income sources (Li et al. 1998). Moreover, it has been shown that if

contracts are sufficiently flexible, risk will not be an important factor (Carter and Yao 2002).

Another institutional arrangement that will affect the level of land transactions relates to land taxation. As

it increases the cost of holding land idle, higher levels of land taxation, or continued maintenance of the

grain quota would also be expected to increase the propensity to transact land. Institutional arrangements

which increase the transaction costs of engaging in land market transactions in the widest sense are likely

to have a countervailing effect. One clear example would be the imposition of restrictions such as a

requirement of obtaining village approval even on land transactions within the village (Deininger and Jin

2003). Similarly, even though this requires a number of largely unproven assumptions and little empirical

evidence on its impact exists, the literature has generally assumed that a history of past land redistribution

will be a signal for a higher probability of future expropriation (Yang 1997, Jacoby et al. 2002) that will

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reduce the household’s propensity to invest and to engage in land transactions that may be interpreted as a

signal for such land not being needed and thus available for expropriation.9

All of this leads to the hypothesis that, while economic diversification, higher levels of income, and more

intensive land taxation, all are associated with a higher level of land transactions, insecure property rights

will reduce the propensity to engage in efficiency-enhancing land transactions. To test this hypothesis

empirically, denote communities by i and let Ti be an indicator for the presence or level of decentralized

land transfer at the village level. In line with the discussion above, we estimate an equation of the form

Ti = • + • Di +• Ai + •Ri + • i (1)

where Di is a vector of indicators for economic diversification and income growth, Ai is a vector that

indicates the importance of agriculture, Ri is a vector of restrictions imposed on land market activity, •i is

an iid error term, and •, •, and • are coefficients to be estimated. To proxy for Ti , we use either (i) a

dummy of whether or not anybody in the village participated in land rental (either in or out) in 2003 or

(ii) the share of total cultivated land that has been rented out during the same period. The former takes

account of the fact that village leaders are likely to have better information on whether or not any land

rental activity took place in the village than on the exact amounts involved in such transactions. The

vector Di includes the level and growth of per capita income, the share of households that have individual

enterprises, the share of village land that is irrigable, the per capita land endowment available to the

village, and the share of area that was taken through administrative means in the 2000-2003 period. Ai

includes the share of households who have their main income from agriculture and the presence of grain

obligation or other land-related taxes. Finally, Ri includes dummies for whether or not the village carried

out a reallocation after 1998, and whether rental to outsiders is not allowed. In line with the hypotheses

formulated earlier, we expect •>0, •<0, and •<0.

While the law puts household property rights on a secure legal basis, it will be effective only if those who

are expected to benefit know about its provisions and, if needed, will be able to use the mechanisms for

enforcement. 10 Although the ideal way to obtain information on this would be to directly query

households on some of the law’s specific provisions and their confidence in the ability to seek redress if

needed, the fact that the law had become effective only a few months before the survey led us to focus on

9 A rather surprising result from Kung and Liu’s study (1997) shows that in some counties majority of farmers actually prefer shorter duration of land contract to a longer one. However, this preference is due to the serious mismatch between land and labor resulted from the combination of no land adjustment since the adoption of household responsibility system, and the underdevelopment of rental market activity, the latter of which is partly due to the lack of off-farm opportunity and partly due to the restrictions from local village leaders. With the further development of local off-farm market as well as the opportunity to migrate, removal of transaction cost of land market transactions is likely to shift farmers preference from short-term contract to longer term contract. Likewise, any restriction on land market transfer is likely to exacerbate its negative impact on production and productivity. 10 In Uganda, for example, even four years after the promulgation of a new Land Act only 20% of male household members -and even fewer females- were aware of its existence of this Act, let alone its stipulations. Together with the failure to establish the institutions needed for implementation, this greatly reduced the effectiveness of the Act (Deininger and Castagnini 2004b).

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the community level for the time being. Having public dissemination events and, more importantly,

producing written information material to inform villagers about the content of the new law increase their

level of knowledge about the new law. Although they can, of course, not prevent attempts to subvert the

law, such public information campaigns will make it much more difficult for village leaders to act in

ways that are inconsistent with its provisions.11

The extent of implementation at the village level, our dependent variable, will be affected by economic

and social variables. Concerning the former, the literature demonstrates that, in environments where risk

is high, land scarce, and options for insuring against it through social networks, saving, and

diversification of income sources are limited, households may appreciate land, including the prospect of

possible redistribution which are eliminated by the RLCL, as a social safety net (Kung 2002a). In poor

communities, households would therefore be less favorably disposed towards implementation than in

situations where income is higher and more diversified since the latter will also increase the payoffs, in

terms of investment and transferability, from more secure land rights, we expect higher income levels to

be unambiguously associated with more effective implementation of the RLCL.

The socio-economic variables hypothesized to affect RLCL implementation are based on systematic

differences in the subjective (and static) benefits which individual households, village officials, and

higher levels of government RLCL derive from such a measure. Giving only weak and ill-defined

property rights to households tends to increase the discretionary power of village leaders, implying that,

these would have little incentive to strengthen household property rights even if doing so could produce

productivity benefits (Turner et al. 1998).12 By contrast, households and higher level governments are

likely to favor more secure property rights, which are likely to be beneficial for productivity, equity, and

social stability (Guo 2001).

We thus expect that, holding constant for economic characteristics, a village will conduct dissemination

activities for the RLCL if prompted to do so from higher levels of government, and if the local population

is more empowered to challenge their leaders. To test these propositions, let Ii be a dummy indicating

whether the village (rather than other levels of government) has initiated activities to disseminate the

RLCL either through a village assembly or through preparation of written material. To test this

empirically, we estimate a probit equation of the form

Ii = • + • PAi + • PB

i + • Ei + • ERi + • i (2)

11 Both the level and sophistication of dissemination activities undertaken by individual villages that was encountered in the field during questionnaire development and pre-testing was surprising: Some villages produced 40-page booklets that contained the law as well as explanations while others had developed brochures with “100 questions and answers about the new land law”. 12 This was confirmed during the field-test of the questionnaire where the village leaders interviewed pointed out that giving legal force to households’ 30-year rights would greatly increase the fiscal requirements associated with expropriating land (as households will have to be compensated for a much longer remaining lease period) and would also limit their ability to negotiate and strike deals with outside investors.

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where PAi and PB

i denote the strength of pressure from above and pressure from below, respectively and

Ei is a vector of other economic characteristics. Consistent our hypothesis, we expect • and • to be

positive and highly significant.

