China’s leadership just released a communique summarizing its policy priorities for reform to fix the country’s slowed economic growth. A complete analysis will have to wait for the full text of the decision – expected in the next week. Still, there are positive signs that China will continue reforming its rural land rights system to ensure farmers’ land rights.

The communique suggested China may take steps to allow farmers to participate on equal terms in land markets and use their land as a source of capital to fund agricultural development or move to urban areas.

First, the communique states the need to create a unified land market for rural and urban construction land.  This could mean resolving a chronic controversy about the transferability of rural construction land rights, conditionally allowing market transactions of farmers’ residential land.

That would likely come with heavy caveats to ensure the transfer is completely voluntary and the farmer has stable non-agricultural income and more importantly, secure residence in the city. That reflects concerns about farmers bullied or tricked out of their land flooding the cities.

Second, the communique calls for giving farmers’ more property rights. It is not yet clear, but this could mean creating de facto perpetual land rights under the central policy of “long term without change” and lifting the prohibition on mortgaging rural land rights. Taken together these reforms would be important steps toward allowing farmers to participate on equal terms in the land market, and use their land as a source of capital to fund agricultural development or a move to the city.

Unification of rural and urban land markets would also be an important step toward reforming China’s land expropriation regime. According to the law as it stands, if developers want rural construction land for commercial purposes they have to rely on local government to seize it. Allowing market transactions means farmers could negotiate directly with developers, taking local government out of the equation and enabling farmers to negotiate for the true value of their land.