Since 1949, the National Government of the Republic of China has introduced a series of land reform programs in the rural areas of Formosa. These reforms have resulted in remarkable improvements in the social and economic condition of more than one-half of the entire population on Formosa.
Formosa, a sub-tropical island of China lying off the southeastern coast of the Chinese mainland, has a land area of 35,960 square kilometers and a population of 8 millions. The eastern part of the island is a chain of high mountains, but the western part consists of plain lands with fertile soil It is chiefly on this fertile plain that the island's economy depends.
Formosa is predominantly an agricultural province. While about 900,000 chia(1) or ¼ of its total area are cultivated lands, 4.5 millions or 56% of its total population are farmers. Of this 900,000 chia, 61% are paddy fields for growing rice and 39% are dry lands for growing sweet potato, sugarcane, tea, pineapple, jute, peanut and other kinds of citrus fruit. Rice and sugar are the two major farm products on the island. In 1953, it produced 1.6 million metric tons of rice and 800,000 metric tons of refined sugar. The former is sufficient to feed the entire population and leave some surplus and the latter is the principal item of Formosa's export trade. To the production of these two crops, more than 70% of the cultivated area is devoted. Industries on the island are being developed; the most promising are sugar-refining, fertilizer, hydraulic power, cotton textiles, cement, paper and pulp, and coal. They are mostly owned and operated by the Government.
Agriculture in Formosa is operated on small holdings. On its 900,000 chia of farm lands, there are 725,000 farm families with each family tilling an average farm of only 1.2 chiao Those who till farms smaller than two chia form 80% of the total farm families. When land reform was first introduced in 1949, the total cultivated land, excluding 180,000 chia owned by the Government, was distributed among 610,000 private owners of whom 170,000 were landlords. Before the introduction of land reform there were 36% tenant, farmer, 24% part-owner, 32% owner-cultivator, and 8% farm hands families. But more than 41% of the total cultivated land was under tenant operation.
The conditions under which farm land had been leased on the island before the reform were very unfavorable to the tenants. Rents were at least 50% of the crop harvest. In addition, tenants had to furnish their own fertilizers, farm equipments and farm buildings. To lease a land they had to pay key money and to keep it they had to renew the lease each year. These factors, together with the small acreage they cultivated, had made it extremely difficult for them to earn a decent living. The results of such a situation were discontent and unrest in the rural areas.
II. Farm Rent Reduction
To correct this situation, the Chinese National Government instituted a series of land reform programs. The first was the reduction of rent private tenanted lands to a fair rate; the second the sale of public land to tenant farmers; and the third the distribution of excess private tenant holdings among landless peasants. These three programs were started in 1949 and completed in 1954 with the technical and financial assistance of the Chinese-American Joint Commission on Rural Reconstruction.
The farm rent reduction program was enforced on the island in 1949. Its important features are as follows:
1) Reduction of Farm Rental Rates: To reduce the rent, we fixed in advance a standard yield for each grade of farm land in Formosa. This standard yield is not necessarily the actual harvest but is closely related to the soil fertility and productivity, on the basis of which all paddy field and dry land are divided into 26 grades. With the standard yield definitely fixed, we set the new rental rate at 37.5% and all rents are to be no more than 37.5% of the standard yield. Suppose a tenant has leased one hectare of fifth-grade paddy field. Its standard yield is fixed at 10,000 Formosan catties (2) of rice. Formerly the tenant had to pay 50% or 5,000 catties of rice to his landlord. After rent reduction, he pays no more than 3,750 catties of rice, being 37.5% of the standard yield, regardless of the amount he actually harvests. The reduction was effected by means of a new lease contract between the landlord and his tenant and registered with the Government.
