A Study On The Mechanism Of Usufruct Transfer Of Rural Homestead

The rapid urbanization and industrialization in China has been sharpening the conflict in land use for different purposes primarily between the use for urban and rural construction projects and the use for farming, especially for crop growth. The expansion of urban areas will inevitably squeeze rural areas and reduce the land for farming. Hence the thorny but urgent problem of balancing between building construction for rapid economic development and the insurance of necessary farm land. The state of China, largely populated, and with relatively limited land area and little arable land reserve inherently necessitates the reduction of rural construction land to enable the expansion of urban areas, so as to attain the state strategic goal of maintaining a dynamic steadiness of the total amount of arable land. The amount of all homestead land nationwide is fairly large and far from finely used, and therefore possesses great potential for further exploitation. The asset value is remarkable against the background of an ever shrinking land resource. As a rule, asset value can be cashed out only through market trade. So it can be confidently envisioned that, under the legislation for the permanent farmer collective ownership of rural homestead, a legal guided and autonomous usufruct transfer of rural homesteads(UTRH) can not only activate rural land asset, improve the efficiency of rural homestead resource allocation and increase farmers’ household effects income, but also help solve the great problem of agriculture, the countryside and farmers while broadening the space for urbanization and industrialization, by freeing up more land for use.Firstly, on the ground of a careful study of relevant domestic and foreign literature and theories, with a main thread of thought connecting "property rights, market and management", a research framework is established with respect to property rights design, market mechanism, management mechanism, and exit mechanism. Then, after a look is taken back on the ever changing nature of property rights to homesteads in China, an analysis is made of the current disposition of property rights to homesteads and its effect on UTRH, and proposals on proper disposition of property rights are provided to facilitate UTRH. Next, with a view to regulatory environment and based on economic theories and regulatory economic theories, an analysis is made of the problem of the balance of regulations for UTRH with requirements for appropriate regulations to facilitate UTRH. Fourthly, an argument is made for the mechanism of UTRH, which consists of a market mechanism, a management mechanism and an exit mechanism. Fifthly, with the statistics of Guangdong Province as a sample, an exploration is made of farmers’knowledge of their property rights to homestead, their will and action in UTRH, and the underlying factors. Lastly, by analyzing UTRH cases at provincial and village levels, a search is made for the law governing UTRH and innovations in mechanism are explored. The main contents and findings of the study are as follows:(1) Since1949, the property rights to homesteads in China primarily fall into two types:One is the "one right to one homestead" type, i.e. the possession and usufruct of the homestead and the possession of the house on the homestead being private to the farmer household; the other is the "two rights to one homestead" type, i.e. the possession of the homestead being common to the farmer collective while the possession of the house on the homestead and the usufruct of the homestead being private to the farmer household. The current property rights to homesteads is the "two rights to one homestead" type, with the possession of the homestead lying with the farmer collective at three levels and shared by all members of the collective, while the ultimate right of disposition being to the country as a whole; and with the usufruct of the homestead being to the farmer household, which justifies that the farmer household takes possession of, exploits, partly benefits from and partly transfers the usufruct of the homestead. In step with the evolution of the property rights to homesteads, UTRH in China has passed through four stages, from transfer at farmers’own sweet will to transfer prohibition to limited transfer and now to autonomous transfer.At present, in China, the main problems in UTRH lie in the facts that the law system is outdated, leaving some relevant practice legally guideless; that there is not a definition of full and complete property rights, which is accompanied with a lack of actual management; that most deals in UTRH were conducted covertly and against relevant regulations; that there is neither an open market for UTRH nor any rules to follow in benefit distribution; and that many disputes arose in UTRH while the decision on judicial relief is rather difficult to make.The existing property rights to homesteads restrict UTRH.To change this situation, suggestions as follows are made to adjust property rights to the needs of UTRH:In terms of the possession of homesteads, first, make the possession of homesteads full and complete, and give the possessor of a homestead the right to provide the land on the market; second, clarify the property possessor of a homestead, and give the property possessor an independent right to manage the property. In terms of the usufruct of homesteads, first, define the membership of the rural collective economic organization; second, define the separation of farmer households; third, define the benefit rights on homesteads; fourth, clarify the usufruct of homesteads and the usufruct of rural commercial construction land and give a usufruct transfer right on homesteads.(2) UTRH is subject to various laws and regulations at different levels. Under the current law framework for rural homesteads, there exists an exterior profit in UTRH, which can be expressed as an economic value generated in UTRH. Through generally classifying different kinds of land into arable farmland and construction land (subdivided into rural homesteads and urban development land), and establishing a model of UTRH and a model of the comprehensive value of arable farmland (homesteads), it is found that the overall social welfare will suffer when homesteads are in idleness, which will bring about a negative exterior effect, with the economic value of homesteads being their marginal private benefit; and that the economic value of arable farmland (homesteads) will decrease when homesteads are recovered into arable farmland, thus generating a positive exterior effect, with the lower limit of the loss being the decrease in the opportunity value of the arable farmland while the upper limit being the positive exterior value the homestead may generate for the society.The imbalance in the distribution of exterior profit affects the balance between the supply and demand relevant to a homestead system. In China, the supply of a homestead system lags behind the demand for a homestead system, mainly because it is inconvenient for the central government to share in the exterior profit. And it follows that the supply of a local homestead system is also unsatisfactory. However, local governments, rural collective economic organizations and individual farmer households have a great demand for a homestead system in their hot pursuit of exterior profit.The main interested parties involved in UTRH can be grouped into the two opponents in a game with local governments on the one hand and farmer households on the other and their strategy choice depending on their respective benefit calculations. Their costs put together include the cost of the acquirement of the homestead (and the house), the cost due to the idleness of the homestead, the cost of UTRH, the compensation fee on the homestead (and the house), the cost of the handover of the farmland, the yield of the farmland, the mental loss of the farmer household due to the loss of the homestead(and the house),the social cost of homestead disputes, and the political cost of the confrontation between local governments and farmer households.