China's decision to let farmers trade land only points to a need to allow private property.
Chinese leader Hu Jintao came closer than ever this month to tearing down the great wall that guards a key vestige of communism – government ownership of all land. But he stopped short of embracing private property. The party decided only to allow China's 700 million to 900 million peasants to sell the rights to the land they till.
That's no small step for China – and the world – as rural land trading may now become a new financial rocket for the world's most populous nation and its third-largest economy.
The decision comes on the 30th anniversary of the radical changes begun by Deng Xiaoping to break up China's collective farms and allocate plots to peasants, who make up two-thirds of the population. Under that system, peasants were given 30-year leases on land still controlled by unelected party leaders in the village.
That limited shift to a market economy was vital to the Chinese economic boom. It provided the wealth to turn China into an export machine to the Wal-Marts of the world. It also led to the recycling of billions of dollars into the purchase of US debt.
American consumers have lived high on a Chinese hog for years with credit provided in part by China's excess dollars from exports. Now with the global credit crisis reaching China, its leaders are smart to reach for another capitalist reform to generate more wealth in the countryside.