The variable representing pressure from above is a dummy indicating whether the county or provincial

government had organized a meeting to disseminate the new land law. The household’s ability to voice

their concerns and push for effective implementation of a legal regime that would strengthen their rights

and bargaining power vis a vis village cadres will be enhanced by democratic representation at the village

level. Such participation is indicated by the fact that a village assembly (comprising all members of the

village) had been held, and the share of village committee members that is elected democratically rather

than appointed by existing bureaucrats. We also know whether, in case a higher level of government had

convened a meeting to disseminate the new land law, representatives from the village participated. Even

though this variable is partly endogenous, we include a dummy for such participation in some of the

regressions. Economic variables in the regression include a measure of the village’s income level,

economic diversification (share of households in agriculture and with own enterprises), land scarcity and

demand for non-agricultural land (per capita endowment of cultivable land and whether there had been

any land taking after 1997), whether the grain obligation is still in place, and a measure for the strength of

property rights in the past (whether any reallocation of land had taken place in the period after 1998).

3. Data sources and descriptive evidence

Even though one needs to be aware of the constraints associated with use of village level data, the ability

to draw on information regarding past land reallocations and land takings, the rules governing land access

and land transfers at the local level, and the implementation of the RLCL for more than 1,100 villages in

the country’s 12 most important provinces allows us to produce an unprecedented snapshot of land

relations in China. We find considerable divergence between its provisions and practices on the ground.

More surprisingly, especially if compared to the situation in Africa, and given that the new law had been

in force for less than 9 months, is the large extent to which dissemination activities had already been

implemented -- 82% of villages had been invited to participate in a meeting organized by the township

and in 58% the village had organized a meeting of the representative assembly to disseminate the law.

The fact that, on average there was about a 10-day (or 0.4 month) lapse between the meeting by higher

government and that by the village provides descriptive support for our hypothesis and justification for

further analysis.

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3.1 Nature and sources of data

The empirical basis for our study is provided by a survey of more than 1,100 villages in 12 provinces of

China conducted in November 2003 by NBS, in a collaborative project with the World Bank’s

Development Research Group. Together, the chosen provinces account for nearly two thirds of China’s

rural population and more than 60 percent of the country’s agricultural production in value terms. Within

provinces, the sample is statistically representative and the villages coincide with those included in the

household sample of the NBS, thereby reducing cost and providing a possibility for future analysis at the

household level.

The survey instrument captures information on the village’s socio-economic characteristics, infrastructure

access, land market transactions, migration, and governance. This was complemented with detailed

information on land reallocations and land takings, and the rules governing land transactions, changes in

land use, and the access to land by women at the local level. Finally, respondents were asked to report

about any dissemination activities that had been undertaken either by the village or by higher levels of

government and the perceptions of villagers about the RLCL. In an attempt to capture the situation before

the RLCL took force, and to assess whether most respondents were asked to provide information on

economic variables for 2003, 2000, and 1997 while information on land-related rules and regulations was

captured retrospectively back until 1985, i.e. before the adoption of the 1986 land management law.

Before reviewing key findings from the survey, a brief discussion of the advantages and disadvantages of

the survey instrument, and their likely implications for data quality, is in order. Focusing on the village

level has three distinct advantages. First, many of the phenomena of interest are rare events which will not

be adequately captured by a survey of randomly selected households. As village officials are required to

maintain records of such events that would form the basis for any sampling scheme to get at households

affected by such phenomena, it obviously makes sense to start at this level. Second, while households

may, for a variety of reasons, either not be aware of or may have misperceptions about the rules and

regulations governing land transfers, village officials who are responsible for enforcing such regulations

will be the most reliable source for information on the nature of such regulations. The same will be true of

dissemination activities implemented by the village and of which individual households may not be

aware. Finally, in the context of China where village officials are required to keep books on a wide

variety of issues that range from basic socio-economic characteristics to sources of local revenue, trying

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to obtain such information from individual households is likely to be inefficient and associated with a

considerable sampling error, especially for variables such as migration.13

While our focus on community data implies that a village level survey of the type conducted here is likely

to be a cost-effective way of capturing the immense variation across China, there are a number of issues

which one should be aware of in interpreting the results. First, the level of error still may be relatively

high for household-level variables that are not captured in village-level statistics and on which leaders are

likely to have only incomplete knowledge. Examples are the participation of households in land

transactions. Second, village leaders may have an incentive to mis-state some of the information,

especially if they have reason to believe that their reporting will have an impact on how their performance

is being assessed. For example, knowing that government is trying to promote the RLCL, they might want

to overstate the level of dissemination activities undertaken. Similarly, they might be loath to admitting

that land ahs been taken without or at very low levels of compensation. In addition to relying on

traditional principles of questionnaire design, we deal with this issue by administering a test regarding

their actual knowledge of the law.14 Third, asking village leaders about farmers’ attitudes to the RLCL

may indeed produce biased results. While we do not rely on this information in our econometric analysis,

we note that it may be of interest to compare this information to what comes out of household interviews

at a later stage.

3.2 Descriptive evidence

The data, which we report on a regional basis, illustrate the high recent levels of economic growth as well

as the pervasive nature of migration in China. 15 We find that, even though market-based transfers are on

the increase, redistributions, part of them related to the 1998 policy change, have been quite frequent and

the extent of land taking shows a significant increase since 1997. At the same time, and even though there

are still a number of villages in which the practice of land reallocation continue to be at variance to what

is being stipulated in the RLCL, village rules with respect to land use and exchange have been moving

towards higher levels of tenure security for land users. Even more surprisingly, and although higher levels

of government have clearly taken the lead, dissemination of the RLCL has proceeded at a considerable

pace and -at least according to their leaders- villagers appreciate that the law puts their land tenure on a

more secure footing and express high levels support for its provisions.

13 In fact, the presence of such books allowed us to implement the surve y in a way where the first part of the questionnaire was given to village officials during a first visit and collected during a second one that served to collect other types of information (e.g. regarding the RLCL) and to cross-checked the information provided against the village books. 14 In addition to relying on official records wherever possible, the fact that the instrument was administered to at least two persons (the village accountant and village leader) also reduced the bias that is likely to arise from this. 15 The regions are defined as follows: North and northwest region includes Hebei, Liaoning and Henan provinces, coastal region includes Jiangsu, Zhejiang and Shandong provinces, central China include Hubei and Hunan provinces, and south west includes Sichuan, Guizhou, Yunan and Shanxi provinces. Figures that are disaggregated by province are available from the authors upon request.

