Huang Qifan on deepening reforms around urban-rural integration
The former Chongqing mayor's qualified optimism ultimately rests on implementations - and more ambitious reforms.
Huang Qifan is the most frequent public speaker in his league of provincial-ministerial-level officials in China. The former mayor of the southwestern metropolis of Chongqing, known in China for his macroeconomic analysis, gave a speech on December 3 at the 2024 “Understanding China” International Conference in the southern city of Guangzhou.
The conference is the annual flagship event of the China Institute for Innovation and Development Strategy (CIIDS), originally as an in-house research arm of the Chinese Academy of Sciences and later approved by the State Council, China’s government cabinet, as a national non-profit organization. Huang is now Executive Deputy Director of its Academic Committee.
Huang, not unexpectedly, projects confidence towards China’s economic future. What might be unexpected is that he chose the occasion to highlight certain parts of the July Resolution of the 20th Central Committee of the Communist Party of China on further deepening reform comprehensively to advance Chinese modernization - over four months later after its publication.
Reading the tea leaves, his confidence is not unqualified. As the title of his speech reads, “deepening reforms around urban-rural integration is the key to advancing new-type urbanization and comprehensive rural revitalization in China,” suggesting work in progress rather than success guaranteed.
In my observation, Beijing has, in recent years, struggled to balance rural and urban developments. Huang is clear-eyed, albeit circumventing, in getting the priority straight: “In fact, Chinese modernization requires agricultural modernization, but fundamentally, it relies on promoting rural areas through urban development, relying on a group of super-large cities, megacities, and city clusters to drive growth.”
Beijing has found it difficult to lift restrictions over rural land out of genuine but excessive and misplaced concerns over food security and rural well-being. A prime example is Beijing’s unwillingness to allow farmers to monetize their 宅基地 rural residential land, with the agriculture minister reiterating after the Third Plenary Session in July that rural residential land can only be traded within farmers’ respective villages, a stance Beijing has held firm since at least 2013. That effectively dashed hopes for meaningful rural land reform and one way to turbocharge the Chinese economy.
In sidestepping more ambitious reforms, Huang chose to criticize - by Chinese standards, rather bluntly - the lack of progress in a minor step forward, highlighting the dysfunction of the current national mechanism enabling provinces to trade quotas of coveted construction land. That mechanism, as modest as it is, would have given more badly-needed space to economically vibrant provinces, if operated smoothly.
Huang also carefully, if inconspicuously, conditioned four excellent outcomes upon four “ifs,” such as adding 400 million more urban residents in the next decade. However, each of the four “ifs” requires many significant undertakings to be realized. The second half of his last point almost reads as if he veered off subject, but the embedded call for “the flow of capital and technology to rural areas” is more like a silent rejection of China’s mainstream view of staving capital off the countryside.
In summary, Huang painted a rosy picture, but he skillfully qualified his expressed optimism with recommendations and expectations that are far from sure to come true. As the Hungarian writer Miklós Haraszti summed up decades ago: “the technique of writing between the lines is, for us, identical with artistic technique. It is a part of our skill and a test of our professionalism. Even the prestige accorded to us by officialdom is partly predicated on our talent for talking between the lines.”
The following translation is based on the Chinese-language transcript published on December 9 in the WeChat blog of CIISD.
黄奇帆：围绕城乡融合深化改革是推进新型城镇化和乡村全面振兴的关键所在
Huang Qifan: Deepening reforms around urban-rural integration is the key to advancing new-type urbanization and comprehensive rural revitalization
I am delighted to attend the "Understanding China" International Conference. The "Resolution of CPC Central Committee on further deepening reform comprehensively to advance Chinese modernization" made by the 20th Central Committee of the Communist Party of China (CPC) has systematically outlined the direction, path, and measures for deepening reforms in the next five years. My personal understanding is that this document is historic and should be recorded in the annals of history. Now, I will discuss my understanding and views on the content related to promoting urban-rural integration as proposed in the Resolution.
The Resolution states that “integrated urban and rural development is essential to Chinese modernization. We must pursue coordinated progress in new industrialization, new urbanization, and all-around rural revitalization, facilitate greater urban-rural integration in planning, development, and governance across the board, and promote equal exchanges and two-way flows of production factors between urban and rural areas, so as to narrow the disparities between the two and promote their shared prosperity and development.” This requirement will greatly release a new round of development and reform dividends, laying the foundation for more significant and substantive progress toward common prosperity for all people.
As everyone knows, due to China's unique "Hu Huanyong Line" phenomenon in the geographical distribution of the economy, the right side of this line has a large population and limited land, with 94% of the population living on only 36% of the land area.
