Market-Driven Rural Construction—A Case Study of Fuhong Town, Chengdu

Abstract

Although local government has played an important role in rural China’s development, some disadvantages of government-led rural construction have gradually emerged with changes in socioeconomic structure, which have negative impacts on rural development. To solve the problems of the traditional rural construction pattern, the introduction of market mechanisms into rural construction became the consensus in theory and in practice. Extant studies emphasize the importance of a market-driven rural construction pattern; however, they do not discuss how to practice this pattern in detail. Thus, this paper uses a case study and comparative analysis to illustrate the background, implementation process and outcomes of the market-driven pattern, aiming to identify the intrinsic dynamics among the local government, market capital and villagers in the market-driven pattern. We argue that although the transformation from a government-led to market-driven pattern is a gradual process, the market-driven pattern is an alternative to the traditional pattern and can better fulfill villagers’ interests and enhance sustainable rural development.

1. Introduction

Rural decline is a worldwide problem in the context of urbanization and industrialization [1] (Gao and Wu, 2017) and is expressed as rural outmigration, inefficient rural land use, declining rural industry and ultimately insufficient endogenous development capability in rural areas [2]. Among them, land-related issues are considered to be a major factor in rural decline [3,4] because land is important for rural industry development and villagers’ livelihoods. To revitalize rural areas, western countries began comprehensive rural reconstruction in the middle or late stages of industrialization and urbanization, which focused on encouraging urban residents migrate to rural areas to relieve crowded cities [5,6,7,8]. Contrarily, the outflow of production factors from rural areas and the ensuing widening urban–rural gap are the main problems in rural East Asia [9,10]. Both Japan and South Korea have paid attention to the promotion of self-help and cooperation among rural communities through the “new village movement” campaigns [11,12]. However, these related experiences are insufficient to explain the complexities of China’s rural development under the distinct rural construction land regime and uneven urban–rural relationship. With a long-term planned economy since 1949, China has gradually formed a dual system to separate urban and rural areas. As the representative of public interests, local governments can use their “extra-territorial power” [4,13] to acquire land from the rural collective and deprive villagers of land development rights [14], while the rural collective, as a legal owner of rural land, is merely informed that the decision has been made to acquire their land for development [15]. Meanwhile, the availability of rural construction land for residential or public purposes is limited, and transferring this land to commercial end-users is prohibited. Contrastingly, state-owned land can be used for business opportunities, especially for real estate. In addition to the limited land use rights, the particularity of rural construction land also lies in its allocation principle, causing less efficient land use. As a major composition of rural construction land, rural residential land is allocated to collective members for free and for an unlimited duration. Similarly, residential land cannot be transferred to users outside of the rural collective.

This dual land-ownership system reflects an asymmetric urban–rural relationship. To some degree, government-led urbanization results in rapid urban growth at the expense of villagers’ interests. Under this pattern, the so-called rural construction is just a supporting tool for land finance and urban expansion, while the rural collective’s endogenous development capability and sustainability are ignored. On the one hand, the GDP- oriented performance evaluation system and administrative resource allocation result in urbanization charactered with “rural land urbanization” [16,17,18]. The local government depends highly on land finance, and some enterprises prefer land speculation than industrial development, resulting in the wasting of land resources. On the other hand, the local government pays little attention to villagers’ sustainable livelihood after land requisition. Landless farmers, especially those who are middle-aged and elderly, find it difficult to find non-agricultural employment [19,20]. This, coupled with the higher cost of living after concentrated resettlement, means that many villagers actually face greater economic pressure than before. Considering these negative impacts and indirect costs, villagers may lack enough economic incentive to participate in land requisition [21,22]; however, they have little bargaining power to decide whether and how to participate when facing the “coercive force of the state”. As a result, villagers are forced to become involved in the government-led urbanization scheme and are excluded from sharing economic development outcomes. This passive rural construction led by the government results in many serious socioeconomic issues such as “hollowing villages”, abandoned arable land, idle homestead land, poor rural living environments and weak rural governance [23,24].

To solve the problem of the “thriving cities, declining villages” and “strong government and weak market” [25,26,27] associated with the government-led rural construction pattern, the introduction of a market mechanism into rural construction became the consensus in theory and in practice [23,27,28,29].

In theory, both urban and rural areas are spatial expressional forms resulting from the interaction of production factor aggregation, market transactions and public goods provision [30]. Economies of scale and transaction efficiency are driving forces for their emergence, development and maturity. Just as enterprises are explained as an organizational form of saving transaction costs by Coase, cities and villages have the same nature as enterprises for realizing economies of scale and decreasing transaction costs. The concentration of transactions in a certain space results from humans’ spontaneous choice to minimize their market transaction costs. Subsequently, there will be a virtuous circle between population agglomeration, public goods provision and more market transactions, boosting the development of cities and villages. Hence, urbanization or rural development should come back to its essence of concentration and seek for a co-ordination between the market and government. In practice, the Chinese Central Government opts to use the market mechanism instead of coercive forces [10,31] to promote rural revitalization and new-type urbanization, emphasizing the importance of “people, land, capital and industry” for rural revitalization and an equal urban–rural relationship [32,33,34]. Since the Central Government pointed out “the decisive role of the market mechanism in resource allocation” in 2013, China continuously deepens the reform of the economic system with a focus on a market-oriented resource allocation system. In February 2022, the Central Government further emphasized the importance of the market mechanism in realizing efficient mobility and the reasonable allocation of production factors, as well as a balanced allocation of public resources between urban and rural areas.

