Equity Versus Efficiency: Reconsidering China's Rural Land Contract System

In China, rural land is collectively owned at the village level. This implies village officials, under demographic changes across families within village, usually have to reallocate land on an ongoing basis. Realizing that frequent land reallocation will threaten economic sustainability as well as social stability, the government promulgated the 'Rural Land Contract Law' in 2002 according to which farmer' s land tenure security must be maintained for at least 30 years since 1998. Though there was an overall reduction of land reallocation in Chinese villages, administrative land reallocations are still being made in some villages because of the need to accommodate demographic changes within village.Based on an almost nationally representative rural data set of 119 villages in 6 provinces across China collected in 2008, this paper aims to lay out the stylized facts about the administrative land reallocation after 1998. Analyzing the subjective opinions from 2257 farmers about the central policy of providing long-term agricultural land tenure, we are able to rationalize why some farmers support the policy while others oppose it. This analysis helps us to better understand the dilemma between equity and efficiency built in China' s present rural land contract system. It is further shown that social conflicts between farmers within village may easily arise either due to administrative land reallocation or due to lack of it.We argue that this dilemma faced in China' s rural land contract system cannot be resolved effectively without coordinated reforms in household registration system that helps the hundreds of millions of Chinese rural migrant workers to realize permanent migration into cities and that release extra land for those who stay in the countryside.