China is lifting thousands of farmers out of poverty with a new land reform policy. Farmers can now rent out their land to private companies, provided that it is still used for agriculture. This is the first time in more than 60 years that the Communist Party has enacted land reforms, effectively decreasing rural poverty in China.

In 2012, Sihong, a Chinese county of about one million people, implemented a pilot project to test the results of the new land reform policy. Then in November 2016, Beijing approved the enactment of the policy in the rest of the country.

Before the application of this policy, collective farming was one of the Communist Party’s main political devices. The land belonged to the state, and individual farmers would contract to use it without ever owning it. Now farmers can rent out their land-use rights, and sometimes they can even use the rights as collateral for loans. However, they still are prohibited from leasing the land rights to property developers and industrial enterprises, even though these would likely be more lucrative.

One national goal of this reform was to increase the country’s food production through control by large commercial agriculture companies. Another important goal was to limit Chinese reliance on imports, which more than tripled in the past ten years, reaching $110.6 billion last year.

This reform allows more farmers to participate in the economy as consumers. So far, almost 30 percent of China’s 230 million rural households have rented out their land through various pilot programs. Farmers represent 300 to 400 million people with more purchasing power who could significantly bolster the economy.

Furthermore, Chinese leaders are hopeful that this change may generate business investments in agriculture, a goal they have been pursuing for years. They hope to convince Chinese investors to redirect their funds away from real estate or investments abroad and back into Chinese agriculture.

These reforms also have an important social consequence. Namely, they are decreasing rural poverty in China.

China is the fourth largest country in the world and has over 1.3 billion people. In the past twenty years, China has experienced unparalleled economic growth, resulting in a significant decrease in poverty. However, not all groups benefited from this development.

A huge disparity exists between urban and rural incomes. The average urban household’s income per capita was ￥29,831, which is the equivalent of $4,500 per year. Meanwhile, rural households have a per capita income of only ￥9,892, or $4 a day.

Around 50 to 55 percent of the Chinese population lives in rural areas, and in these areas about two-thirds of people are farmers. Some of the factors keeping rural farmers in poverty include increasingly frequent natural calamities, poor community infrastructures and services, limited access to financial services and markets, outdated farming techniques and depleted natural resources.

The land policy reform has proven itself to be an effective solution to the problem of rural poverty in China. For example, one farmer in the Shiji township went from earning ￥10,000 a year growing rice to pocketing ￥8,000 just from renting his land and making an additional ￥60,000 annually in his store.

This policy aligns with President Xi Jinping’s pledge to reduce poverty. By decreasing poverty in rural China, the land policy reform demonstrates the positive social and economic impact that opening new markets in poor regions can have.

– Lauren McBride

Photo: Flickr