Under these guidelines, many local governments began to introduce the market mechanism to rural construction based on context-based innovative institutions, such as “land tickets” in Chongqing, “land coupons” in Yiwu and “land reclamation coupons” in Henan. These local experiments, based on rural construction land consolidation (RCLC), have attracted much attention from academics. RCLC is widely considered to be a spatial problem-solving instrument for land management [35] to enhance efficient land use [23], as well as to improve rural production and living conditions [36], community building [37] and endogenous development capability [38]. However, it also has a profound impact on the villagers’ production and lifestyle. The introduction of the market mechanism and private capitals to RCLC further complicate the relationship between the government, the market capital and villagers. Zhou et al. [39,40] pointed out that the resettlement of villagers to high-rise apartments is essentially a way to use rural residential land for urban expansion, and the local government and market capital have become the residual claimant of differential land rent.

Extant research points out the importance of the market mechanism for rural construction; however, such studies do not discuss how to integrate it into rural construction in detail. Thus, this paper establishes a framework of “institutional environment–governance structure–performance” based on the New Institutional Economics, using a case study and comparative analysis to illustrate the background, implementation and outcomes of the market-driven pattern. By taking a company-dominated RCLC project in Chengdu as a case study, we aim to identify the intrinsic dynamics among the local government, market capital and villagers in rural revitalization via asking two questions: how is the market-driven pattern implemented, and what are the differences between the market-driven and government-led patterns? It is hoped that this paper will improve our knowledge of the market-driven rural construction pattern and offer new guidance for the design and implementation of resource governance policies, and finally for rural revitalization.

In the following part, this paper first introduces some basic information of the study area and data collection process. Then, the detailed implementation process and outcomes of the market-driven rural construction scheme are demonstrated. Based on the discussion above, the next section compares the market-driven pattern with the government-led one from the perspective of “people, land, capital and industry”. The last section presents the conclusion and suggestions.

2. Case Selection and Data Collection

2.1. Study Area

Fuhong town is 25 km away from Chengdu Municipality and has convenient access for transportation. In 2012, the town covered an area of 39.36 square kilometers, including arable land of 38,346 mu (about 25.564 square kilometers) and consisted of nine administrative villages. (Because the Fuhong town began coordinating the new-type urbanization and agricultural modernization through the comprehensive rural construction land consolidation in 2012, this information mainly reflects the situation circa 2012.) In particular, Fuhong town is located within the scope of the Longquan Mountain Tourist Area in Chengdu and owns a national-level scenic spot with more than 13,000 mou of apricot tree stands. In addition, it is adjacent to several Ancient Town tourism attractions. Despite better resource endowments and location, Fuhong town was still a traditional agricultural town with an agricultural population of 26,419 and about 3000 non-agricultural residents, and was one of the poorest towns in the Qingbaijiang District by 2012. Farmers’ annual net income per capita was only RMB 4000. As Chengdu is a national pilot for Urban–Rural Coordination Reform, the town government grasped this political opportunity and cooperated with an external private investor on rural construction.

Fuhong town was chosen as a case example for following reasons. Firstly, all of the nine administrative villages were incorporated into a comprehensive RCLC project, while most similar projects in China were carried out within a single administrative village. Considering the potential for construction land consolidation in each village, the economies of scale of the project implementation and the town’s development planning, the local government decided to optimize the layout of the rural space, especially the rural construction land through RCLC, ultimately to coordinate new-type urbanization and rural construction. Secondly, the local government introduced a private company into the RCLC project. As a new actor, this company was involved in the whole implementation processes from providing funds, preparing township development planning and constructing concentrated residence areas to developing rural industry. This means that the company participated fully in the rural and town construction, which is traditionally undertaken by the local government.

2.2. Data Collection Process

To understand the detailed transformation process of the rural construction pattern and the invisible relationships between the different stakeholders, we employed a case study method to elucidate the implementation and impacts of the market-driven pattern using qualitative and quantitative analyses. A group of eight researchers conducted an in-depth field investigation for 7 days during October 2016 and June 2017. Quantitative data were collected from semi-structured interviews and a questionnaire survey to validate the qualitative description and arguments. The interviewees included township-level officers, villager cadres, a private investor and some villagers.

For the township-level officers from the related departments and the villager cadres, the questions in the semi-structured interview concerned the general implementation process, including decision making, project management and their personal comments on the project. Specifically, the interview questions included the following: (1) Why did you decide to implement the rural construction through rural construction land consolidation? (2) Why did you decide to introduce market capitals? (3) How did you introduce this project to the villagers and what kind of policies did you explain to the villagers? (4) What roles do you think you or your department/organization played? (5) How did you protect villagers’ rights and interests during the whole process?

To understand the investment incentives of the private company, questions in the semi-structured interview referred to how the company designed, planned and implemented the project and how the villagers were negotiated with. A questionnaire was also used to obtain some specific data about the project, including basic information regarding the investor, the quantity of demolition and reclamation, the construction standards of the concentrated residential areas, investment costs and returns, ways in which construction land quotas were saved and encountered problems.

For the affected villagers, 137 questionnaires were administered to a random sample. The questionnaire included seven sections: (1) interviewees’ household demographic characteristics and changes in employment; (2) changes in household income and expenditure; (3) functions, areas and location of residential land and farmhouse, areas of resettlement house; (4) types and quantities of compensation obtained and costs undertaken; (5) changes in living environment; (6) the ownership and use of reclaimed homestead; (7) reasons for participation and satisfaction levels.

The age of the interviewees was mainly between 35 and 64 years old, with an average of about 60 years old. This is because we rarely found interviewees under 35 years old in the field investigation. Female interviewees accounted for 45.99%. To some extent, this reflects the general phenomenon of hollowing out and aging of the village, and the information provided by these people who lived in the village for a long time also better reflects the impacts of a RCLC project on their welfare. In addition, the majority of the participants were from agricultural households and were ordinary villagers, which avoids the impact of certain special factors, such as social capital and elite capture, on the participation willingness and project outcomes. The detailed characteristics of the interviewees are shown in

Table 1. Basic characteristics of interviewees.

