Influences of reforming the system of rural land property rights on the rural financial market—the mechanism and micro-evidence
(2.Center for Rural Financial Development Research)
(3.Research Center for Rural Economy, Ministry of Agriculture of the People's Republic of China)
【Abstract】The new round of reforming the system of rural land property rights mainly includes the confirmation, registration and issuing certificates of the right to land contractual management, and granting the right power and functions as mortgages and guarantees. This paper established a theoretical framework for analyzinginfluences of reforming the system of rural land property rights on the rural financial market, and verifiedinfluences and the influencing mechanism empirically with data of 707 sample households in pilot and non-pilot regions. Results showed that effects on the credit supply of mortgaging rural land appeared preliminarily, and the credit supply of financial institutions for mortgaging rural land had a preference for scales. The confirmation of rural land right and the circulation of rural land improved rural households' nominal credit demand significantly, but due to legal restrictions and credit rationing of financial institutions, 43.24% rural households with nominal credit demand could not express their demand effectively, but rather transfer it into potential credit demand. Amending relevant laws that restrained mortgaging rural land, and improving the system of mortgaging rural land would help to improve credit terms for these rural households.
【Keywords】 reforming the system of rural land property rights; effects on the credit supply; potential credit demand; loans for mortgaging rural land;
. ① Article 37 of Guarantee Law of the People's Republic of China passed in June 30, 1995 and implemented in October 1, 1995 stipulated that rights to the use of land owned collectively such as farmland, the homestead, plots of land and hills left to households for personal needs should not be mortgaged. [^Back]
. ② Data source: National Bureau of Statistics of China (eds.). Rural Statistical Yearbook of China 1996 (中国农村统计年鉴1996). Beijing: China Statistics Press, (1996). [^Back]
. ① For example, in 2013, a land cooperative in Zaozhuang City, Shandong Province transferred in 1,600 mu of land and obtained loans by mortgaging the right to the use of land. When default occurred due to bad management of the cooperative, the lending Rural Credit Cooperative did not re-transfer the land to repay loans, but rather returned the land to farmers for farming. Finally, most losses were afforded by the government-funded bonding company (Wang, 2014). [^Back]
. ② In December, 2011, the Ministry of Agriculture of the People's Republic of China and member units of the joint session in pilot regions of rural reform approved 24 pilot regions for rural reform. Pilot regions for reform mainly carried out reforms of the system of rural property rights, rural financial reform, and innovation in the agricultural operational system and mechanism. http://www.moa.gov.cn/hdllm/wszb/zb41/ [^Back]
. ① Long-term investment in rural land mentioned in existing literature were classified into two types: long-term investment connecting to the plot of land (such as digging wells, and using fertilizer), and long-term investment disconnecting to the plot of land (such as buying tractors or working animals) (Gao et al., 2013). In addition, this paper believes that planting perennial cash crops is also a form of long-term investment. [^Back]
. ① Gaochun District in Nanjing City was a provincial-level pilot region for rural reform established by Jiangsu Province according to the method of national pilot regions for rural reform. But during the survey, the research group found that the confirmation of rural land right was only launched in small scope, construction of the formal market for circulating rural land was lagging behind, and the pilot for mortgaging rural land was not started. Thus sample households in Nanjing were ultimately defined as samples of non-pilot regions, resulting in a high proportion of sample households in non-pilot regions. [^Back]
. ① The original hypothesis is that the sum of log-likelihood value of the Probit model and the log-likelihood value of the selection model equals to the log-likelihood value of the Heckprobit model. [^Back]
1 Chen, X. Economic Information Daily (经济参考报), (2014-10-23).
2 Gao, L., Ji, X. & Huang, J. Chinese Rural Economy (中国农村经济), (11) (2013).
3 Gu, N. & Fan, Z. Issues in Agricultural Economy (农业经济问题), (8) (2012).
4 DRC, WB. China: Developing Efficient, Inclusive and Sustainable Urbanization (中国: 推进高效、包容、可持续的城镇化). Beijing: China Development Press, (2014).