There are currently 230 million farming households in the country, with an average operating scale of 7.8 mu per household. [Note: one mu corresponds to 1/15 of a hectare, or about 666.67 square meters.] Of these, 210 million households operate on less than 10 mu of land, exhibiting significant small-scale farming characteristics. Small farmers account for 80% of food supply. In contrast, Japan, also characterized by a high population and limited land, has an average farm size of 22.5 hu, despite only having 0.7 mu of arable land per capita. In the United States, which has a vast land area and sparse population, there are about 2.2 million farms, with an average size of about 2,550 mu per farm. Canada has 240,000 family farms, with an average size of over 4,000 mu, and farms exceeding 20,000 mu are not uncommon. These countries have more concentrated agricultural land, making it easier to promote agricultural technology, and agricultural labor productivity can be more easily improved. In China, however, due to the limited land per household, economies of scale are difficult to realize, leading to high food production costs and a prominent issue of "high yield but poor harvest." This is the greatest constraint facing China's rural revitalization and common prosperity efforts.
In response, the 20th Central Committee has systematically deployed urban-rural integration development. The Resolution states that “We will implement the systems for allowing people to obtain household registration and access basic public services in their place of permanent residence. We will push to see that eligible people who have moved to cities from rural areas enjoy the same rights as registered local residents with regard to social insurance, housing support, and access to compulsory education for their children living with them. The process of granting permanent urban residency to these people will also be accelerated.” Currently, there is a gap of 18 percentage points between the urbanization rate of the population permanently living in cities (66%) and the urbanization rate of the population with legally urban household registration (48%), affecting about 250 million people. Implementing the above policies will ensure that by 2030, all 250 million people will be registered in urban areas, with further efforts to increase the urbanization rate of registered populations to 75% between 2035 and 2040, bringing several tangible benefits:
First, with a significant reduction in rural population, moderate-scale farming will be feasible, and rural revitalization will have an industrial foundation. According to the goals above, by 2035 and 2040, the current 230 million farming households will be reduced to about 70 million. By then, moderate-scale farming will be possible. The average landholding per household will increase from the current 7.8 mu to around 30 mu, creating better conditions for the use of large-scale agricultural machinery and the promotion of agricultural technology. This will help mitigate the risks of an aging rural population, rural hollowing-out, and farmland abandonment. At that time, the average income from farming per household will rise from about 20,000 yuan ($2,741) to about 100,000 yuan ($13,705), which will be comparable to the income of migrant worker families with two working members. This will be a significant progress, narrowing the income gap between urban and rural areas and laying a solid material foundation for common prosperity.
Second, this will create new demand for new urbanization, foster new momentum, and promote high-quality economic development in China. Currently, China has entered a stage of population aging and declining birth rates, with some cities seeing population decreases, which is detrimental to sustained and stable economic growth. According to the Third Plenary Session's deployment, if we continue to promote the settlement of nearly 400 million people into cities over the next decade, it will not only effectively increase the labor supply in urban areas, reduce excess real estate inventory, and spread out the costs of urban infrastructure construction, but also promote the formation of new super-large cities, megacities, and large cities. In fact, Chinese modernization requires agricultural modernization, but fundamentally, it relies on promoting rural areas through urban development, relying on a group of super-large cities, megacities, and city clusters to drive growth. These super-large gears will drive smaller gears, allowing China's economic super-machine to run more steadily and efficiently.
Third, for thousands of years, China has been dominated by an agricultural population and agricultural civilization. In the next 20 to 30 years, urban civilization will take the leading role. According to the Third Plenary Session's deployment, if the urbanization rate of the urban-registered population can be raised to roughly the same level as that of the population permanently living in cities, not only will the phenomenon of "migrant workers" be fundamentally eliminated, but it will also mean a qualitative change in China's urban-rural dual structure. China will transition from an agricultural country with a predominantly rural population to an industrial country with an urban population in the majority. Urban civilization and civil society will formally enter a new stage of development, becoming more mature. The society and culture that have long been shaped by agricultural civilization will gradually be redefined, transformed, and even replaced by urban civilization and civil society. This will lead to significant changes in the production and lifestyle, consumption and health concepts, and ideological identity of the people living under the old agricultural civilization.
A series of policy measures and reforms are necessary to realize the above development dividends. In this regard, the Third Plenary Session has also made specific arrangements:
First, it is necessary to establish a coordination mechanism between newly added urban construction land indicators and the increase in the permanent population. The Resolution says, “We will see that public services follow the movement of populations and facilitate the reasonable concentration of people in and their orderly flow between urban and rural areas and different regions.” The urbanization of agricultural migrant workers will certainly bring pressure on public service expenditures such as education and healthcare in the destination cities and increase social security spending, but it also contains huge incremental dividends. Currently, rural land accounts for more than 60% of the total construction land in urban and rural areas, but it only accommodates just over 30% of the population. If we accelerate the improvement of the cross-regional trading mechanism for the surplus quotas of urban-rural construction land increase-decrease linkage and supplementary farm land quotas, we can activate the market value contained in these lands. This not only benefits farmers by increasing their property income and promoting urban-rural integration but also facilitates the complementary advantages and coordinated development between regions. However, this reform is still in pilot stages in some areas and has not been fully rolled out nationwide. The "transaction" of construction land quota and supplementary farmland quota between provinces and regions still follows a batch reporting and central government ministry approval process, with non-market pricing and delayed financial settlement, which affects the interests of the stakeholders, especially the farmers whose homestead is requisitioned.