Indicator	Classification	Proportion (%)
Age	Under 34 years old	1.46%
	35–64 years old	59.85%
	Over 65 years old	37.96%
Gender	Female	45.99%
	Male	53.28%
Level of education	Illiteracy	29.93%
	Primary school	51.82%
	Junior high school	15.33%
	Senior high school	1.46%
	Higher education	0.73%
Type of household registration	Agriculture	93.43%
	Non-agriculture	5.84%
Marital status	Unmarried	2.92%
	Married	84.67%
	Divorced	0.73%
	Widowed	10.95%
Village cadre	Yes	5.84%
	No	93.43%
Member of CPC	Yes	5.84%
	No	93.43%

.

3. Institutional Background of Market-Driven Rural Construction

As a national pilot for Urban–Rural Coordination Reform, Chengdu has had rich experience in using rural construction land consolidation (RCLC) for rural construction since 2006. An RCLC project is composed of three areas: demolition and reclamation areas (chaijiu qu), resettlement areas (anzhi qu) and construction areas (jianxin qu). To ensure that the quantity of arable land does not decrease and the quantity of construction land does not increase, a RCLC project promotes rural space reconfiguration through demolition and reclamation, resettlement, construction quota transactions and utilization. Figure 1 shows the spatial mechanism of an RCLC. The first area refers to the reclamation of scattered rural construction land, which mainly consists of residential land, as arable land. By demolishing the villagers’ scattered old farmhouses and reclaiming them as arable land, more arable land is created, which is more than the quantity the local government is required to preserve. This amount of arable land is registered as “newly-created construction land quotas”. Then, the affected villagers are resettled into higher-density concentrated residential areas that occupy a smaller area of rural construction land than before. Thus, some construction land quotas are saved and can be used in the construction areas (jianxin qu). The saved construction land quotas can be used to convert some arable land in a desirable location near the town into rural commercial construction land for industrial development. They can also be sold to end-users of urban land through the Chengdu Agricultural Equity Exchange. During the whole process, the quantities of arable land and construction land remain unchanged within the town, but the rural construction land is more concentrated.

More importantly, different from being resettled to high-rise apartments under the traditional pattern and other villages’ RCLC practices, there are often three kinds of resettlement options for villagers to choose from voluntarily in Chengdu: high-rise apartments in the township, high-rise apartments or relatively concentrated single houses in the village and monetized resettlement. Different resettlement options mean different benefits and costs for the villagers, the investor and the local government.

When villagers are resettled into high-rise apartments with a higher density than before, most find it difficult to adapt to this “upstairs” lifestyle because of the higher living costs and the inconvenience in terms of farming. Villagers not only have to pay for water, electricity and gas, but also cannot find space to store their farming tools and plant vegetable for self-sufficiency, and the scattered old farmhouses have now disappeared. However, higher residential density often means more saved quotas for transaction, higher returns and ensuing higher compensation. Villagers pay less to buy their new resettlement houses because of the lower construction costs and receive more monetary compensation because of more saved quotas. For the investor, more saved quotas mean more investment returns as a result of rural industry development indirectly, or from quota transactions directly. For the local government, it is much more convenient and cost-efficient to offer infrastructure and public services in a large-scale concentrated residence area. If villagers are resettled into single houses that occupy more rural construction land, fewer quotas are saved and less compensation is paid to villagers; living costs and farming costs are also lower than the first way, because villagers can be self-sufficient by growing vegetables near the homestead plots. What is more, the resettlement houses can be built by the villagers themselves or by the investor, since the construction costs of the former is relatively low. As for monetized resettlement, this is the simplest way. As long as villagers have a fixed house and stable income, they can choose monetized resettlement.

Table 2. Comparison of different resettlement options.

	Resettlement in the Township	Resettlement in the Village		Monetized Resettlement
Type of resettlement house	High-rise apartments	High-rise apartments	single houses	No need for resettlement
Quantity of saved quotas	+++	++	+	++++
Farming radius and costs	++	+	+	No farming costs
Living costs	+++	++	+	Unchanged living costs
Construction costs of resettlement houses	+	++	Depending on construction standard	None
Monetized compensation	+++	++	+	++++
Degree of lifestyle change	+++	++	+	Unchanged lifestyle

Note: the greater the number of “+”, the higher the degree.

gives a brief comparison of these resettlement options.

4. Case Study of Market-Driven Rural Construction

4.1. Implementation Procedures of Market-Driven Pattern

Through semi-structured interviews with government officers, project managers and villager cadres, the implementation processes of the market-driven pattern, in which a private company plays a leading role, are summarized in Figure 2.

(1) Reaching an agreement between the Village Committee and the private investor

With support and guidance from the local government, the company drafted a project scheme based on the land use situation and potential for land consolidation in each village. Then it introduced the implementation process, benefits and costs of the project to the villagers and village cadres, as well as communicating directly with the villagers to determine their willingness to participate and interest demands. After rounds of negotiation with villagers and democratic discussions within the village, the Village Committee (VC), representing all of the villagers, reached an agreement with the company regarding how to implement the RCLC project.

At this step, whether the villagers can reach a consensus on the implementation details is critical for a smooth implementation. Before contracting with the company, the village cadres took the village group as a basic unit for propaganda and mobilization. (In China, a villager cadre refers to a leader in an administrative village that usually consists of several natural villages.) The village cadres explained to every village group leader about key questions, such as “what is RCLC?” and “what are their costs and benefits, rights and obligations?”, and then the group leaders delivered the information to every household. In the meantime, a formal announcement on these issues was publicized by the VC. After seven working days, the VC held a Villager Meeting to collect villagers’ opinions on the project and discuss whether to participate in this project. If more than 80% of the households agreed to participate, the Village Council (cunmin yishihui, YSH) would subsequently organize a public discussion with every household representative about a range of issues including participation qualification, compensation standards, resettlement house construction planning and allocation procedures. Following this, a “Consultation Form” containing the discussion outcomes was publicized and delivered to every household to collect their opinions and confirmation in writing. When the final implementation rules had been agreed by more than two-thirds of the villagers or household representatives after repeated amendments, the villagers submitted some materials to the VC including a letter of attorney, application and commitment. Once these materials had been verified, the villagers and the VC reached a written agreement to formally confirm their participation. Importantly, villagers who refused to participate also had to submit a letter of commitment to avoid possible contradictions in the future. Figure 3 shows the democratic decision-making procedures in the village in brief.

