To keep or not to keep the farmland? Incentives and barriers to farmers’ decisions in urbanizing China

Abstract

Global societies are becoming increasingly urbanized, which is posing serious challenges to the efficient use of farmland. In response to this, a suite of institutional reforms in China from 1978 onwards has been released to combat the marginalizing of smallholder farming, and drive the modernization of agriculture. Nevertheless, the conventional literature sidelines the outcomes of the reforms eventually undertaken varied, and the knowledge concerning the behavior logic of farmers. This article aims to understand the contributory barriers and potential incentives that drive the adaptation of farmers to a recent farmland use right reform. Such institutional reform, that is “the withdrawal from farmland contracting management right (FCMR)”, which allows farmers to terminate their FCMR at any time, and at the same time, can withdraw from their agreement on the ground of the principle of voluntariness and compensation by law. Through the questionnaire surveys and semi-structured interviews in two pilot areas in inland China, this article has interrogated the factors that drive or impede the farmers in selecting to discontinue holding their FCMR by employing the Probit model. We argue that firstly, notwithstanding the positive effects of farmland scale upon the withdrawal from FCMR, it is jointly inhibited by the risk aversion of smallholding farmers, the expected potential property value, and the exaggerated transaction costs. Secondly, in contrast to the traditional perception, those who have a lower reliance on agricultural production are disinclined to terminate their FCMR instead. Overall, this article articulates the determining role of the rise in property value in the conceptualization of the behavior logic of farmers in relation to the withdrawal from FCMR. Also, this article unravels that the abovementioned factors complicate the realization of central government directives on the ground.