Grain Output and Cultivated Land Preservation: Assessment of the Rewarded Land Conversion Quotas Trading Policy in China’s Zhejiang Province

Although it is difficult, many countries are attempting to balance economic development and cultivated land preservation for various reasons. China’s experience is a good illustration of such challenges during rapid economic development and urbanization. The central government of China emphasized the high self-sufficiency ratio of grain and therefore set a bottom-line for the area of cultivated land in order to ensure food security. The State Council of China requires that the area of cultivated land should not be less than 120,000,000 hectares until 2020 through strict land management measures. In view of such stringent regulations, various alternative practices, such as rewarded land conversion quota (RLCQ) trading in Zhejiang Province, have been proposed to satisfy the construction demand while preserving cultivated land. This study empirically investigates the impact of RLCQ trading on cultivated land preservation in terms of grain output. Results showed that RLCQ trading leads to decreased grain production, measured in both total grain output and grain output per hectare, for both buyers and sellers. Furthermore, buyers of land quotas experience a more severe grain reduction than sellers. The findings suggest that RLCQ trading is unfavorable to cultivated land preservation in terms of grain output. Recognizing this dilemma, local governments should improve the land market mechanism to motivate intensive use of existing construction land and consolidation for improving quality of cultivated land.