(2) Determining the implementation scheme

Based on the potential for land consolidation and villagers’ willingness, the company proposed an implementation scheme focusing on resettlement and compensation standards. Three resettlement options were offered: ① six-story apartments in the newly-built township. Every villager was offered 30 square meters of floor space for living and 5 square meters of floor space for commercial purposes, in exchange for their old residential land. Taking a three-person family, for example, this family could get a resettlement house of 90 square meters and a commercial house of 15 square meters in principle. In order to use commercial houses as a whole and achieve a long-term income, the villagers do not use the 5 square meters of floor space by themselves but transfer the use rights to the company. The rights for use in this respect were transferred to the company to build and operate large-scale commercial buildings near the newly planned town; the villagers could receive an annual dividend according to their shares converted from the rights they relinquished, and the VC representing the rural collective obtained the ownership. ② Three-story apartments in the village. Every participant was entitled to a floor space of 35 square meters per capita for living. ③ Monetized resettlement. Villagers could voluntarily give up the 35-square meter resettlement houses and get RMB 45,500 per capita at the price of RMB 1300/m². In addition, all affected villagers could receive subsidies and compensation according to the standard of RMB 20,000 per mou (1 mou is equal to 667 square meters) for their demolished residential land.

(3) Applying for project approval, construction and inspection

From negotiating with villagers in Xianfeng Village (Xianfeng village is one of the nine administrative villages; we used it as an example because the implementation procedures and standards are similar in every village, and it participated early in the RCLC), 150 households (about 500 people) refused to participate. Finally, 66 households (204 people) chose to resettle in the village, and 651 households (2134 people) chose to resettle in the town. Since more than 80% households agreed to participate, the company prepared the final project scheme and submitted it for approval to different government departments. Once approved, the company began demolition, reclamation, resettlement and compensation. After the construction was complete, the company applied to relevant government departments to verify the quality of the new resettlement buildings and reclamations, meanwhile formulating a resettlement houses allocation scheme and helping to prepare the villagers to move.

(4) Making investment returns

According to the previous agreement, the company would bear all of the project costs including resettlement houses, infrastructure and public services, villagers’ compensation, demolition and reclamation. In exchange, it would own all of the saved construction land quotas. For the saved quotas of 585.91 mu, 488.58 mu were bought back by the Chengdu Agricultural Equity Exchange and the remaining 97.33 mu were mainly used for industrial development in the town. Specifically, there were four ways to recover the investment costs and make profits. Firstly, the company built shops totaling 48,843.3 square meters on the ground floor of the high-rise resettlement apartments in the town, and these shops could be sold or rented to anyone, even non-collective members. Secondly, some arable land near the newly-built township was converted into rural commercial construction land using saved quotas to construct an industrial park and standardized factory buildings. According to the agreement with the VC, the company owns all of the saved quotas and associated rights to use the rural commercial construction land, thus, the company could transfer the land use rights in the industrial park for transfer fees or lease the factory buildings for rent. Thirdly, the company could directly sell some of the saved quotas to enterprises engaging in leisure agriculture, rural tourism, etc. Lastly, the saved quotas could be bought back by the Chengdu Agricultural Equity Exchange at a fixed price.

(5) Supporting community governance and rural industry development

The company was responsible for not only engineering the construction, but also community governance and industry development in cooperation with the local government. During the project implementation, the local government invested special financial funds in improving the infrastructure and public services of the newly planned township, and organized different community activities to help the villagers to adapt to their new lifestyles sooner. In addition, the company, in cooperation with the local government, successively introduced a number of enterprises engaging in modern agriculture, rural tourism and labor-intensive processing factories.

4.2. Impacts of Market-Driven Pattern on Rural Revitalization

By introducing private capital into rural construction, Fuhong town used a company-dominated RCLC as a platform to integrate rural revitalization and urbanization in situ. At present, Fuhong town has an established modern agricultural system led by planting roses and apricots, as well as a rural tourism service system based on leisure agriculture. In 2019, the town received more than 2.15 million tourists and RMB 165 million in tourism revenue. In addition, the town introduced some manual processing factories, providing non-agricultural employment opportunities for villagers. With the industry development, farmers’ annual net income per capita also increased from RMB 4000 in 2012 to RMB 20,572 in 2017. In this section, we will focus on the villagers’ welfare changes and their perceptions about the project, to reflect on the impacts of the market-driven pattern on rural revitalization.

(1) Impacts on rural industrial development

Our villager questionnaire contained two questions about rural industrial development. The first was: “Are there any measures taken to promote industrial development during the project implementation?”. Most interviewees said that some measures had been taken, such as a newly established collective economic organization, an introduction of industrial enterprises, professional skills training for villagers and arable land circulation. However, 37.74% of the interviewees said that they never heard of any measures being taken. The second question was: “How is your reclaimed residential land used?”. After the villagers’ scattered residential land was reclaimed as arable land, most arable land (41.94%) was idle, 25% of the villagers chose to cultivate by themselves, 12.90% of the villagers gave the land to their relatives or neighborhoods for free, and only 8.06% and 12.10% of arable land, respectively, was transferred to agricultural businesses and the collective economic organization. This shows that the arable land use efficiency decreased, although the quantity of arable land had not changed.

