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Conditions not ripe for farm land privatization

By Wen Xiantang (Global Times)

08:19, June 05, 2012

As China pushes forward with plans to accelerate urbanization and local governments turn to rural lands as potential sites for new urban construction, many have called for Beijing to grant land rights to farmers and make agricultural properties a tradable good in the market.

Such a move would further not only the country's development goals, but serve the economic interests of China's poor farmers, advocates argue. While the former assertion may have some merit, completely opening up the country's agricultural land market would do more harm than good for the majority of China's already disadvantaged farmers.

In China, most farmers earn their income through a combination of agricultural work and urban employment. But, if the agricultural land is opened to market forces, farmers will likely see their livelihood from both these sources dwindle.

If rural residents are allowed to hold their land as a tradable commodity, most of the country's agricultural land would likely find its way into the hands of a few well-funded farmers or investors thanks to market forces. In such a situation, poor farmers would likely first see their land holdings and then their harvests dwindle, putting them into an even more precarious financial situation.

At the same time, wealthy land owners or speculators could also push up the prices for agricultural plots by leveraging their positions in the market. As the country rushes forward with urbanization, inflated land prices will make the market as volatile and overheated as the rest of the real estate sector.

If agricultural lands became tradable, land prices would inevitably skyrocket due to short supplies in the market. Property and housing prices would likely follow suit, making it harder for farmers seeking employment in cities to locate affordable accommodations. Also, runaway prices in the land market could lead manufacturers to speculate on arable lands, just as they did previously in the residential property market, diverting their attention and capital away from production and expansion plans and thus cutting into job opportunities for farmers.

Rather than radically reforming China's agricultural land market, the government should first study the example set by India. Although it has more arable land than China, about a third of India's farmers have no land holdings and have been forced into slums following the privatization of the agricultural land market.

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