How Can Chinese Farmers' Property Income Be Improved? A Population–Land Coupling Urbanization Mechanism

• Author: Xiaoling Zhang,Yuzhe Wu,Jiaojiao Luo,Martin Skitmore,Wendan Jiang
• DOI: http://doi.org/10.1111/cwe.12277
• Published date: 01 March 2019
• Date: 01 March 2019

China & World Economy / 107–126, Vol. 27, No. 2, 2019

107

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

How Can Chinese Farmers’ Property Income Be Improved?

A Population–Land Coupling Urbanization Mechanism

Yuzhe Wu, Wendan Jiang, Jiaojiao Luo, Xiaoling Zhang, Martin Skitmore*

Abstract

Balancing urban and rural development is an important political goal in China. The

failure of rural land privatization has led to a low level of rural economic development

and a vast property income gap between citizens and farmers. This paper illustrates the

reasons for property income inequality from the perspective of the land tenure system

and the dualistic household registration system. After evaluating the segmentation

of the rural land market and the rigid nature of rural land assets, a population–land

coupling urbanization mechanism is proposed. The paper argues that China’s land

property system has externalized a high degree of geospatial and social urban and

rural intertwinement. Major reform of the rural land property rights system is required

to correct the situation (further development of the social security system and stable

urbanization) and to increase property income potential for farmers.

Key words: household registration system, land ownership, land privatization, property

income

JEL codes: H70, R52, Z18

I. Introduction

Property income refers to the income received by virtue of certain activities involving

someone’s capital, technology or management. Two major forms of property income are

personal property, such as interest received by deposit and securities; and immovable

property, such as rent received from the ownership of a house, vehicle or land. For

farmers, personal property income is consistent with that of urban citizens, but their

*Yuzhe Wu, Professor, Zhejiang University, China. Email: wuyuzhe@zju.edu.cn; Wendan Jiang, Postgraduate

Student, Zhejiang University, China. Email: jiangwendan92@163.com; Jiaojiao Luo, PhD Candidate, Zhejiang

University, China. Email: luojiaojiao@zju.edu.cn; Xiaoling Zhang, Professor, City University of Hong Kong,

. Email: xiaoling.zhang@cityu.edu.hk; Martin Skitmore, Professor, Queensland University of Technology,

Australia. Email: rm.skitmore@qut.edu.au. This research was funded by the Key Program of National Natural

Science Foundation of China (Nos. 71874155 and 71373231) and the Fundamental Research Funds for the

Central Universities (No. 2-2050205-17-182). The authors would like to thank Prof. Charles Choguill for

linguistic assistance during the preparation of this manuscript.

Yuzhe Wu et al. / 107–126, Vol. 27, No. 2, 2019

108

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

immovable property income is different. Land compensation and rental earnings are key

and particular components of farmers’ immovable property income.

The gap between urban and rural incomes in China is vast and contributes

substantially to overall inequality (Sicular, et al., 2007; Liu and Zhou, 2011). Many

studies have illustrated domestic urban–rural income inequality. For instance, Kanbur

and Zhang (1999) developed a unified empirical framework to describe the relative

contribution of rural–urban and inland–coastal inequality, and found that rural–urban

inequality is the primary contributor to regional inequality; while Yang (1999) used

household survey data to investigate the sources and causes of rising urban–rural

inequality and found that rural–urban income differences constitute a large part of

total inequality. Further studies of the causes of the urban–rural income gap show that

the key reasons include industrial preference, citizen expansion, regional economic

disparity and labor migration (Sinha, 1978; De Gorter and Swinnen, 2002; Wang and

Piesse, 2010; Cheng and Liu, 2013; Li and Ma, 2013). The income gap between rural

and urban China is increasing, although the underlying reasons are still under active

discussion.

The nationwide inequality of income distribution, an important issue in China, is

unlikely to improve unless the urban–rural property income gap is reduced (Chang,

2002). Although farmers have special immovable property income, there are still deep

concerns over the inequality of property incomes during the current period of fast

urbanization. A recent series of sociological studies examined potential approaches to

increase farmers’ property income. Some concentrated on theoretical analysis, making

such policy suggestions as improving the land circulation system and farmers’ land

property rights, along with homestead (zhaijidi) consolidation (Xiao and Liu, 2008).

Others focused more on empirical studies. For example, Xu and Liu’s (2012) analysis of

statistical data from Wuhan City during 1998–2009 concluded that the rural land system,

together with a suitable compensation mechanism, could help to improve farmer’s

property income. Although there are several ongoing land reform pilot projects, such

as the “homestead exchange for apartment approach”1 in Tianjin (Fang et al., 2016),

“land coupon program”2 in Chongqing (Wen et al., 2017), and the “two divisions and

two exchanges policy”3 (Shan et al., 2017) in Jiaxing, some believe that these projects

still shortchange farmers’ interests, and it has become a controversial issue whether it is

1Villagers can exchange their homesteads for houses in town.

2Under the land coupon program, urban agricultural land can be converted to construction land if an equal

amount of rural construction land is converted to farmland.

3The “two divisions and two exchanges policy” refers to the process of exchanging rural homesteads for urban

real estate and exchanging rural land contracting management rights for social security.