13

Population and endowments: Table 1 illustrates that the villages under concern had on average about 470

households with slightly less than 4 members each. Population growth over the last six years has been

relatively modest, at 0.29% on average. Compared to other countries, secondary school attendance is,

with about 95% on average (up from 91% in 1997), quite high; moreover, in 2003 45% of those who

finished secondary school continued to high school (compared to 38% in 1997). Inter-regional variation

in schooling attendance is limited; even in the South West, the country’s poorest region, 92% of eligible

children attended secondary school and 37% of graduates continued to high school. On average 11% of

workers did not complete their primary education, a figure that varies between 7.5% in the North and

15% in the South West.

The impact of rapid economic progress during the last decade is also visible in significant increases of

asset ownership; for example while only 15% of households had access to phones (either cell phones or a

landline) in 1997, 54% had access in 2003. Although regional differences remain pronounced -phone

coverage reached 79% in China’s coastal region compared to only 31% in the South West- the fact that

growth rates where highest in poor regions where phone coverage increased more than fivefold since

1997 suggests that there may actually be come catching up. Growth in the population’s access to color

TVs, from 27% in 1997 to 57% in 2003, is also pronounced.

Per capita endowments with cultivable land range between less than one mu (72% of which irrigable) in

the coastal regions and 1.7 mu (with 50% irrigable) in the relatively land abundant North, a density of

between 770 and 1,5000 individuals per km2 of cultivable land. To provide a measure for the level of

economic activity, we use the average daily wage for a male unskilled worker. With an average of 19 Y,

this variable ranges between 15 Y in the Southwest and 24 Y in the Coast. The fact that differences in

wage rates are much less pronounced than those in income suggests that the high level of migration does

help to equalize wage rates, something that is confirmed by the fact that, in percentage terms, wage rates

increased most in the South West, the country’s poorest region.

Significant differences between the Coast and the rest of the country also are observed in the sectoral

distribution of the labor force; while according to village officials 69% of households derive their main

income from agriculture at the national level (compared to 76% in 1997), this is true for 78% in the

Southwest but only 54% in the Coast. By contrast, the share of workers that has access to local off-farm

income in the Coast is, with 27%, more than double of what is found in any of the other regions.16

Participation in the local workforce, however, does not imply that migration is absent in Coastal

provinces; to the contrary, the share of migration (defined as households who leave their place of origin

for more than 3 months) is, with about 19%, one and eight percentage points higher than the share of

16 Note that these figures need not add up to 100% as one is in terms of households and the other ones in terms of workers.

14

migrants in the Southwest and North/Northwest respectively. The nature of migration, however, differs

among regions. Only about 25% of the migrants leave their home province in the Coast compared to 63%

of migrants in the Central Provinces.

Land markets and land reallocations: As panel 1 of table 2 illustrates, the share of villages where land

rental is practiced has increased by almost 20 percentage points, from 49% in 1997 to 68% in 2003. The

increase in the share of households participating in such markets is even more remarkable; compared to

about 6% in 1997. Village officials estimate that 10% of farm households rent land in and 12% of

households rent land out. The high incidence of rental in the Center and South West (80% and 69% of

villages, respectively) may suggest a link to migration. Although a large majority of land rentals occur

within the village, 11% of the contracts (as compared to 8% in 1997) are concluded with outsiders or

entrepreneurs, a share that is particularly high in the coastal areas where almost 20% of contracts are of

this type. While only about 14% of rentals rely on written contracts, 58% of them are for a duration that

exceeds one year, possibly indicating that long-term land rental is not taken as a signal for village leaders

to take back land everywhere.17

Land taxation has long been recognized as a desirable instrument to provide incentives for more intensive

land use. Our data suggest that, even though the implementation of tax reform in the vast majority of

sample villages has led to a slight reduction of the tax burden, taxation of agricultural land in comparison

to other countries is quite high (Bird and Slack 2002). In fact, the amount per mu that has to be paid in

taxes amounts to about 70% of the rental value of land. The nationwide reforms of rural taxes and fees

which have been implemented in 94% of the villages, appear to have reduced the burden on farmers only

marginally: in villages where such reform had been implemented, farmers on average still paid 80% of

their pre-reform tax bill. About one third of villages have set aside a land reserve that can be used flexibly

to cater to emerging needs of either urban expansion or award of land to new families.

One of the big gaps in the existing literature is that it contains little conclusive evidence on the level and

incidence of administrative reallocations and its changes over time, especially since the late 1990s. Our

data suggest that 64% of villages undertook reallocation in the 1997-2003 period, a share that was

actually higher than in the 1990-96 period (44%). In the villages that were affected by the reallocations,

the number of reallocations (during the six year period) or the share of area affected (conditional on the

decision by a village to reallocate) changed only marginally. Interestingly, reason for the reallocations

appear to have changed. For example, the size of the area and the number of households affected by the

reallocations due to population change decreased markedly from more than 50% to less than 30%. The

17 This is one place in which community-level data differs from household level data. In a 2000 survey of 1200 households in six provinces, it was found that more than 90 percent of land rental agreements were for one year or less.

15

reason that this number fell is that many villages appear to have undertaken a “final” adjustment in 1998

or shortly thereafter in response to the issuance of “new” 30-year contracts (which was implemented in

many villages following the 1998 revision of the land management law). The hypothesis that, in the

absence of legislative action to make land rights more secure, even administrative measures such as the

award of contracts, may have had less impact on tenure security than one might have expected is

supported by the fact that the share of villages who, in contravention of the provisions of the RLCL, took

land back from term migrants who continued to maintain their village residency status, declined only

marginally, from 11% to 10%.

Consistent with the literature which has pointed towards a decrease in the growth rate of land taken as a

consequence of policy reforms in the late 1990s (Cai 2003), our data shows that the share of villages that

reported any land takings remained relatively constant, at 18 to 19% during the 1995-2000 period. The

fact that 29% of villages reported land taking in the 2001-2003 period highlights, however, that in the

face of rapid economic growth such institutional adjustments provided at best a temporary reprieve in the

rate of land takings. Between the mid-1990s and the 2001 and 2003 period, the extent of area taken more

than doubled, from 3.7% to 7.9% of the original arable area.18 Not surprisingly, there are pronounced

differences across regions. For example, the area of land taken between the mid-1990s and the 2001-03

period more than tripled in the coast (from 4% to 14%) but remained stagnant or may actually have

declined in the North (from 6% to 4%). The fact that growth in the share of households that were affected

by such takings was lower than growth of the area taken implies that, land takings seem to be more

concentrated in specific areas and that individual households tend to lose a larger share of their

endowment to non-agricultural projects. Such a finding is consistent with Deng et al. (2004).

