President Hu Jintao has made improvements in rural living standards a key goal of his administration. The new reform comes a symbolic 30 years after the radical changes that Deng Xiaoping introduced, breaking up Soviet-style collective farms so that peasants could do as they liked with the plots they were allocated.
That is widely credited with kick-starting the economic reforms that have driven China's extraordinary economic growth over the past three decades. Peasant farmers, however, have not enjoyed the fruits of that growth anything like as much as their cousins in the cities: The urban-rural income gap is now more than 3 to 1.
Under the current system, village committees divide village land equally between residents who hold 30-year leases free of charge, and who can grow what they like and sell their harvests wherever they want.
This boosted productivity and incomes when it was first introduced, but 30 years later the system is beset by inefficiencies and waste. At the same time, 120 million peasants who have headed to the cities in search of work as migrant laborers no longer use their land to its full potential.
In recent years, many of those migrants have begun informally leasing their land-use rights to relatives and neighbors, a trend that the authorities tolerated. "We sincerely respect the creativity of peasants" says Zheng Jiandong, head of the economics department of the local Agricultural Administration that has been supervising land reform experiments in this district in Henan Province for the past 18 months.
"But disagreements can easily arise" from informal deals, he adds, "and that has a bad impact on social stability, so the government has stepped in."
Building on experiments around the country, like the one Mr. Zheng is supervising, the new decision sets a policy framework to "establish and improve a market for the transfer of land-use rights ... and allow farmers to transfer their rights by subcontracting, leasing, swapping, or using them to form a joint-stock company."