2) Provision of Tenure Security: In addition to the reduction of the rental rates, the program provided tenure security to the tenants in several ways. Firstly, tenure of lease was lenghthened to 6 years beginning from 1949, and any landlord who arbitrarily terminated the lease before the expiration of the 6-year period would be subject to penalty. Secondly, key money which used to be paid to landlord was abolished; whatever key money had been already paid should be returned to the tenants. Thirdly, advance payment of rent was prohibited and the amount of rent at 37.5% rate, its kind, purity, date and place of payment were all clearly stipulated in the lease contract. Finally conclusion of new lease contract and revision and termination of existing lease contracts by tenants and landlords must be duly registered with the Government in order to be valid in the eyes of the law. All these provisions are being strictly enforced by the Government.
3) Farmer's Participation and Government Supervision: To give additional protection to tenants against illegal acts by unscrupulous landlords, the Government encouraged farmers' participation in the program execution by creating a farm tenancy committee in each township and district to mediate and settle rent and lease disputes. The committee membership includes tenants, owner-cultivators, and landlords but gives tenants a greater voice in dealing with rent reduction matters. In addition to that, the Government sent field teams to the rural areas to inspect rent payment practices and investigate the condition of the tenants.
4) Effects of the Reform: The rent reduction program has reduced rental rates success fully on 260,000 chi a of private tenanted lands, or 38% of all cultivated area excluding public land, and increased immediately the cash in come of some 300,000 tenant families, or 53% of all farm families except those cultivating public land. The effects of the reform were most evident in improved living conditions in rural areas. Formerly, tenants did not have enough rice to eat; now they have not only enough rice to eat but also some surplus to sell. Formerly, they wore worn-out clothes, which are now replaced by new and better ones. New farmhouses can now be seen in the countryside and more children are sent to schools. The most beneficial developments on the island are seen in increased rice production and the increasing number of tenants who own their own farms. In 1949 before rent reduction, rice production was only 1,200,000 metric tons. In 1953 it went up to 1,600,000 tons. Other factors might have contributed to the increase, but rent reduction is certainly an important one. As to land purchase, 1,700 tenants purchased 800 chia of tenanted lands with their own savings in 1949. In 1953 there were 28,900 purchasers who purchased 15,600 chia of farm land. A total of 66,300 tenants have purchased 35,500 chia in the 5 years since 1949.
III. Sale of Public Lands
After the rent reduction program was carried out on 260,000 chia of private tenanted lands, the Government turned its attention to the vast public lands in the Province on which a sizable farm population was working as tenants and farm hands. The measure the Government adopted was to sell the public lands to their incumbent cultivators.
1) Condition on Public Lands Before Sale: In Formosa there were 180,000 chia of public cultivated lands. Of this vast domain, 100,000 chia had been allotted to the Formosan Sugar Corporation for raising sugarcanes and for demonstration. Of these 100,000 chia, 60% was used as sugar plantations and tilled by farm hands and the other 40% was tilled by tenants. The other 80,000 chia were mostly leased to farmers for raising other farm products and a small part was used for experiment and demonstration purposes. Thus, before the sale, 59% of this vast public land were under tenant operation while most of the remaining 41% was tilled by farm hands employed by government corporations and agencies. On those lands, the tenure of lease was from 5 to 9 years and could be renewed upon expiration. Tenants paid 25% of the crop as rent to the Government; this rental rate was even lower than the newly reduced rate on private tenanted land. However, low rental rate and secure tenure also gave rise to problems in a country where land supply is limited and population is dense. Many peasants competed for the lands. Lands were often subleased at high charges. To wipe out such illicit practices, the sale of public lands was decided upon by the Government.
2) The Sales Measures: As soon as the policy was decided upon, sales measures were formulated by the Government immediately. In general, these measures consisted of the following features:
(a) All farmers tilling public tenanted lands were qualified to purchase them, but first priority of purchase was given to those tenants who had duly signed lease contracts with the Government.
(b) All qualified farmers might purchase all lands leased to and tilled by them without any restriction. But farmers other than those who had duly singed lease contracts with the Government might purchase only from 0.5 to 2 chia of paddy field and/or from 1 to 4 chia of dry land.
(c) Farmer purchasers should pay the purchase price at 2.5 times the annual crop of the lands according to their respective grades in the light of soil fertility and productivity in 20 semi-annual installments spread over a period of 10 years. The payments were so adjusted that two semi-annual installments plus the annual land tax would not exceed 37.5% of the annual crop.
