For the first time, the "use rights" for the 18 million hectares of rural land in China set aside for construction will be able to be traded in the marketplace.

Li Yuan, vice-minister of land and resources, said the changes were the key to further reforms of the country's land market mechanism, which came into being last year.

The revisions will be submitted to the Standing Committee of the National People's Congress - the top legislature - for final approval.

China's rural land, which is collectively owned by various villages and towns but contracted to farmer households, is categorized as either for agricultural use or for construction use.

The last revision of the 1986 Land Management Law forbids the transfer or lease of the right to use collectively owned rural land, unless the business which holds the right goes bankrupt or is taken over.

But rapid economic development and urbanization has put pressure on these parcels of rural land, which real estate developers call "barrels of gold."

"The absence of a legal channel to transfer use rights results in illegal transactions which victimize farmers," said Meng Xiangzhou, an expert with the Chinese Academy of Land and Resources Economics.

He said real estate developers often bribe local officials to take back the land, defying state rules that ban such resumptions except in the public interest - for example, for the construction of capital facilities.

In such cases, farmers receive far less than the market value for the land. Under present rules, compensation is limited to no more than 30 times the average annual output value of each mu (0.0667 hectare), which is normally calculated at 600 yuan (US$72.50).

Meng, who is one of the Chinese scholars drafting the revisions, advocates a two-pronged approach to managing the use rights of land zoned for construction.

(China Daily June 25, 2003)