Conversion of land to non-agricultural uses is unlikely to have adverse effects on equity and efficiency if

the former owner is compensated at full market value (or with agricultural land of comparable value in

another location). If the compensation paid is below the market value, however, such taking involves a

wealth transfer from (often poor) land owners either to village officials, the state, or developers and the

incentives conveyed to the new owner may not be appropriate. The fact that more than 20% of those who

had land taken in the North and North West compared to only 6% in the Coastal did not receive

compensation suggests that there are significant differences in the extent to which laws are respected

across regions. We also note marked differences in the amount of compensation paid that are broadly

consistent with the above observations whereby the lowest amounts of compensation are paid in the

center.19 18 To make figures comparable and avoid biases due to a shrinking denominator, we express all areas as a share of the village’s 1997 arable endowment. 19 Of course, a more appropriate treatment of the topic would require to adjust for land quality differences, something that was beyond the scope of the survey instrument used and would require more detailed follow-up.

16

Rules on land transactions and local governance: Given that, at least in the past, local governments had

high levels of discretion in setting the rules governing allocation and taking of land as well as land

transactions, it is of interest to describe these in more detail and to assess the extent to which they are in

line with the RLCL’s provisions or have been changing to become more consistent with them. Doing so

reveals that, despite a shift towards increasing transparency and accountability at the local level and

providing land rights that are secure and can be easily transferred, a significant share of villages are still

characterized by deviation from the provisions of the new land law.

A first observation is that tenure security for those that are not able to personally able to cultivate their

land remains incomplete. For example, our data show that 8% of villages (down from 12% in 1997) had

rules according to which land would be taken back from migrants who had rented out their land for a

number of years, a percentage that is highest in the center (11%) and lowest in the South West (6%). As

the literature has noted, this is likely to constitute a disincentive for migration (Yang 1997). Land that is

left uncultivated will be taken back immediately by 9% of villages, after 1 year by 8%, and after 3 years

by 4% while the remainder indicated that they did not have any rules.

Secondly, although more villages allow rental to outsiders than previously, slightly more than 10%

prohibit such transactions and around 20% require village permission rather than notification (as

stipulated in the new law for all contracts with a duration longer than one year). While 18% of villages

had outlawed land rental to outsiders in 1985, 13% continued doing so in 2003 and an additional 22%

required permission by the village to do so (rather than just the notification included in the RLCL).

Regionally, such restrictions appear to have been most common in the coast (where 19% outlawed and

28% restricted rental to outsiders in 2003) and least pervasive in the South West (6% and 14%).

A common problem in customary tenure systems is that women’s rights are less secure than those for men

and not automatically transferable upon marriage or death of the husband (Agarwal 1994, Deere and Leon

2001). In fact, China is remarkable in that still 29% of villages, compared to almost half in 1997, report

that they provide land to women that marry into the village. There is marked regional variation in this

figure, however, from 14% in the South West to 35% in the Coast. The flip side of this arrangement is

that in many cases (25%, down from 41%), women who marry out lose land. Furthermore, widows will

lose land in 16% of cases while divorcees will do so in about 10% of villages. Our data also suggest that

governance has improved markedly; almost 90% of villages now have their director elected, with

relatively high turnout in elections. At the same time, the fact that only 61% of villages convened at least

one village assembly during the last year and only 55% had at least two meetings of village

representatives, suggests that there remains room for improvement for increasing participation in village

governance.

17

Implementation and knowledge of the RLCL: Our data suggest that, contrary to what has been reported for

the legal changes in 1994, the requirement for written 30-year contracts by the 1998 reformulation of the

Land Management Law seems to have been largely complied with: 85% of households report to have

been given such contracts. About three-quarters of these contracts (74%) had the seal of the province or

the county, thereby providing a higher level of security than just the signature of a village or other local

official. However, only 40% and 45%, respectively, contain either physical demarcations of the land

(even if only in sketch form) or the terms of the contract, implying that in many cases issuance of such

contracts is not sufficient to protect households against encroachment of their land or premature

termination of the lease (Schwarzwalder et al. 2002).

Although it clearly illustrates the fact that higher levels of government are taking the lead, evidence on

dissemination and implementation of the RLCL by lower level leaders points towards a level of activity

that is surprisingly high, given that the survey was conducted less than 9 months after the law’s coming in

force. More than 82% of villages report that at least one meeting had been organized by the township or

county government to inform villagers about the new law; in 81% of these cases more than one meeting

had been organized, and in about 50% of the cases, this meeting was attended by members of the

representative assembly. 20 Even though only 58% of villages had organized a village assembly to

disseminate the new law, 45% of them had produced and distributed material to explain the key features

of the new law to the village population. This is a considerable accomplishment compared to other

countries where, even years after the promulgation of new land laws, little or no dissemination material is

available to educate those who are affected about the content of the law, thus enabling them to be more

vocal and proactive in demanding implementation from the relevant authorities.

As local cadres may easily want to overstate the level of implementation, we use their actual knowledge

about four critical elements of the law to check the extent to which implementation activity is backed up

by familiarity with key substantive provisions of the law. To do so, we ask whether, under the RLCL (i)

large scale readjustments are allowed (they is not); (ii) whether villagers can lease or transfer (zhuan bao)

their lands without approval of local leaders (they can if they notify village officials); (iii) whether the

collective can take away any land from villagers (it can only if the whole household changes its

registration from rural to urban); and (iv) what the conditions for land transfer contracts are (written for

any contract over one year).

The third panel of table 4 illustrates that even for the law’s main provisions, knowledge remains far from

complete. Only 56% of village leaders knew that large scale adjustments are no longer allowed. Only

20 Village representatives are made up of representatives from all production groups in the village each of which is selected by villagers within his/her respective production group.

18

22% knew about the rights of villagers right to transfer land. And, finally, only about one third were

correct about the collective’s ability to take land back from existing users.