(3) The market mechanism of UTRH is analyzed from four aspects:a supply and demand mechanism, a competition mechanism, a price mechanism, and a regulation mechanism. In terms of a supply and demand mechanism, the suppliers of homesteads are mainly farmers’collective economic organizations and possessors of the usufruct of homesteads, whereas the demanders are mainly farmers’collective economic organizations and their members, local governments or enterprise land users. At a certain point of time, the market supply of homesteads is approximately equal to the demand, and the market is stable. The market can thus be considered to have reached a balance between supply and demand. In terms of a competition mechanism, measures can be taken to reduce administrative rations, to increase market allocations and to introduce market competition, especially by enforcing and improving competitive market allocation means such as public bidding, auction or putting out for grabs. Ii terms of a price mechanism, a scientific price formation mechanism should be established, based on the implication and structure of the price for UTRH. It is proposed that surface structures and the attached be evaluated with reference to urban housing evaluation methods. The price for UTRH is composed of social security price and market price, with the social security price alone being the lower limit of the total price and the highest possible market price the upper limit. In terms of a regulation mechanism, the government should foster a fair market for UTRH, set up and improve a market system and appropriate market operation rules, sort out and clarify government functions, regulate trade principals’behavior on the market, supervise market operations and provide timely market public services, and ensure a good market running order.(4) From the viewpoint of management before, during and after UTRH, a management mechanism is proposed for UTRH with respect to government policy management, routine management and social security management, with the first comprising planning and projecting management, information management, revenue and taxation policy management, financial policy management and land price management; the second including routine property rights management, routine UTRH dealings and benefit management, etc.; and the last covering a competent administrative organizational system, a welfare system and a judicial relief system.(5) With Guangdong Province as a sample, farmers’will and action in UTRH is analyzed. It is found that up to73.75%farmers are willing to transfer the usufruct of their homestead through selling, leasing, exchanging for shares, etc. and that only26.25%farmers are unwilling to do so.59.33%homesteads have experienced UTRH across the whole province,60.06%in villages in urban areas and55.71%in rural areas. Locally, the percentages in the Pearl River delta region (67.42%) and the east region (62.5%) are higher than the average for the province as a whole, while those of the west region and the north region are lower, at59.26%and43.04%respectively. Through a principal component analysis and a Logistic Econometric Analysis, it is found that the factors which influence farmers’will and action in UTRH are obviously different in different areas at different social and economic levels. A further Pearson Correlated Analysis reveals that rural household net annual income and the area of homesteads are the most important factors in UTRH dealings in Guangdong Province.(6) An analysis of farmers’ will and action in UTRH reveals that farmer households have a strong will for UTRH. With conditions being still immature for open and physical UTRH dealings, it is a passable way to an optimum allocation of homestead resources to guide and encourage well-found and willing households to exit from their homestead. An exploration is made for an exit mechanism in UTRH from the aspects of property rights regulations, the market price formation mechanism for homesteads and farm houses and the government management system. In property rights disposition, it is suggested to concretize the possessor of a homestead and give the possessor the status of a corporal body on the market; make relevant regulations on the exit from rural homesteads and give exit compensation rights on homesteads. In terms of the market price formation mechanism for homesteads and farm houses, it is suggested to evaluate farm houses with reference to mature evaluation methods on the urban housing market; to strive for free exit from those homesteads which cannot be recovered into farmland, whereas, for those homesteads which can be recovered into farm land, set their price by subtracting transaction costs and recovery costs from the guide price of homesteads quoted on the UTRH market. In the aspect of the government management system, with the supply of the homestead system of the central government, local governments are suggested to set up an operational routine management system, and an incentive and restraining mechanism to encourage farmer households to exit from their homestead at their own free will, most importantly, through establishing a farmers’economic compensation and punishment mechanism, a social welfare and security system, etc.(7) Cases are chosen at provincial and village levels to explore innovations in the mechanism of UTRH. At the provincial level, UTRH dealings in Guangdong Province, Zhejiang Province, Sichuan Province, Chongqing Municipality and Tianjin Municipality are analyzed. It is found that in those pilot areas full and complete property rights to homesteads have been given more attention and their scope extended; that the function of the market, especially in price setting, has been strengthened; and that the government regulates and controls UTRH practice through policy management, routine administrative management and social security management; Chongqing Municipality, Tianjin Municipality and Zhejiang Province have set up a incentive mechanism to encourage farmer households to exit from their homestead, But a restraint mechanism is still lacking. At the village level, three cases are chosen to represent different areas with different development levels in Guangdong Province in order to assess the applicability of the UTRH mechanism. Analysis reveals that, between different areas and between areas at different economic development levels, there is a wide difference in their property rights disposition, their exit mechanism and their market mechanism, and that a management mechanism is lacking in them all to facilitate UTRH practice.In the end, the areas are pointed out which may require further exploration. Mainly included are the study of the applicability of the UTRH mechanism in different economic areas, the comparison study of the UTRH mechanism in different UTRH modes in different areas, and the empirical study of the analysis model of the economic value of UTRH and the analysis model of the UTRH game.