An analysis of China’s reforms on mortgaging and transacting rural land use rights and entrepreneurial activity

Abstract

Purpose The purpose of this paper is to investigate the economic relationship with recent changes in China’s land use policy and rural development through innovation and entrepreneurship. Design/methodology/approach The first issue of economic importance is in understanding the market value of land use rights (LUR) transactions. To examine this, the authors build an argument around the idea of economic and marginal rents from Ricardo. The second issue relates to the extent by which deepening the rural financial landscape by allowing the mortgaging of LUR will promote and advance much needed entrepreneurial activity. To explore this issue, the authors draw on Schumpeter. The empirical contribution is based on a survey of 1,465 farm households in Gansu, Henan, Shaanxi and Shandong provinces. Findings In an endogenous Two-Stage Least Squares model, the authors find a positive and significant relationship between a willingness to mortgage LUR and entrepreneurship, which suggest that the new policy may well meet that objective. However, the authors do not find that entrepreneurs alone will have a willingness to mortgage LUR; non-entrepreneurs – traditional farmer types – would also be willing to mortgage LUR, but with a caveat that either group already has a disposition or demand for credit. Originality/value The value of the analysis is to provide an evidence to understand the market value of LUR transactions and to study the relationship between mortgage of LUR and entrepreneurial activity.

Heterogeneous choice in the demand for agriculture credit in China: results from an in-the-field choice experiment

“…On August 10, 2015, the document concerning the trial implementation of rural management rights over contracted land and farmer's homes as collateral for bank loans was approved by the State Council. Chinese farmers would now be allowed to transfer LUR and use LUR and homes to raise mortgages, in addition to converting LUR into shares in large-scale farming entities (Peng and Kong, 2020). The clear intention of the new policies is not only to create a more inclusive financial system that addresses these long-standing policy issues but also to improve the scale of existing operations and advancing entrepreneurial activity (Peng and Kong 2020;Peng and Zhou, 2020;Liu et al, 2019;Turvey and Xiong 2017) and increasing agricultural incomes (by about 25.9% according to a study of 1,279 farm households by Yang et al, 2018).…”

The Impact of Farmland Management Rights Mortgage Loan on the Agri-Food Industrial Agglomeration: Case of Hubei Province

“…The policy primarily caters to various large-scale agricultural management entities that have long-term financing requirements, which are generated through land management rights transfer. These entities can utilize loans to expand their operations further, while simultaneously promoting the development of agriculture towards scalability, industrialization, and modernization [32,33]. Additionally, the provision of loans assists in releasing the labor force of small-scale farmers, thereby meeting the labor-intensive employment needs of the AIA [2].…”

Rural Entrepreneurship Development in Southwest China: A Spatiotemporal Analysis

“…An example of this is a 2009 law, which allowed farmers to rent out their land-use rights to other farmers or agriculturally related enterprises. This resulted in an ability to collateralize and mortgage land-use rights, encouraged mortgaging willingness, and entrepreneurial activity of rural households [63]. Employment outside the TVEs in private enterprises grew fast and off-farm job creation since the 1980s was prolific across many areas of China [64,65].…”