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China is Mulling Rural Land Reform

China considers allowing rural residents to buy and sell land use rights.

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In the recent weeks, there has been much talk about China's rural land reform. At the center of this reform is the plan to allow farmers to trade the land use rights, although the land should still belong to the state. Rural residents may also obtain bank loans by mortgaging their land use rights or their residential property.

This is a bold initiative as China is trying to revitalize the stagnant rural economy and accelerate the urbanization process, in an effort to narrow the income gap between rural and urban residents. At this point, details are sketchy, and there are concerns about corruption and numerous implementation risks. That's probably why China's decision-makers did not officially endorse the rural land reform at an important meeting held recently to set directions for the country. We expect to hear more about the rural land reform in the following weeks and months.

Dan Su does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.