Although the responses of village leaders need to be interpreted cautiously, their responses to questions

about their own opinions towards the RLCL as well as those of their villagers can provide an indication of

the commitment of those in the rural economy to the implementing the spirit of the law. First, 81% of

respondents indicate that the RLCL increased the tenure security of farmers.21 This finding lends credence

to the hypothesis that the level of tenure security conveyed by 30-year contracts has indeed been deficient

and that a legal initiative was needed to make the legal standing of land clearer. Second, quite surprisingly

in view of the ongoing debate on whether longer land rights would be acceptable to villagers (Kung

2002a), it emerges that a majority of farmers is satisfied with the 30-year contracts and that, if anything,

there is a demand for longer rather than shorter duration of rights. According to village leaders, villagers

would support land rights of a duration shorter contract (that is less than 30-years) only in 5% of the

villages. In contrast, in 42% of the villages, a majority of the population would be in favor of land use

contracts that are longer than 30 years.22 Finally, we note that only 37% of leaders claim to be “very

supportive” of the RLCL. This figure is rather low. However, their willingness to state an opinion that is

in contrast to those of their villagers should allay fears that leaders were not providing good

information.23

4. Estimation results

Regressions of activity in land rental markets support the hypothesis that past interventions and current

rules at the village level that are inconsistent with the provisions of the RLCL have a clear impact on

economic outcomes, thereby providing a justification for exploring in detail how implementation of the

law can be made more effective. In line with our hypotheses, pressure from above, complemented in

varying degrees with a local culture of participatory decision-making, is a key determinant of effective

implementation, through organization of villages meetings, production of dissemination material, or

knowledge of the legal provisions by village leaders.

4.1 Determinants of land transfers

Results for the probit and tobit regressions implementing equation (1) are reported in columns 1 and 2 of

table 5. As the results are fairly consistent with each other, we interpret them jointly. A first result of

21 57% indicated that the RLCL “increased” farmers’ tenure security and an additional 25% think that it “increased tenure security very much”. 22 The fact that the share of villages where households would like to have shorter contracts is, with 10% significantly higher than i n the rest (where it is about 3%), suggests that further analysis of the factors affecting preference over land rights at the household level may be of interest. 23 For example, the correlation between leaders being very supportive and stating that village rs want longer rights is, with –0.13 (significant at 1%), opposite of what one would expect under the hypothesis of leaders’ attitudes affecting their responses about others.

19

interest is that the coefficients are consistent with the hypothesis that non-agricultural income growth

provides incentives for land transactions rather than the other way round. The share of households that

have enterprises and the share of migrants in the work force, both factors positively associated with

economic diversification, are statistically significant and quantitatively important. In contrast, the share of

households in agriculture is negative and significant. To illustrate the magnitude of the impact, we can

show that a 10 point increase in the share of migrants (or in the share of households with their own

enterprises) would reduce the probability of a village not participating in land rental by 2.4 to 2.6 (or by

5.1 to 5.7) percentage points. In the tobit regression, these variables are not only all significant at 1%

level but the importance of growth as a motor for land rental markets is supported by significance (at

10%) of the coefficient on the rate of per capita growth.

Second, and most importantly from a policy perspective, past government interventions, either in the form

of land taking, or through land reallocation, are shown to have a distinctly negative impact on the level of

land rental transactions, even though their lower level of significance in the probit specification suggests

that such intervention by itself is rarely sufficient to completely choke off land rental market activity.

While such a link has long been assumed almost as a given in the literature, to our knowledge, this is the

first time that it has actually been confirmed empirically. Also, we find that rules aiming to prevent

villagers from renting to outsiders have a strong negative impact on rental market activity and may

altogether preclude the emergence of rental markets. In addition, having such rules in place makes it 16%

more likely that villagers in a community will not participate in rental markets.24

Variables relating to the village’s economic endowment, such as the share of irrigated land, presence of a

grain obligation, greater land scarcity, and (in the probit specification) distance to the provincial capital,

all increase the probability of participating in land rental market as well as the level of activity observed

in such markets. The most significant of the variables is the level of irrigation and the higher opportunity

cost of leaving land unused it implies; according to the probit regression having a 30% increase in the

share of irrigated land would make it 5% less likely for the village not to participate in rental markets.

4.2 Local implementation activities

In line with our argument, both pressure from above and pressure from below, in the context of a culture

of participation at the local level, emerge as key determinants of local implementation activities. As

columns 1 and 2 of table 6 illustrate, the most important determinant of village leaders organizing an

assembly to inform villagers of the content of the new law is whether higher levels of government had

24 To the extent that such rules may be endogenous, the coefficient on this variable is likely to be overstated; it does not make sense to impose a rule prohibiting rental transactions with outsiders unless such transactions are a real possibility.

20

initiated a meeting for this purpose; having had such a meeting increases the probability that a village

assembly is organized by between 57% and 64%. At the same time, the tendency to organize such an

assembly is greatly enhanced by a tradition of participatory decision-making, in line with the hypothesis

that such structures will be critical for villagers to make their demands heard and prompt local officials to

take action on important issues of concern to them. Quantitatively, in villages in which all committee

members are elected, the probability of having a village assembly is between 19% and 23% higher than in

villages in which all of them are appointed. Furthermore, having an active/functioning village assembly

(measuring active as being a village in which there had been at least one village assembly during the past

12 months—in addition to the one in which the law was being discuussed) also increases the probability

(by between 17% and 195) that the village leaders will convene an assembly to promote the RLCL. As

column 2 of table 6 indicates, there are important synergies between pressure from above and pressure

from below; in cases where village representatives participated in the meeting organized by the higher

government, a subsequent village assembly was 31% more likely to be convened than where this was not

the case. We also note that the coefficients on other variables are largely as expected, although in general

only of marginal statistical significance: villages where the grain obligation is still in place (implying that

agricultural productivity is a more important concern) are slightly more likely to have organized a village

assembly as are those characterized by greater scarcity of cultivable land per capita. In turn, villages

where the economic significance of agriculture has declined because a greater share of the population

owns non-agricultural enterprises are less likely to have organized one. Indicators for past land taking or

reallocation remain insignificant.

Columns 3 and 4 provide results for corresponding regressions using as dependent variable an indicator of

whether or not the village produced written dissemination material about the RLCL. Overall the results

are quite consistent with those reported earlier: A higher level of government taking the initiative emerges

as the most important variable, increasing the propensity to produce written material by between 46 and

49%. In addition, actual participation of village representatives in such a meeting adds an additional 16%

increased probability. When villages have an active assembly, it increases the propensity to produce and

disseminate written material on the law by 11 or 12, Having the village committee elected and the grain

quota still in place increases the probability of distribution for such material by between 10 to 20% (a

result that is significant at the 10% level). The importance of per capita income suggests that, contrary to

having an assembly, production of material will require at least a minimum amount of non-labor

resources. Also, while land scarcity increases the propensity to produce written material (significant at

10% in one of the specifications), it is worth noting that in villages where land was taken after 2000, the

perceived need to learn more about the land law seems to be significantly higher, with a coefficient of

0.11 that is highly statistically significant.