(2) Impacts on villagers’ wealth

After the project implementation, the villagers’ employment structure changed gradually and there was more non-agricultural employment available, which helped to improve their income. Reflected by the questionnaire, the proportion of the population engaging in agriculture decreased from 34.07% to 9.90%, and the proportion of those working in non-agricultural employment outside the town decreased slightly from 22.54% to 20.14%. Those in non-agricultural employment working in the town increased from 18.98% to 23.44%, and the proportion of self-employed villagers engaging in restaurant and agritainment work, etc., in the town increased from 0.68% to 3.82% (

Table 3. Changes in household employment.

Employment Type	Before the Project	Percentage	After the Project	Percentage
Agriculture	201	34.07%	57	9.90%
Non-agricultural rural employment in town	112	18.98%	135	23.44%
Non-agricultural rural employment outside town	133	22.54%	116	20.14%
Self-employment	4	0.68%	22	3.82%
Others (students, full-time mothers, etc.)	140	23.73%	246	42.71%
Total	590		576

Note: “Before the project” reflects the information before 2012, while “After the project” reflects the information in 2017, so the total number decreased from 590 to 576 because some people died during this period. Moreover, the total number is not 137 because these data contain employment situation information of interviewees’ family members.

). These data demonstrate that the project slowed down the rural outmigration to some extent.

To further understand the reasons for the employment structure changes, we also asked two questions: “Do you think your employment changes relate to the project?” and “What do you think led to your employment changes? (Multiple choices are allowed)”. N total, 55.12% of the interviewees thought that the project led to their employment changes. As for influential factors, 77.78% of the interviewees thought the changes to employment were not directly related to project.

Table 4. Reasons for employment changes.

Question	Answers	Proportion
Reasons for your and your family members’ employment changes	Changes in macroeconomic conditions	17.78%
	Changes in education level	0.00%
	Changes in professional skills	2.22%
	Changes in age	57.78%
	Secondary industry introduced after project	6.67%
	Development of tourist industry	11.11%
	Other reasons	4.44%

shows the villagers’ views on the reasons for the employment changes, reflecting that the impact of the project on promoting non-agricultural employment was not that obvious.

What is more, changes in living style and employment further affected household income and expenditure (

Table 5. Changes in household income and expenditure.

Income (per Capita)/RMB	Before Project	After Project	Income Gap between and after Project
1. Total income	62,719.58	136,958.52	74,238.94
1-1 Agricultural income	5969.56	2216.09	−3753.48
1-2 Operational income	4989.05	20,336.23	15,347.18
1-3 Wage	44,725.55	99,731.88	55,006.34
1-4 Transfer income	4427.99	6512.71	2084.72
1-5 Property income	248.91	5351.38	5102.47
1-5-1 House rental income	21.90	221.74	199.84
1-5-2 Dividend income from collective economic organizations or cooperatives	0.00	28.99	28.99
1-5-3 Rent for arable land circulation	193.43	2936.74	2743.31
1-5-4 Insurance income	820.12	3812.25	2992.13
2. Total expenditure	39,874.58	79,619.51	39,744.93
2-1 Agricultural production expenditure	4079.71	724.64	−3355.07
2-2 Operational expenditure	2153.62	12,443.48	10,289.86
2-3 Consumption expenditure	33,589.57	66,982.17	33,392.61
2-3-1 For daily food	13,911.45	30,691.30	16,779.86
2-3-2 For water, electricity, gas, etc.	1806.38	5533.62	3727.25
2-3-3 For medicine	4484.49	10,748.84	6264.35
2-3-4 For education	4300.00	5063.04	763.04
2-3-5 For social communication (marriage, funeral, friends, etc.)	8972.46	10,730.43	1757.97
2-3-6 For estate management	0.00	11.30	11.30
2-4 Insurance expenditure	285.30	341.91	56.60

Note: this table only lists some key income and expenditure types in the leftmost column, and ignores some types that only 1–2 people had.

). After the project, the average annual total income and expenditure of the households all increased, and the net income increased by RMB 74,238.94. From the perspective of income structure, except from agricultural income, other types of income increased. However, agriculture expenditure decreased in parallel with lower agricultural income, while other types increased significantly. As for reasons of income–expenditure change, only 43.73% of the villagers related the income increase with the project, while 65.97% thought the project increased their expenditure, especially daily consumption costs.

(3) Impacts on living environment

For villagers, both house quality and residential safety were enhanced when they were resettled to concentrated residential areas. Their living environment was significantly improved and they enjoyed similar public facilities to urban residents (

Table 6. Changes to infrastructure and public services.

	Before Project		After Project
	Yes	No	Yes	No
Are there street lamps on the village’s main road?	14.60%	85.40%	98.54%	1.46%
Is there a waste disposal station in the village?	8.03%	91.97%	100.00%	0.00%
Is there a sewage treatment plant in the village?	0.00%	100.00%	96.35%	3.65%
Are there shops in village?	37.96%	62.04%	94.89%	5.11%
Is there a kindergarten in the village?	5.11%	94.89%	88.32%	11.68%
Are there entertainment or fitness facilities in the village?	0.73%	99.27%	88.32%	11.68%
Are there medical and health facilities in the village?	31.39%	68.61%	96.35%	3.65%
Is there a bus station in the village?	8.76%	91.24%	99.27%	0.73%
Are there cleaners employed in the village?	2.19%	97.81%	99.27%	0.73%
Are there security staff employed in village?	17.52%	82.48%	99.27%	0.73%

). The concentrated residential areas were equipped with not only water, electricity, gas, etc., but also basic service facilities such as garbage and sewage treatment stations and a kindergarten. There were also cleaning and security personnel responsible for the community’s environment and safeguarding. However, the villagers’ residential land areas decreased significantly from 368.97 square meters per household to 98.85. We argue that the decrease in residential land is just a phenomenon and trend during the rural reconstruction, and is not a problem. The key issue behind it refers to how to balance the relationship between residential land demand and land use efficiency.

