Agriculture Ministry Clears Path for Transfers of Contracted Land

February 10, 2005

On January 7, China’s Ministry of Agriculture released a new regulation on transfers of farmland that has been contracted to individual farmers by village collectives. The right to transfer contracted land was established in Article 32 and related provisions of the 2002 PRC Rural Land Contracting Law. The new regulation, entitled Measures on the Administration of Transfers of Rural Land Contract Rights, tracks these provisions, confirming the right to transfer contracted land without interference and providing detailed guidelines on the permitted forms for transfers, transfer procedures, and other matters. Among the regulation’s 35 articles are provisions dealing with the following:

  • Basic Transfer Rights - Article 6 provides that a party with contract rights may voluntarily decide whether to transfer the rights and in what form and stresses that no other unit or individual may compel a transfer or create obstacles to a transfer. Article 7 confirms that all income from the transfer belongs to the party transferring its contract rights.
  • Transferees and Use - Article 9 provides that contracted land may be transferred to any organization or individual permitted to engage in agricultural production, although if other conditions are equal (presumably the terms of an offer), members of the transferor’s own collective agricultural organization have priority. Article 11 prohibits transferees from using the land for purposes other than agricultural production.
  • Forms of Transfer - Parties may transfer their contract rights by subcontracting, assigning their contracts, leasing or exchanging land, or pooling land and dividing it by shares for the purpose of engaging in cooperative agricultural production (Articles 15 and 19). Notably, the regulation does not authorize parties to mortgage their contract rights.
  • Approvals - Articles 18, 25, and 35 indicate that the agreement of the original contracting party (the village collective) is required for an assignment of a contract. Other forms of transfer do not appear to require such approval. A written contract is required for transfers and must be registered with the township government. Parties may apply to the township government for "authentication" of a contract, but the township government may not require such authentication.

The regulations become effective on March 1, 2005 and should help to create a functioning land market in rural China. As a representative of the Rural Development Institute told a Commission roundtable in 2003, "Functioning markets for long-term rural land use rights will accomplish two important goals. They will allow voluntary, gradual re-allocation of land rights to the most efficient farm households. They will further allow farmers to realize the value of 'dead capital' (to use Hernando de Soto's phrase) currently tied up in the land. Markets for agricultural land in comparable Asian settings suggest that the 135 million hectares of rural land in China should eventually attain a total value of $500 to $600 billion US dollars