21

5. Conclusion and policy implications

Our analysis suggests that comparative analysis of legal change of land laws can provide substantive

lessons that may be useful for countries trying to respond in a constructive way to the challenges posed by

changing economic and social conditions and increased land scarcity. Given the complexity of the issues

and the need to find solutions that can respond flexibly to local needs that may differ widely across

different regions of the country, the approach chosen by China is based on a gradual and rather pragmatic

approach, together with decentralized implementation at the local level. In China, emphasis is on

experimentation and pilots that can then be modified and scaled up or discarded depending on the results

achieved. Even though it requires the central government and its bureaucracy to relinquish much of its

discretionary power, it appears that giving responsibility to local governments in this way has provided

China not only with the flexibility needed to address location-specific needs but also provided a basis for

moving ahead with implementation much more rapidly than would have been possible by trying to

develop an “ideal” law that is out of sync with ground realities and the fiscal constraints confronted in

putting these provisions into practice.25

As numerous contributions to the literature point out, trying to decentralize land administration without

adequate mechanisms of accountability and control may increase the discretionary power of local elites,

rather than strengthening the land rights of the vulnerable. Evidence from China, as in the case of the

gradual restriction of the power of local cadres powers to arbitrarily take land, illustrates that

decentralization is not equivalent to the absence of centrally imposed rules. In fact, it is to the contrary.

The evidence suggests that having clear rules and enforcing them is indispensable if rent seeking by local

cadres is to be avoided and the productivity and equity goals of land policy are to be achieved. Our

regressions suggest that dissemination sponsored from the center, in conjunction with a process of greater

accountability at the village level, are critical determinants driving implementation of the new law that

may hold useful lessons for other countries who struggle with similar problems.

While our data allow us to paint a fascinating picture of the current land situation in China, we note that,

even though China has made rapid progress in disseminating the RLCL, knowledge of its provisions by

village leaders remains far from universal. While the data do not yet provide the basis for an assessment

of the law’s impact on household welfare and productivity, they suggest that further efforts in this

direction would clearly be desirable and could also provide a vehicle to better understand the dynamics of

institutional change in rural areas. If this is done in a way that complements the village data used here

with household information, it could yield insights of great interest in three related areas.

25 Whether or not policy-makers are willing to give up this power has been hotly debated in the recent debate on African land laws (Shivji 1998, Shackleton et al. 2001)

22

First, by matching “landlords” and tenants, it would be possible to study in more detail the evolution of

institutional arrangements to transfer land, to better assess their impact on productivity, and to appreciate

the associated equity implications. The latter would be particularly important with respect to women who

are traditionally (though with little empirical basis) singled out as potential losers from the property rights

reforms. Second, even though our survey provides evidence on the frequency of land takings and land

redistributions, we do not have sufficient information with which to identify the gainers and losers from

such actions. We also can not precisely quantify the associated impacts. The fact that pressure for

conversion of agricultural land is unlikely to subside in the future implies that efforts in this direction

could provide important inputs to assess the associated outcomes, to determine whether the existing law is

appropriate (and whether its implementation makes any difference), and to suggest additional legislative

or regulatory measures that might need to be taken. Finally, while it is well known that changing the

nature of property rights will have distributional implications and a large literature has developed to

describe and analyze determinants of household perceptions regarding different types of property rights

regime, the high levels of support for leases that are even longer than the current 30 years reported at the

village level suggests that studying the change in household perceptions about property rights and

comparing these to actual economic benefits may yield interesting insights about institutional change in

more general terms.

23

Table 1: Basic village characteristics in China’s village, 1997 to 2003 All China North & Coast Central South West North West Population characteristics Number of households in 2003 470 497 373 366 579 Population in 2003 1772 1890 1268 1433 2235 Annual rate of population growth (%) 0.29 0.35 0.14 -0.04 0.55 Secondary school attendance 2003 (%) 94.86 96.50 95.29 95.92 92.29 Secondary school attendance 1997 (%) 91.15 92.24 95.67 92.72 85.15 High school attendance in 2003 (% of eligible) 45.18 35.44 62.72 47.34 37.04 High school attendance in 1997 (% of eligible) 38.27 30.17 53.78 41.17 29.97 Share of workers with education below primary school in 2003 (%) 11.11 7.49 11.59 9.36 15.08 Assets Share of households with phone in 2003 (%) 53.99 59.71 79.11 47.23 31.12 Share of households with phone in 1997 (%) 15.11 17.24 28.65 8.71 5.54 Share of households with color TV in 2003 (%) 56.60 63.80 68.00 47.02 46.30 Share of households with color TV in 1997 (%) 26.85 34.37 34.86 16.20 20.01 Land endowments Cultivable land (mu per capita) 1.22 1.72 1.00 1.04 1.08 Irrigated land (mu per capita) 0.67 0.86 0.72 0.77 0.37 Permanent land (mu per capita) 0.08 0.07 0.08 0.06 0.12 Economic activity Male wage in 2003 (Y/day) 19.24 17.36 23.89 21.18 15.37 Increase in wage since 1997 (%) 27.04 26.80 29.86 19.37 31.13 Distance to provincial capital (km) 213.72 191.47 221.62 224.97 219.47 Distance to county seat (km) 24.33 20.88 23.72 25.17 27.44 Distance to nearest township center (km) 4.64 4.25 4.28 4.63 5.31 Income sources Per capita net income in 2003 (Y) 2564.69 2486.17 3991.50 2114.37 1667.89Increase in per capital income since 1997 (%) 28.51 20.88 35.76 20.67 31.89 Share of households in agriculture in 2003 (%) 69.12 75.45 53.59 67.14 78.36 Share of households in agriculture in 1997 76.19 79.16 62.65 76.52 85.12 Share of workers in local off farm labor force in 2003 (%) 15.04 12.67 27.31 9.78 9.81 Share of out-migrants (that were away from home for more than 3 months) in 2003 (%) 17.94 10.87 18.68 27.16 17.64 … of which those outside the province (%) 38.31 29.76 25.69 63.15 39.60 Share of in-migrants in 2003 (%) 4.12 2.43 9.65 1.64 2.38