(4) Impacts on protection of villagers’ rights and interests

The questionnaire survey also provided a way to understand the impacts of the project on the degree of protection of villagers’ rights. In general, over 80% of the interviewees felt satisfied with the living environment, employment and economic conditions, land readjustment and other factors (see

Table 7. Interviewees’ general satisfaction with the project.

Degree of Satisfaction with the Whole Implementation Process	Frequency	Ratio of Frequency (%)
−2 (not satisfied)	4	2.92
−1 (below average)	23	16.79
0 (average)	68	49.64
1 (above average)	29	21.17
2 (completely satisfied)	13	9.49
Total	137	100.00

Note: From −2 to 2, the degree of satisfaction increases gradually.

). Democratic negotiation and decision making were practiced in the project: some key issues were highlighted and discussed with all participants, and then the outcomes were agreed by more than two-thirds of the participants (see

Table 8. Interviewees’ decision-making rights.

		Standard for Compensation (Ratio of Frequency%)	Construction Standard of Resettlement House (Ratio of Frequency%)	Allocation Standard of Resettlement House (Ratio of Frequency%)
Whether to ask for your family’s opinion	No	8.03%	21.90%	13.97%
	Yes, but disagree	4.38%	2.92%	2.21%
	Yes, and somewhat agree	61.31%	48.91%	49.26%
	Yes, and fully agree	26.28%	26.28%	34.56%
Decision-making method	Through the VC	59.85%	58.99%	63.57%
	Through the Village Meeting	7.30%	7.91%	15.71%
	Through the government or company	11.68%	15.83%	7.14%
	Do not know how to make decisions	21.17%	17.27%	13.57%

and

Table 9. Interviewees’ right to know.

Key Issues	Ratio of Frequency (%): Which Rules did your Household Know About? (Multiple Choice)	Ratio of Frequency (%): Which Rules Were You Notified or Informed About? (Multiple Choice)
Standard for resettlement and compensation	87.59%	24.09%
Construction standard of resettlement house	68.61%	22.63%
Land property rights adjustment	35.04%	8.76%
Land reclamation	56.20%	9.49%
Allocation standard of resettlement house	74.45%	13.87%
Funding use	0.00%	2.19%
Project supervision	5.84%	3.65%
Know little about these	10.22%	75.18%

). However, villagers’ rights to know about and make decisions regarding these issues were not quite protected enough. In particular, many interviewees pointed out problems such as unreasonable compensation, monetary compensation in arrears and longer farming radius. Thus, some villagers thought that the company and local government encroached on their interests and that the village cadres did not protect their rights very well (see

Table 10. Interviewees’ evaluation on the company, the local government and village cadres.

		Frequency	Ratio of Frequency (%)
Does the company encroach on your rights?	Yes	72	52.55
	No	65	47.45
Does the local government (or investor) encroach on your rights?	Yes	51	37.23
	No	86	62.77
Do the village cadres protect your rights?	Yes	61	44.53
	No	76	55.47

).

One interviewee told us that for the villagers resettled in the newly planned township, the resettlement standards were a floor space of 30 square meters per capita for living and 5 square meters per capita for commercial purposes. However, these were not the original standards. At first, the company told the villagers that the 5 square meters would be compensated with a payment of RMB 500 per square meter (that is, RMB 2500 per capita), but the villagers did not receive the money for a long time. To pacify them, the company said that the 5 square meters would be converted into shares instead and used in the town-level industry park, and then the villagers would receive dividends every year. Another other problem highlighted by many participants concerned house allocation. Due to the existence of shops on the ground floor of the resettlement apartments, villagers who were allocated homes on the second floor by drawing lots actually lived on the third floor. This meant that they needed to pay more to buy their resettlement houses because the construction costs varied across the different floors. For example, the construction costs of the second and third floor were RMB 280/m² and RMB 240/m², respectively; thus, the households living on the third floor needed to pay an extra RMB 40/m² to the investor.

In sum, the production, living and ecological spaces in the countryside were optimized after the project. By reconfiguring the layout of rural construction land, the land demands for rural industrial development were guaranteed. Although the impacts of the project on changes to employment structure were not that obvious at first, the levels of agricultural modernization and industrial integration were higher than before, which established a foundation for future development. As reflected by the field investigation, the villagers’ job opportunities and income sources became diversified with the upgrading of the industrial structure, and some migrant workers even returned for entrepreneurship and employment in the town. For the local government, it was more convenient to provide infrastructure and public services in more concentrated residential areas.

5. Discussion

Drawing on the field investigation results, this section aims to identify the key issues related to rural construction and elucidate how an alternative approach to the government-led pattern functions. Further, we attempt to analyze the relationships among the main actors under the different patterns.

5.1. Comparison of Two Patterns

(1) A traditional pattern of government-led rural construction

Rural construction led by the government is, in essence, a tool to deal with urban sprawl; that is, local governments convert rural land into state-owned land through land expropriation, and then transfer it to end-users by bidding, auction, or listing in the primary land market at different prices. The logic behind this is that the local government depends on monopoly power for land conversion and coercive power to acquire the land from rural collectives at a low price, and then to transfer the land to those who require it at a high price. During this process, the local government obtains high land-transfer fees while the villagers receive a lower amount of compensation, and the government normally does not pay much attention to rural construction once the landless peasants are resettled and compensated. What is worse, the landless peasants cannot find non-agricultural employment from urban industry development under this pattern, because the local government prefers the introduction of capital- or technology-intensive enterprises and foreign-owned businesses rather than small and medium-sized factories. However, the former is far beyond the villagers’ skills, and the latter could offer job opportunities for villagers. As a result, the urban–rural gap is likely to be widened further, and rural outmigration cannot be reversed due to the neglect of rural industry development, creating a “hollowing-out” of villages and inefficient land use [23,24]. It does not mean that the local government should not introduce these kinds of enterprises, but should pay attention to the affected villagers’ sustainable livelihoods.