[Note: Understanding the paragraph above requires detailed knowledge about the ownership and control of land in China. All urban land is state-owned, according to China’s constitution, and it is directly managed by local governments subject to stringent central government regulations. China’s constitution also mandates all rural land is owned by rural collectives - not by individual farms. The Chinese government categorizes part of China’s land - both urban and rural - as construction land, and categorizes part of China’s rural land as farmland. The Chinese government apply quotas to both construction land and farmland in different provinces, and allow some transactions of the quotas between provinces, and at the same time maintains strict requirement for the number of farmland, out of concerns for food security. Typically, more developed provinces need bigger quotas of construction land and smaller farmland, and less developed provinces the other way around. The provinces are allowed to trade the quotas between themselves subject to the approval of central government ministries, but as Huang pointed out, the transactions are difficult and inefficient because of the scrutiny imposed at the central level.]
Second, we need to protect the legal rights and interests of farmers who migrate to cities, increasing their property income. The Resolution states “We will protect the lawful land rights and interests of former rural residents who now hold permanent urban residency, protect, in accordance with the law, their rights to contract rural land, to use their rural residential land, and to share in the proceeds from rural collective undertakings, and explore avenues to facilitate voluntary, paid transfers of these rights”; “ensure that farmers enjoy more adequate property rights and interests”; “We will promote orderly reforms for market-based transfers of rural collective land designated for business construction and improve the mechanisms for distributing returns realized from the appreciation of land”.
These policy measures aim to fully protect farmers' property rights and increase their property income. In fact, the biggest problem for Chinese farmers is that 97% of their annual income comes from labor income, with almost no property income. Meanwhile, urban residents' income from property assets such as housing and stocks may account for more than 50% of their overall income. Although every farming household has one and a third mu of land, this land cannot yet generate cash flow or provide property income for farmers. However, activating the "three blocks of land" in rural areas [Note: The Chinese government categorizes rural land into contract rural land, rural residential land, and rural collective land designated for business construction.] and enabling the legal and orderly transfer of land resources can create conditions to increase farmers' property income. The gradual improvement and promotion of the urban-rural construction land transfer policy will help reduce the rural-urban income gap.
Third, we need to comprehensively improve the level of integration in urban-rural planning, construction, and governance, promoting the equal exchange and two-way flow of urban-rural production factors. For many years, rural populations have moved to cities, with farmers' savings being lent to urban commercial and industrial households through the banking system, and agricultural economic surplus flowing into other industries due to the "scissors gap." This one-way flow should be reversed. To systematically realize the movement of capital, technology, and talent to rural areas, good governance systems and institutional arrangements are required in rural areas.
In this regard, the Resolution not only extends land contracts for another 30 years but also requires “deepen[ing] the reform to separate the ownership rights, contract rights, and management rights of contracted land”; “refine the pricing mechanism for the transfer of contracted land management rights. We will encourage farmers to engage in cooperative operations”; “We will develop new types of rural collective economies, establish related operating mechanisms featuring clearly defined property rights and rational income distribution, and ensure that farmers enjoy more adequate property rights and interests.”
These reforms will facilitate the flow of capital and technology to rural areas, narrowing the income gap between urban and rural areas. The flow of capital and technology to rural areas will not only increase agricultural output but also upgrade the entire agricultural industry chain. In the future, agriculture is expected to grow into the "sixth industry." The sixth industry is about empowering the first industry (agriculture) with the second and third industries, creating a high-level supply chain from "field to table." In fact, after years of reform, innovation, and development, we already have the material and technical conditions to transform agriculture with modern industry and services. Some places have successfully integrated specialty agriculture, cold chain logistics, and live-streaming e-commerce, using industrial and internet-based thinking to run agriculture. If the 8.9 trillion yuan agricultural GDP can be transformed into 18 trillion yuan of GDP, farmers' income will also double. With the improvement of people's living standards, the demand for food is shifting from "sufficient" to "better" and "healthier," creating more and more opportunities for China's agricultural "new revolution."
In summary, the series of major measures on urban-rural integration development in the Resolution made by the 20th Central Committee will profoundly change the face of China. We are full of confidence in the forthcoming Chinese modernization. Of course, this beautiful vision will be realized through action. According to the Resolution’s requirements, in the process of implementing the spirit of the Third Plenary Session, we must pay more attention to systematic integration, focus on key points, and emphasize the effectiveness of reform, fully unleashing the new dividends of urban-rural integration and promoting higher-quality economic development in China.
More on China’s baby steps in furthering rural land reform
Another speech from Huang Qifan this year