China has adopted the household contract responsibility system that entrusts the management and production of publicly owned farmlands to individual households through long-term contracts that are valid for three decades. The system allows farmers to conduct household-based production on small plots of land and prevents capable farmers from having more farmland and conducing large-scale farming operations, Cai said. The scattered, individual plots can hardly meet the demands of developing a modern agricultural sector and enhancing its comprehensive productivity. Only when large-scale farming operations are permitted can China develop modern agriculture, he said, adding that the transfer of land-use rights in various forms would make large-scale farming operations possible.

Once the Law on Land Contract in Rural Area is revised to include articles on land-use right transfers and standardized transfer procedures are created, the value of land as a major means of production and the value of contracted land-use rights will develop through market competition, Cai said. He added that this would help farmers to realize their interests and motivate them to develop modern agricultural techniques.

The new policy also will speed up urbanization in the countryside, said Niu Fengrui, a researcher with the Chinese Academy of Social Sciences. When surplus rural laborers move to cities to become migrant workers there, they are not included in the urban social security schemes. This is why they are hesitant to give up their contracted farmlands, he said. Because the former farm laborers only participate in non-agricultural production to limited extent, they create a significant obstacle for China's urbanization process. If farmers were allowed to turn their land-use rights into income, a more rational allocation of farmland and rural labor would be possible to speed up the country's urbanization, he added.

Private ownership impossible

The government's decision emphasizes three conditions for land transfers and stipulates that there will be no changes in the collective ownership of farmland, use of farmland or violations of contracted farmers' interests.

Chinese law stipulates that farmers collectively own rural land as members of individual households or as part of a village community. Only members of a certain economic collective can contract plots of farmlands that belong to the collective, Chen said.

The goal of allowing farmlands to be transferred is to increase scale operations. The main difference between the transfer of farmland and land privatization is that farmers are only allowed to transfer or lease land-use rights and are not permitted to use the land for purposes other than farming, Chen said.

Farmers are not allowed to mortgage contracted land-use rights, their housing land or their homes, Chen added. Usually, land-use rights are transferred only between farmers, not with urban residents, he said.

The new policy aims to create stable, long-term rural policies for the farmers, instead of pushing them off farmlands, Chen said.

Because of fluctuations in the economy, companies may stop their production and even close down when the economy hits a low point. When that happens, a large number of migrant workers return home and rely on land registered in their names for income, Chen said.

"We will first ensure a sense of security and stability for farmers living on the farmland, and then encourage them to test themselves in market-oriented agricultural production," he said.

No easy change

Even if the policy is implemented, farmers may still be reluctant to sell their land-use rights, Xu said.

More farmers must give up rights to their farmland and property in the countryside to become urban residents and to make large-scale land transfers possible.

"The number of farmers decreases while the area of farmlands remains unchanged, and in this way, the scale operation of agricultural production will become possible," Xu said.

But this seems easier said than done. The Beijing Municipal Bureau of Land and Resources, for example, launched a pilot project in two towns in suburban areas in September 2003, allowing farmers to transfer, lease or convert as investments their housing land-use rights. The project turned out to be a failure, because few farmers and villages tried to make money on their land-use rights, partially due to the fact that they were unclear about the rights.

Xu believes putting a formal market in place for selling land-use rights would help promote the transfers. It also would serve to inform farmers of their rights and limitations, and the effective protection of their rights.

"The most important thing is making the land contract relationship a long-term policy and a relationship that enjoys substantial protection and allowing no administrational interference," Xu said.

The smooth transfer of land also will depend on whether the rural population can find stable jobs in the industrial and service sectors, he said. Chen warned of the possible threat to grain security because many of farmlands now functioning as large-scale operations grow fruits, vegetables, flowers or herbs, all of which give them higher economic returns.

"I believe we should moderately promote land transfers in order to maintain a balance in agricultural product structure," Chen said.