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Influences of reforming the system of rural land property rights on the rural financial market—the mechanism and micro-evidence

ZHANG Longyao1,2 WANG Mengjun1,2 LIU Junjie3

(1.College of Finance, Nanjing Agricultural University)
(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;


【Funds】 Supported by the General Project of National Natural Science Foundation of China (71573125) Young Scientists Fund of National Natural Science Foundation of China (71103132) Key Project of Philosophy and Social Sciences in Colleges and Universities in Jiangsu Province (2014ZDIXM011) the Fundamental Research Funds for the Central Universities (SKCX2014010, SKJD2014001)

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    [1]. 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]. 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]

    [3]. 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]

    [4]. 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]

    [5]. 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]

    [6]. 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]

    [7]. 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]


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This Article


CN: 11-1262/F

Vol , No. 12, Pages 14-30

December 2015


Article Outline


  • 1 Introduction
  • 2 The theoretical framework and the influencing mechanism
  • 3 The reform in sample regions and the descriptive analysis
  • 4 Empirical analysis
  • 5 Conclusions and implications
  • Footnote