From informal farmland rental to market‐oriented transactions: Do China's Land Transfer Service Centers help?

Abstract

Farmland rental markets are important in production agriculture. Informal farmland rental markets have taken root in Chinese agriculture. However, farmland rental markets need to be transparent for increased efficiency and smooth functioning. This study uses three waves of nationally representative panel data and a difference‐in‐differences framework to examine the effect of China's Land Transfer Service Centers (LTSCs) on market‐oriented farmland transfers. The result indicates that LTSCs enhance farmland transfer marketisation, encouraging landowners to rent their land to large‐scale operators, engage in fixed‐term contracts and charge pecuniary rents. However, the LTSCs' “discrimination” against smallholders may limit their impact on the overall market. Additionally, LTSCs have weaker effects in villages with large clans and stronger effects in villages with bank outlets. The results illustrate the potential value of intermediary service organisations (ISOs) in land rental markets.