Considering the sustainability of this pattern, one important thing is the funding source for rural construction. Often, rural construction funds come from the budgetary fiscal revenues and land transfer fees. To attract industrial enterprises, which are main sources of government tax revenues, local governments tend to lower the price of industrial land. This approach not only makes some enterprises care little about land use efficiency and even engage in land speculation, but also increases the government’s financial burden. The extra financial burden caused by unreasonably low industrial land prices is always compensated by higher commercial land transfer fees from real estate developers. This means that rural construction funds are highly dependent on the sustainable prosperity of the real estate market. However, increasingly high house prices caused by land transfer fees has depressed housing demand, and coupled with the regulation from central government, the real estate market is gradually depressed, which makes this funding source unsustainable.

Briefly speaking, this pattern itself and following villagers’ livelihoods are unsustainable. With the aim of coordinating the urban–rural relationship and rural revitalization, it is urgently necessary to transform government-led rural construction patterns.

(2) Market-driven rural construction

To relieve the financial burden on rural construction, local governments turn towards encouraging market capitals to invest in rural areas. Typically, there are two fund sources in the market-driven pattern: the rural collective’s own funds, or external funds from the private sector. The former means that the rural collective mortgages the use right of rural construction land or saved construction land quotas to directly receive loans from local banks. The latter means that a private company pays the necessary funds in advance in exchange for the ownership of saved quotas or the right to utilize rural construction land. Obviously, land is key for rural construction funds under both patterns, but the difference from the traditional pattern is that these fundraising methods would not burden the local government as much and would raise resource use efficiency. In the market-driven pattern, investors aiming to maximize profits will take market demands, local conditions and benefit–cost analysis into consideration to choose an appropriate land use pattern and industry type. For example, rural areas with distinct natural resources are suitable for sightseeing agriculture; rural areas in a desirable location may develop industrial parks to attract small and medium-sized enterprises.

Another important difference is that the land is still owned collectively in the market-driven pattern and land use rights are transferred to the end-users through land circulation, lease or shareholding [41]. There are two ways to use rural construction land for commercial purposes: one is that the rural collective develops non-agricultural industry by itself, an approach exemplified by Zhenggezhuang Village in Beijing. The other is that a private investor rents the land with the right to develop industry, and the rural collective is passively involved in industrialization, a method represented by the Jiaolong Industrial Park in Chengdu. However, both of these approaches depend highly on the land’s location and scale, because not all land parcels are suitable for industrial development. Now, the case village offers a third way to combine rural construction and new-type urbanization by implementing RCLC. The rural construction land is abstracted into construction land quotas, which represent the right to convert arable land into construction land. After deducting the quotas for building concentrated residential areas, most quotas are used to convert arable land for rural industrial development. Land supply in this way is more flexible in scale and location, as well as more cost-friendly for the end-users, and ultimately can better contribute to rural sustainable development due to a virtuous interaction between industrial development and population agglomeration. On the one hand, enterprises entering into the village- or town-level industrial parks are often labor-intensive small- or medium-sized enterprises that are difficult to find room for in urban industrial parks. However, these enterprises can provide many job opportunities for the low-skilled labor force in rural areas, which would improve the possibility of population agglomeration. On the other hand, resettling villagers from different villages into concentrated residential areas in the town will also promote population agglomeration, which in turn supports rural industrial development.

In sum, an intuitive difference between government-led and market-driven rural construction is an institutional arrangement, that is, land expropriation and RCLC. This difference subsequently effects the main actors, funding sources, land use efficiency and, ultimately, the rural development approach.

Table 11. Comparisons between government-led and market-driven patterns.

Key Issues	Government-Led Pattern	Market-Driven Pattern
Industry development	Neglects rural industry development	Emphasizes introduction of small and medium-sized or labor-intensive enterprises
Population agglomeration	Has little impact on rural population outmigration	Makes villagers more concentrated and attracts migrant workers back
Land acquisition	Compulsory land expropriation and rural land is changed to state-owned land	Land use rights are transferred and land is still owned collectively
Fundraising	Land transfer fees from estate developers and land mortgage loans	Market capital

compares some key features of the two patterns discussed above. Land expropriation, as an urban-oriented institutional arrangement, aims to fulfill land demands for urban expansion. To realize “urban modernization” and industrialization as local governments prefer, they tend to monopolize land conversion rights. As land is an important funding source, this monopoly power, which excludes other market entities from land access, inevitably leads to the local government playing a leading role in the whole implementation procedure including fundraising, planning, negotiation and construction. When the local government relaxes this monopoly power and gives other actors access to land, the market actor will have economic incentives to invest in rural areas. Thus, to some extent, RCLC is an innovative institutional arrangement that is jointly chosen by the government and the market forces [42,43,44]. In the RCLC project, land users do not wish to obtain state-owned land, since rural construction land can also fulfill their demands due to the removal of controls and restrictions on rural land management. Hence, RCLC is a more flexible and responsive way to meet the land demand from small and medium-sized or labor-intensive enterprises, since these enterprises are normally overlooked by the local government. In next section, we will further discuss how these different institutional arrangements impact the rural construction pattern and the relationships among the main actors.

5.2. Characteristics of Market-Driven Rural Construction

Our empirical research reveals that rural construction in China is now more complicated than a top-down land expropriation led by the local government. Based on the experiences of the village used in this case study, new development patterns and relationships among the main actors in the transformative process of rural construction are identified. Market-driven rural construction, which is supported by the local government and organized by private companies, has the following characteristics.

