Land Holding and Social Security in Rural China

This paper analyzes shifts in means of old-age support in rural China and argues that the current rural institutions are failing in providing an adequate support for rural elderly. Bequest in the form of land was once a powerful leverage used by rural elderly to secure care from children. This leverage was destroyed by collectivization of land in the 1950s. The decentralization of production in the early 1980s succeeded in solving incentive problems associated with collective production, but the reform was incomplete because the collectives still retain land ownership. As the responsibility to provide elderly care was returned from the collectives to families, rural elderly have lost the benefit of collective welfare, but not regained the bargaining instrument of land bequest as compensation for care because the children turn to the collectives instead of the parents for land rights. The authors further examine alternative saving instruments for old age security and conclude that rates of return on these investments are too low. The analysis points to an urgent need for further reforming the rural land tenure system.