24

Table 2: Land markets and reallocation in China, 1997 to 2003 All China North & Coast Central South West North West Land markets Villages with land rental activity in 2003 67.60 64.83 59.51 80.00 69.16 Villages with land rental activity in 1997 48.78 41.72 39.79 67.14 51.09 Share of area rented out 2003 7.71 3.90 12.71 10.17 5.41 Share of area rented out 1997 3.71 1.61 6.52 5.07 2.36 Share of households renting out 2003 12.03 6.47 19.83 14.57 10.18 Share of households renting out 1997 5.53 4.07 7.73 6.30 4.91 Share of households renting in 2003 9.75 5.45 14.12 13.23 8.62 Share of households renting in 1997 6.03 3.01 10.38 8.18 4.65 Contractual details Contract longer than one year 2003 (%) 57.62 71.75 71.92 37.58 50.50 Contract longer than one year 1997 (%) 51.86 72.81 66.67 36.09 40.82 Contracts that were in written form in 2003 (%) 13.84 18.04 16.58 5.71 14.16 Contracts that were in written form in 1997 (%) 11.51 20.93 11.50 5.47 9.61 Renting of land to outsiders and entrepreneurs in 2003 (%) 10.73 5.75 19.38 7.68 10.48 Renting of land to outsiders and entrepreneurs in 1997 (share) 7.51 2.99 16.32 5.11 6.79 Rental Payments Rental rate of paddy land in 2003 (Y/mu) 167 214 180 103 168 Rental rate for paddy land in 1997 (Y/mu) 155 200 126 136 163 Rental rate of upland in 2003 (Y/mu) 115 126 142 73 110 Rental rate of upland in 1997 (Y/mu) 107 108 113 90 111 Land taxation Tax reform implemented (%) 93.76 98.97 92.61 99.52 86.29 Taxes collected on area basis (%) 84.62 89.31 64.08 96.67 90.65 Taxes and fees per mu (Y) 89.95 107.92 94.57 101.34 62.17 Taxes 2003; percent of before reform rate (%) 80.36 98.85 89.26 69.28 61.20 Incidence of land reallocation Any reallocation 1997-2003 (%) 64.16 74.14 76.76 69.05 40.81 Any reallocation 1990-96 (%) 43.62 56.55 42.25 42.86 33.64 Number of reallocations 1997-2003 1.36 1.34 1.28 1.42 1.44 Number of reallocations 1990-1996 1.34 1.39 1.17 1.43 1.40 Share due to population change 1997-2003 0.52 0.51 0.33 0.69 0.69 Share due to population change 1990-96 0.92 1.10 0.53 1.14 0.91 Share of village area affected 1997-2003 (%) 80.30 100.37 88.85 66.45 48.46 Share of village area affected 1990-96 (%) 84.47 113.16 90.82 57.88 55.88 Share of area: Population change 1997-2003 (%) 24.40 32.02 20.68 25.91 16.23 Share of area affected due to population change 1990-96 (%) 53.86 84.47 37.42 38.77 37.78 Share of households affected due to population change 1997-2003 (%) 29.37 36.83 23.43 32.46 23.53 Share of households affected due to population change 1990-96 (%) 54.53 84.80 33.42 45.01 39.64 Long-term migrants whose land was taken back 1997 (%) 11.47 13.04 10.08 19.25 3.64 Long-term migrants whose land was taken back 2003 (%) 10.10 10.58 8.05 18.23 4.62 Village has any reserve land (%) 33.48 51.03 45.77 11.90 20.87 Land takings Village had any land takings during 2001-03 (%) 29.14 20.69 38.38 25.71 30.84 Village had any land takings during 1998-2000 (%) 18.37 11.72 26.76 18.57 16.82 Village had any land takings during 1995-1997 (%) 19.19 14.14 21.13 20.48 21.18 Share of area taken 2001-2003 (%) 7.85 3.89 14.53 4.07 4.59 Share of area taken 1995-97 (%) 3.72 6.42 3.81 2.55 2.74 Percent of households losing land 2001-03 (%) 17.67 14.68 24.82 11.06 14.77 Percent of households losing land 1998-2000(%) 11.73 10.89 14.15 12.75 8.09 Share of takings without compensation 1998-2000 (%) 11.90 21.15 5.77 10.20 14.61 Share of takings without compensation 1998-2000 (%) 13.90 25.00 8.70 16.22 12.24 Compensation paid 2001-03 (Y/mu) 12359 17254 15784 4517 10722 Compensation paid 1998-2000 (Y/mu) 9434 13914 9811 5528 9739

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Table 3: Restrictions on land transactions and land use changes in China, 1997 to 2003 All China North & Coast Central South West North West Rules for taking back land Migrant land taken back 2003(%) 7.78 7.59 7.39 11.43 5.92 Migrant land taken back 1985 (%) 11.95 14.48 10.56 16.19 8.10 Student's land taken back 2003 (%) 12.31 6.55 13.73 14.29 14.95 Student's land taken back 1985 (%) 23.71 16.21 21.83 29.05 28.66 “Will never lose land” (2003) (%) 24.43 5.17 29.58 46.67 22.74 Lose land immediately when uncultivated 8.96 10.00 12.32 10.48 4.05 Lose land after 1 year when uncultivated 8.33 7.59 8.45 9.52 8.10 Lose land after 3 years when uncultivated 4.07 1.72 4.23 6.67 4.36 Rules for land markets Rental to outsiders not allowed 1985 (%) 17.74 22.41 23.59 15.24 9.97 Rental to outsiders not allowed 2003 (%) 12.85 16.55 18.66 10.95 5.61 . requires permission by village (%) 21.90 25.52 28.17 20.48 14.02 . requires notification of village (%) 3.80 4.14 2.82 5.71 3.12 Rules for widows and divorcees Widows will lose land 2003 16.20 17.93 19.01 15.24 12.77 Widows will lose land 1985 21.27 28.62 19.01 21.90 16.20 Divorcee will lose land 2003 9.68 11.03 14.08 8.57 5.30 Divorcee will lose land 1985 14.21 19.66 15.49 14.29 8.10 Gender issues Woman marrying out of village loses land 2003 (%) 25.37 31.03 28.56 29.64 14.29 Woman marrying out of village loses land 1997 (%) 40.92 50.96 39.82 45.93 29.14 Woman marrying into village receives land 2003 (%) 28.71 33.97 35.25 34.43 14.18 Woman marrying into village receives land 1997 (%) 46.15 57.61 47.08 50.11 31.88 Governance Current director elected 89.32 88.28 83.10 91.90 94.08 Previous director elected 79.19 81.38 79.58 80.95 75.70 Turnout in last election 80.25 78.62 87.53 80.29 75.93 Held village assembly last year 61.45 65.17 46.13 66.67 68.22 Held at least 2 village represenative meetings last year 55.11 61.03 54.23 58.57 48.29