(d) The purchase price was paid in commodity; for the purchase of paddy field the payment was made in rice, and for dry land in sweet potato by converting it into cash according to the market value of sweet potato at the time of payment.
3) Effects of the Reform: From 1950 to 1953, four successive sales were authorized by the Government and a total of 63,000 chia of public tenanted lands were sold for 254,760 metric tons of rice and 560,480 metric tons of sweet potatoes to 120,000 tenants families. The area sold represent 35% of the total public land and the number of purchasers represent 17% of the total farming families on the island. On an average each farming family acquired the ownership of about 0.5 chiao Of the 63.000 chia sold, 26,000 chia or 41% were sold to those tenants who had leased them from the Formosan Sugar Corporation and the rest was purchased by farmers who had leased them from the Government directly. The impact of this program was two-fold. One effect was that it has elevated the economic status of some of the tenants in Formosa to part owners and full owners and eliminated a part of farm tenancy. The other was that by offering the public land for sale the Government has set an example for private landlords to follow in a later program soon to be implemented under the Land-to-the- Tiller Act.
IV. Government Purchase and Resale of Private Tenanted Lands
The outcome of the rent reduction program has convinced the Chinese Government of two things. Firstly, a land reform program can be peacefully carried out if it meets the needs of the local condition and is equitably planned. Secondly, a timely reform will not only promote social justice and political stability, but also encourage agricultural production and improve the farmers' livelihood. With these effects demonstrated by the rent reduction program, the Government went ahead in 1952 with the third measure to re-allocate private tenanted lands on the island. This measure proceeded on the assumption that although private lands in Formosa was by no means concentrated in the hands of few large landlords, yet to keep a large cultivated area under tenancy would not be in the long run conducive to the social security and economic interest of the island as a whole. It was on this basis that the third measure was launched by the Government.
This measure, known as the Land-to-the-Tiller Program, went into action in February 1953. Before that, two steps were taken by the Government to pave the way. The first was to make a detailed survey and classification of the area and ownership of all cultivated lands on the basis of the existing land records. This task took two years from 1951 to 1952 and produced 6,000,000 index cards which show all details about the location, area, grade, category, owner and user of every tract of land and the total area of holdings of every landowner. After this was done, a land reform bill was drafted by the Government for legislative action. From the first drafting to the final enactment, this task took 10 months from March 1952 to January 1953. On January 20, 1953, a private land purchase program was enacted by the Legislature of the Chinese Government under the title of "The Land-to-the-Tiller Act".
1) Basic Principles: The Land-to-the-Tiller Program is a democratic and reasonable one. In essence it is a measure for the purchase of excess private tenanted land from landlords and its resale to tenant farmers by the Government at a fair price. It was carried out according to the following principles:
(a) Each landlord, with certain exceptions, might retain a maximum area of three chia of medium-grade paddy field or its equivalent. Tenanted holdings exceeding that limit should be purchased by the Government.
(b) Lands after being purchased should be resold, along with immovable fixtures thereon, by the Government to tenant farmers who had been tilling them.
(c) The lands should be purchased and resold at 2.5 times of the crop according to their respective grades. The value of immovable fixtures should be assessed by the farm, tenancy committees and local governments.
(d) The price paid to the landlords by the Government should be made 70% in commodity bonds to be redeemed in rice and sweet potatoes in 20 semi annual installments over a period of 10 years and 30% in stocks of government enterprises. The price paid to the Government by the farmer purchasers should be made in rice and sweet potatoes in a corresponding number of installments and years.
(e) If a landlord, besides leasing a part of his lands to tenants, also tilled the remaining part of his holdings himself, and if the area under his own cultivation exceeded the maximum retention limit, he should not be allowed to retain any portion of his land he had leased to tenants.
