Advance the reform of the rural residential land system, injecting new impetus into the development of the national economy and the realization of common prosperity
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The year 2023 marks the inaugural year of implementing the spirit from the 20th National Congress of the Communist Party of China (CPC) and a crucial period for economic recuperation following three years of COVID-19 response efforts. The Central Economic Work Conference in December 2023 highlighted some difficulties and challenges impeding economic revival, including lack of effective demand, overcapacity in some sectors, lackluster social expectations, certain risks and hidden problems, bottlenecks in the domestic circulation, as well as rising complexity, severity and uncertainty of the external environment.

Currently, China is navigating an economic transition, with the once robust real estate sector, a pillar industry of the national economy, now significantly weakened. This poses a substantial risk to the country’s economic stability. Despite the introduction of numerous real estate policies to shore up the market since 2022, the impact of these measures remains limited. The July 2023 meeting of the Political Bureau of the CPC Central Committee underscored that “greater efforts should be made to launch more affordable housing projects to increase supply”, “the idle properties should be put into use and transformed”, and “we should effectively guard against and defuse local debt risks.”

One potential strategy involves initiating reforms in the homestead system, aimed at revitalizing idle homestead land and rural properties. This reform could empower migrant workers and their families, who are increasingly relocating to urban areas, to derive asset-based income by transferring rural homestead rights. Such a move would also incentivize urban professionals to engage in rural entrepreneurship and development, thereby boosting rural growth. This strategy is poised to narrow the income gap between urban and rural residents, unlocking significant domestic demand for economic expansion. Besides benefiting the rural populace and aiding rural revitalization, it would also help reinvigorate the urban real estate market. Moreover, it can contribute to the timely introduction of real estate taxes, which could partially offset the fiscal deficits resulting from reduced local government land transfer revenues. It could provide fresh momentum for China’s ongoing reform and opening-up, fostering sustainable economic and social development and the pursuit of common prosperity.