26

Table 4: Rural Land Contracting Law (RLCL) implementation and knowledge in China’s villages, 1997 to 2003 All China North & Coast Central South West North West Land use certificates 30-year contracts distributed (%) 85.07 75.52 90.14 84.76 89.41 If yes, length of time since distributed (year) 5.44 5.55 5.23 5.65 5.43 If yes, guaranteed by province or county (%) 73.96 64.38 74.51 74.72 80.35 If yes, contain demarcation/sketch (%) 40.21 40.62 64.45 20.79 30.31 If yes, contain contractual terms (%) 45.32 53.42 61.33 37.64 29.62 Dissemination of RLCL Meetings organized by township (%) 82.17 85.52 89.79 85.24 70.40 If yes, months after RLCL effectiveness 2.87 2.70 3.00 2.97 2.85 If yes, more than one meeting (%) 80.51 79.84 81.18 79.33 81.42 If yes, village representatives attended (%) 49.78 48.79 51.76 44.13 53.10 Written material produced by village (%) 44.80 45.52 54.23 49.05 33.02 Village assembly organized to disseminate (%) 57.65 64.83 59.15 55.71 51.09 If yes, months after RLCL effectiveness 3.27 3.24 3.40 2.86 3.49 Leader’s attitude and knowledge Leaders very supportive of RLCL (%) 37.38 41.03 38.03 27.62 39.88 Big adjustment is not allowed (%) 56.11 71.03 41.20 47.62 61.37 Small adj. allowed under conditions & condition correct (%) 20.36 17.59 20.77 25.24 19.31 Contract land taken back under conditions and conditions correct (%) 32.13 32.07 34.86 23.33 35.51 Leaders can not restrict land transfer under any circumstance (%) 68.60 73.79 60.21 70.00 70.40 Zhuanrang has to be approved by leaders (%) 38.37 43.45 40.49 39.52 31.15 Zhuanbao has to be notified by leaders (%) 21.90 25.17 21.13 20.95 20.25 Villagers' attitude to the RLCL Villagers would like longer rights (%) 42.35 46.21 46.48 46.67 32.40 Villagers would like shorter rights (%) 5.34 3.10 3.17 3.81 10.28 RLCL increased security a lot (%) 24.43 28.28 24.65 12.38 28.66 RLCL increased security somewhat (%) 56.65 60.00 55.99 59.05 52.65

27

Table 5. Determinants of village participation in China rental market, 2003 Village not

participating in rental in 2003

Village not participating in rental

in 2003

Share of total cultivated land

renting out in 2003

Share of total cultivated land

renting out in 2003 Annual growth rate of per capita income -0.004

(0.94) -0.005 (1.13)

0.002* (1.79)

0.002* (1.89)

Per capita income (log) -0.018 (0.43)

-0.015 (0.35)

-0.009 (0.90)

-0.009 (0.93)

Share of households w/ individual enterprises -0.566*

(1.95) -0.514* (1.80)

0.150*** (3.21)

0.143*** (3.06)

Share of workers migrating for more than 3 months -0.260**

(2.38) -0.243**

(2.23)

0.089*** (3.78)

0.087*** (3.71)

Share of households in agriculture 0.054 (0.94)

0.053 (0.92)

-0.031** (2.36)

-0.031** (2.33)

Villages reallocated land after 1997 0.003 (0.13)

-0.001 (0.06)

-0.011** (2.33)

-0.010** (2.18)

Share of area taken between 2000 and 2003 0.151* (1.85)

0.155* (1.91)

-0.041** (1.99)

-0.041** (2.01)

Distance to provincial capital -0.000**

(2.12)

-0.000** (2.01)

0.000 (0.24)

0.000 (0.13)

Cultivable land per capita -0.009 (0.47)

-0.010 (0.56)

-0.002 (0.46)

-0.002 (0.43)

Share of irrigated land to total land -0.134*** (2.71)

-0.144*** (2.88)

0.041*** (3.41)

0.041*** (3.48)

Grain obligation still practiced -0.054 (1.25)

-0.059 (1.38)

0.019* (1.84)

0.020* (1.88)

Taxes and fees based on land -0.071 (1.51)

-0.059 (1.27)

0.005 (0.41)

0.003 (0.24)

Rent to outs not allowed 0.157***

(3.47)

-0.030*** (2.76)

Observations 1083 1083 1083 1083 Pseudo R-squared 0.12 0.13 -0.54 -0.55 Log likelihood -602.60 -597.01 384.03 387.87 Absolute value of t statistics in parentheses * significant at 10%; ** significant at 5%; *** significant at 1%

28

Table 6. Implementation of land law by village leaders Village produced

written material Village produced written material

Meeting organized by village leaders

Meeting organized by village leaders

Meeting organized by higher government 0.491*** (8.30)

0.460*** (7.51)

0.636*** (10.47)

0.570*** (8.63)

Village assembly has met during past 12 months

0.121*** (3.41)

0.111*** (3.08)

0.200*** (5.22)

0.170*** (4.32)

Share of village committee members elected 0.158* (1.67)

0.181* (1.86)

0.188** (1.99)

0.229** (2.26)

Grain obligation still in place 0.098* (1.85)

0.097* (1.79)

0.070 (1.34)

0.098* (1.84)

Share of households in agriculture -0.082 (1.27)

-0.071 (1.09)

0.055 (0.79)

0.055 (0.76)

Share of households with individual Enterprises

-0.094 (0.39)

-0.119 (0.48)

-0.412* (1.79)

-0.429* (1.83)

Per capita income (in log form) 0.157*** (3.55)

0.142*** (3.13)

0.001 (0.02)

-0.003 (0.06)

Cultivated land per capita -0.037* (1.74)

-0.032 (1.48)

-0.010 (0.39)

-0.005 (0.20)

Village representative participated in the meeting organized by higher level government

0.163*** (4.76)

0.314*** (8.71)

Village with land taken 0.107*** (2.79)

-0.059 (1.45)

Experienced with land reallocation after 1997 0.059 (1.57)

0.005 (0.13)

Observations 1090 1090 1090 1090 Pseudo R-squared 0.18 0.20 0.25 0.30 Log likelihood -614.04 -596.28 -559.04 -519.23 Robust z statistics in parentheses * significant at 10%; ** significant at 5%; *** significant at 1%

29

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