5 Han, J., Luo, D. & Cheng, Y. Issues in Agricultural Economy (农业经济问题), (2) (2007).
6 Huang, Z., Liu, X. & Cheng, E. Management World (管理世界), (3) (2007).
7 Wang, X. China Finance (中国金融), (9) (2009).
8 Wang, D., Tian, Q., Li, L. et al. Journal of Financial Research (金融研究), (5) (2011).
9 Wang, D. China Rural Finance (中国农村金融), (10) (2014).
10 Wen, G. 前沿视野, (11) (2006).
11 Yan, Z., Zhang, L. & Zhang, B. Journal of Agrotechnical Economics (农业技术经济), (4) (2005).
12 Yao, Y. Social Sciences in China (中国社会科学), (2) (2000).
13 Ye, J., Jiang, Y., Prosterman, R. et al. Management World (管理世界), (7) (2006).
14 Yi, X. Chinese Rural Economy (中国农村经济), (2) (2012).
15 Zhang, Y., Lv, H. & Xiao, X. Rural Economy (农村经济), (5) (2012).
16 Zhong, C., Sun, H. & Xu, C. Journal of Financial Research (金融研究), (11) (2010).
17 Zhong, F. & Ji, Y. Economic Research Journal (经济研究), (12) (2009).
18 Arner, D. W.; Booth, C. D.; Lejot, P. and Hsu, B. F. C.: Property Rights, Collateral, Creditor Rights and Insolvency in East Asia, Texas International Law Journal, 42(3): 515–559, 2007.
19 Baydas, M. M.; Meyer, R. L. and Aguilera-Alfred, N.: Credit Rationing in Small-scale Enterprises: Special Micro-enterprise Programs in Ecuador, The Journal of Development Studies, 31(2): 279–309, 1994.
20 Besley, T.: Property Rights and Investment Incentives: Theory and Evidence from Ghana, Journal of Political Economy, 103(5): 903–937, 1995.
21 Besley, T. J.; Burchardi, K. B. and Ghatak, M.: Incentives and the de Soto Effect, The Quarterly Journal of Economics, 127(1): 237–282, 2012.
22 Carter, M. R. and Olinto, P.: Getting Institutions Right for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment, American Journal of Agricultural Economics, 85(1): 173–186, 2006.
23 De Soto, H., The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, New York: Basic Books, Bantam Press/Random House, 2000.
24 Deininger, K.: Land Policies for Growth and Poverty Reduction, Washington D. C.: The World Bank, 2003.
25 Domeher, D. and Abdulai, R.: Access to Credit in the Developing World: Does Land Registration Matter? Third World Quarterly, 33(1): 161–175, 2012.
26 FAO: Collateral in Rural Loans, Rome, 1996.
27 Feder, G.; Onchan, T. and Chalamwong, Y.: Land Policies and Farm Performance in Thailand’s Forest Reserve Areas, Economic Development and Cultural Change, 36(3): 483–501, 1988.
28 Field, E. and Torero, M.: Do Property Titles Increase Credit Access among the Urban Poor? Evidence from a Nationwide Titling Program, working paper, Harvard University, 2006.
29 Guirkinger, D. C. and Boucher, S. R.: Credit Constraints and Productivity in Peruvian Agriculture, Agricultural Economics, 39(3): 295–308, 2008.
30 Kemper, N.; Klump, R. and Schumacher, H.: Representation of Property Rights and Credit Market Outcomes: Evidence from a Land Reform in Vietnam, Proceedings of the German Development Economics Conference, Berlin, 2011.
31 Lopez, R.: Land Titles and Farm Productivity in Honduras, Washington D. C.: World Bank, 1997.
32 Mushinski, D.: An Analysis of Offer Functions of Banks and Credit Unions in Guatemala, Journal of Development Studies, 36(2): 88–112, 1999.
33 Petrick, M.: A Microeconometric Analysis of Credit Rationing in the Polish Farm Sector, European Review of Agricultural Economics, 31(1): 77–101, 2004.