2) Commodity Bonds and State Enterprise Stocks as Payments to Landlords: Such a program which takes lands from private proprietors not by confiscation but by purchase is apt to fail if no adequate and acceptable device is provided to pay for the land thus purchased. In this respect, Formosa is different from other countries- which have implemented similar programs, in that she has developed two unique payment devices under her program, namely, the commodity bonds and stocks of state enterprises. The bonds preserve the value of amortization payments against possible inflation and the stocks of state enterprises are used to divert a part of the private capital tied up in land to the field of industry and to stimulate the development of private industry by transferring some of the state enterprises to private owner ship.
(a) Commodity Bonds: To meet the agricultural production conditions on the island, two kinds of commodity bonds are issued: the rice bond and the sweet potato bond. Each of them is of 6 denominations and issued on a decentralized basis by 22 administrative districts. The rice bond is expressed in rice and is used to pay for the purchase of paddy field. The sweet potato bond is expressed in sweet potato and is used to pay for the purchase of dry land. Both kinds of bonds are redeemable in 20 semi-annual installments in 10 years at an interest rate of 4 per cent per annum payable in kind. The rice bond is further divided into three kinds: redeemably entirely in commodity, entirely in cash, and partly in commodity and partly in cash, according to the type of paddy field purchased. The sweet potato bonds are redeemable entirely in cash by converting the sweet potato crop into cash according to the market price prevailing after each crop harvest. Both bonds are redeemed twice each year by the Government to the landlord.
(b) Stocks of State Enterprises: Four state enterprises, namely, the Agricultural and Forestry Development Corporation, the Industrial and Mining Corporation, The Cement Corporation and the Paper and Pulp Corporation, were sold by the Government to landlords to cover 30% of the total purchase price. The face value of the stocks was issued in local currency, NT$10 per share, to be paid in one operation at the cash equivalent of rice and sweet potato payments converted according to their market prices prevailing at the time when the capital value of these four corporations was assessed. A definite ratio was fixed by the Government for the number of stocks each corporation was to issue to the landlord. After all stocks were issued, new stock-holders meeting would be called to reorganize these four state enterprises into private corporations.
According to the above plan, a total of 1,272,855 metric tons of rice and 434,709 metric tons of sweet potato was required to pay the landlord for the land purchased by the Government. Of these two amounts, 70% amounting to 889,123 tons of rice and 315,476 tons of sweet potatoes, were issued in commodity bonds and 30% amounting to 383,732 tons of rice and 119,233 tons of sweet potatoes were issued in stocks of state enterprises. All these bonds and stocks were issued in September 1953 to the landlords by the Government.
3) Effects of the Reform: This Land-to-the-Tiller Program started operation in February 1953 and was completed in January 1954. A total of 143,000 chia of excess private tenanted lands have been purchased by the Government and resold to 200,000 tenant farmers on the island. Each tenant farmer has acquired an average of 0.7 chia. These tenant purchasers represent about 50% of the total tenant population.
As a result of the above-mentioned achievements, the most profound and measurable effect produced by the program has to do with improvements on farm tenancy conditions and farmers' living conditions. Before the reform, 38% of the total private farm land, or 260,000 chia, were under tenancy and 53% of the total farm families on private lands, or 300,000 farm families, were tenant farmers. After the reform, the area under tenancy was reduced to 15% of the total private farm land, or 103,000 chia, and the number of tenant families was reduced to 26% of the total families on private lands, or 149,000 tenant families. Along with the reduction in the number of tenant farmers and the area of tenanted land, improvements in the living conditions of the farmers were also noted, Tilling lands owned by themselves after the reform, these farmers value their farm so much the more and become more interested in increasing their production. They have become more willing to use their savings in building new farmhouses and to put more fertilizers and labor on their farms. These improvements can be seen in all rural areas. These achievements have greatly contributed to the economic progress and social stability of the island, and they have been made possible largely through the implementation of the Land-to-the- Tiller Program.
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* Paper presented before the Center on Land Problems in Asia and the Far East held at Bangkok, Thailand, from November 22 to December 11, 1954.
(1) One chia equals 0.9699 hectare or 2.3968 acres. This figure includes 40,000 chia which have not yet been registered by the Government.
(2) 1 Formosan catty = 0.59682 kilogram