Mechanism Of Land Contractual And Use Right Based Mortgage Loan With Property Rights Regulation

As an important part of Chinese rural land property system reform in the new period,land contractual and use right based mortgage loan(LCURML)has aroused widespread concern.Central and local governments have actively promoted LCURML since from the third plenary session of the 18th Communist Party of China(CPC)Central Committee.At the present stage,however,LCURML is confronted with the restriction of property rights regulation,which is not only reflected in that LCURML is banned by law,but also embodied in that regulations on other bundle of rights undermine the liquidity of rural land in especial.In particular,the thin land market caused by property rights regulation is a substantial hurdle to value evaluation of LCUR and disposition of LCUR after the default.In other words,different from the general mortgage lending on real estate,property rights regulation should be taken into consideration when piloting LCURML.In practice,LCURML is owed to the segmentation of LCUR into the Land Contractual Right(LCR)and the Land Management Right(LMR),and several-years LMR is pledged as collateral.Therefore,LCURML in nature is LMR-based mortgage loan(LMRML).Since LMR can be obtained through household-contract or transactions,LMRML can be divided into contractual LMR-based mortgage loan(CLMRML)and transferred LMR-based mortgage loan(TLMRML).Different from CLMRML,TLMRML in essential is obligatory right-based mortgage loan.More than that,since the popular form of land lease contract is annual pay system,TLMRML at present is confronted with an inner contradiction which is that the endogenous instability of transferred LMR has hindered the implement of TLMRML,that is,the long-term stability of LMR is a critical precondition for carrying out TLMRML.Hence,it needs study that how to resolve this confliction.Furthermore,the efficiency of financing mechanism of different pilot areas is different.So,it needs to compare different models.Centering on above topics and according to the way of obtaining LMR and the imparity of financing mechanism,this paper takes Tongxin and Pingluo as typical areas to analyze the mechanism of CLMRML,and takes Jiangjin and Xinyi as typical areas to dissect the mechanism of TLMRML.The financing mechanism of Tongxin and Jiangjin model iscounter-guarantee,and in Pingluo and Xinyi model borrowers can directly take LMR to banks as collateral.Other than that the demand and supply side of guarantee belong to two independent economic organizations in Jiangjin model,the demand and supply side of guarantee have already been integrated to one organization in Tongxin model,namely,although these two models adopt same financing mechanism of counter-guarantee,the mechanisms of these two kinds of LCURML are different from each other.For the sake of probing into the rationale of mechanism design of LCURML,this paper uses the framework of four levels of social analysis proposed by Oliver Williamson to dissect why LMR is pledged as collateral on the level of institutional environment,and to explore the difference and suitability of different mechanisms on the level of governance structure.Briefly speaking,following the from-individual-to-general inductive reasoning,this paper generalizes and compares the operation mode of LCURML of these four typical areas,and attempts to put forward the basic thoughts for optimizing the mechanism of LCURML.The main conclusions of this paper are as follows:(1)LCUR-based mortgage loan is confronted with the constraint of property rights regulation.Property rights’ value and its assignability are the crucial factors for implementing LCUR-based mortgage loan.Currently,however,various kinds of regulations on land tenure not only influence the value assessment of LCUR,but also suppress the development of rural land market.Land property rights regulation is that some bundles of rights constituting property rights are deprived or constrained.The right of possession is commonly interpreted as ownership in a narrow sense,which denotes the ownership of somebody on something.The collective ownership of rural land determines that the non-members of collective economic organization can’t be qualified as holders of LCUR,which will limit the transfer of LCUR in a certain scope.Meanwhile,land fragmentation caused by land equalization system under the collective system of ownership,which not only imposes restrictions on land using,but also impedes land circulation.Moreover,the prohibition of LCUR-based mortgage loan is one pattern of regulations on alienable right.In addition,farmland,especially the cultivated land application is under strict limitation,that is,converting farmland to non-farmland use must be via land expropriation examination and approval procedures.Since asset using determines the value of rights,the value of land in agricultural utilization is far below the value of that in non-agricultural utilization.More than that,land-use regulation system leads to land market segmentation.Therefore,property rights regulation inevitably affects value assessment and transfer of LCUR.(2)Land banking system can strengthen the operability of TLMRML.In order to resolve the contradiction of the instability of transferred LMR,some local governments propose land joint stock system to replace the existing land lease contract,which can get rid of the claim of obligation.Nevertheless,both the costs of generating and running land joint stock system are so high that LMR-based mortgage loan built on land joint stock system can’t be taken place.The key of stability of transferred LMR is to ensure that the rent would be paid timely to farmers.According to the banks’ two important function of turning retail deposits into large loans and short-term deposits into long-term loans,a set of land banking system can be set up to facilitate scattered land been orderly concentrated via market mechanism.The capital of land banks can be secured by using the system of joint liability and asset securitization so that the rent of farmers can be ensured.The primary role of land banks is to accelerate land market development so that the stability of transferred LMR can be strengthened and the liquidity of rural land can be increased,which will create a favorable condition for implementing LCURML.(3)The efficiency of Tongxin model is higher than that of Pingluo model.Tongxin model employs the mechanism of counter-guarantee by forming local financial intermediary called cooperatives for LCURs transfer(CLCURT).Meanwhile,Tongxin model adopts composite guarantee of LCURML with group lending.Moreover,subdividing CLCURT into couples of lending group is to clarify the property rights of joint liability and common credit for saving monitoring costs of CLCURT.There is little difference between Pingluo model and the general mortgage lending,which results in that this model can’t relieve the risk of the disposal difficulty caused by the thin land market.The further comparison between Tongxin and Pingluo model indicates that there are significant differences in the way of institutional change,financing mechanism,the role of land mortgage,disposal mechanisms of land,marketization degree and so on.From a general view,the marketization degree and the sustainability of the spontaneous induced type of Tongxin model are higher.(4)Financing mechanism of counter-guarantee is better than that of direct mortgage.Among these two kinds of LCURML one employing the financing mechanism of counter-guarantee is of higher efficiency.Mortgage on fragmented land can’t eliminate the information asymmetry between creditors and borrowers because of the constraint of the thin land market,so it needs financial intermediaries in the process of CLMRML.Financial intermediary is also necessary in the process of TLMRML.Because instability oftransferred LMR impedes the land disposition,and agriculture is a kind of high risk industry,and the rural credit system has not yet been established,all of which have generated significant information asymmetry.(5)Compared with land contractual and use rights,taking land management right as collateral is of higher operability.Taking LMR as collateral in practice is to break property rights regulation,which is to create a wider space for implementing LCURML.Compared with LCURML,LMRML can effectively avoid legal risk and the farmers’ risk of losing land.More important is that while the transfer of LUCR is only confined to the collective organization members,the transaction of LMR wouldn’t be restricted in a certain scope,which can expand the market scope of farmland transactions.As a result,taking LMR as collateral can weaken the constraint of thin market to some extent.(6)The governance structures of these two kinds of LCURML are different.CLMRML should be matched with hybrid forms of governance because of the higher asset specificity of contractual LMR.For instance,the administrative controls of CLCURT in Tongxin model can make up the flaw of market.TLMRML suits market forms of governance structures due to the lower asset specificity of transferred LMR.In order to decrease transaction costs of LCURML,it’s necessary to relax property rights regulation.Therefore,this paper proposed permitting LMR-based mortgage loan,prolonging the deadline of the second round of farmland contractual relations,absorbing the informal non-government entities,encouraging the participation of intermediaries for putting forward the LCUR-Based mortgage loan with favorable conditions.