Firstly, the decision-making mechanism is transformed from administrative control to a market mechanism. Due to the top-down land control in China, it is impossible to form a completely free land market. “Market mechanism” here means that some market tools are introduced into land governance and resources allocation, allowing private companies to participate in rural construction through RCLC or construction land quota transactions. The two patterns are characterized by different decision-making mechanisms. In the government-led approach, key issues such as construction land quota price, villagers’ compensation standards and resettlement options are decided by administrative orders based on bureaucratic hierarchy [45] and villagers have little room for negotiation. In the market-driven pattern, all decisions are guided by the price mechanism and benefit–cost analysis, and key issues are negotiated by the company and rural collectives. Due to the lack of coercive power such as that held by the government, the company must depend on economic incentives to persuade villagers to participate in an RCLC project. For the investor, direct negotiations help to understand villagers’ actual demands and expectations, to avoid possible contradictions and struggles in the future. For the villagers, the market-driven pattern with little government intervention endows them with more bargaining power to express their true expectations and protect their interests. Villagers then have more choice about whether to participate or not, how to be resettled, etc.

Secondly, the local governments’ role is transformed from being a direct participant to an indirect supervisor and supporter. The introduction of market capital into rural construction not only reduces the local governments’ financial burden, but also relieves them from specific affairs such as scheme design, project implementation and communication with villagers. By delivering these responsibilities to the company, the local government avoids direct interest contradictions with villagers, and can better mediate any conflict between villagers, village cadres and the company [12]. This transformation reflects thew fact that governments’ rural development strategies become rural-oriented instead of urban-biased. Through cooperation with a private company, the local government can offer better infrastructure and public services at a relatively low cost, to enhance villagers’ social welfare.

Thirdly, better protection of the rural collective’s land development rights and interests takes place. In the government-led pattern, rural land is expropriated as state-owned land for urban development, meaning that the rural collective permanently loses land development rights and potential development space. However, villagers only receive one-time monetary compensation, which cannot make up for their indirect losses or opportunity costs of losing future development opportunities. Although the villagers also lose their land development rights under the market-driven pattern, most saved construction land quotas are used for rural industry development in the village or town. Hence, the employment opportunities provided by industrial development could compensate villagers for the loss of opportunity costs associated with losing their land development rights. In addition, the rural collective does not lose land completely, because the land is still owned collectively and the company just obtains land use rights for a period of time.

Lastly, there is a balance of villagers’ willingness and implementation costs using an appropriate resettlement radius. An economy of scale in terms of industrial development and public services can only be achieved with a population concentration of a certain scale. Concentrated residential areas for resettling landless peasants are usually located near their original village or near the city. For the former, a small-scale population concentration is obviously not conducive to industrial development. Without industrial development, some key problems such as rural outmigration are still not resolved, meaning that rural construction may become an action of “building a new hollowed village”. For the latter, huge differences in living habits and ideas will make it difficult for villagers to adapt to an urban lifestyle. Thus, it is important to choose an appropriate resettlement radius. The innovation of the market-driven pattern lies in its flexibility in resettlement options. By offering villagers different resettlement options and economic incentives, most villagers from different villages can be resettled into the more concentrated residential areas in the town, which solves both of the abovementioned resettlement problems.

6. Conclusions

The market-driven rural construction approach mentioned in this study differs from the traditional government-led pattern, whereby a private company dominates the key construction procedures and integrates population agglomeration, rural space restructuring and industry development through RCLC. The contributions of this pattern to rural sustainability are follows: (1) it makes up for insufficient government funding for rural construction by encouraging market capital. It is also conducive to attracting more market capital to engage in rural construction with the support of government funds. (2) It provides land for rural industry development in a responsive and flexible way, and the industry development can, in turn, offer diversified employment opportunities for villagers to increase their operational or property income. (3) It enhances villagers’ governance ability by involving them in the decision-making process.

Under this pattern, different actors realize their interests in a cooperative way. For villagers, their living environment and employment opportunities are improved after the project. They are included in the decision-making processes of design, construction and supervision, and thus have more choice of options to better secure their interests and rights. For private investors, they can gain investment returns through construction land quota transactions, or obtain desirable land use rights in a relative low-cost and flexible way. For local governments, a private company dominates the main implementation procedures as an investor and a developer, which reduces their financial burden and political risks.

However, the path dependency of the institutional change implies that it is not easy to transform from government-led to market-driven rural construction. Both local governments and villagers need time to adapt to this newly emerging pattern, and not all governments embrace this transformation. The fact that some affected villagers felt dissatisfied with the project in our field investigation suggests that the transformation to a market-driven pattern is a gradual process. Yet, the experience in the case study demonstrates that, irrespective of the diversity and complexity of the local circumstances, it is possible and significant to explore a market-driven rural construction that underlines institutional change and government transformation. Accordingly, this paper provides two suggestions to better implement the market-driven pattern. Firstly, the upper-level government should encourage context-based innovative institutions and experiments to diversify participants and financial sources for rural construction. For the rural construction land system, a more liberal transaction mechanism of construction land quotas is necessary. Secondly, institutional barriers hampering the cross-village flow of production factors within the country should be relaxed. Local governments should enhance the open degree of rural collectives, allowing rural labor force and land flow between different villages based on the principle of “Linking Land to People”, that is, construction land quotas are allocated to places with population inflow.

Obviously, whether this local experiment in our study can be adapted to other rural areas requires further discussion with more empirical cases. In addition, this paper only focuses on the relationship between the local government, the private investor and villagers in this new pattern, and thus, two interesting questions arise that deserve further study: the first is how the transformation of the rural construction pattern influences the grassroots governance structure in the village, and the second is about the reconfiguration of rural land property rights during this transformation.