Maintaining the contract responsibility system of forest land distribution in China: Evidence from a novel financial compensation scheme in Daxi Village of Anji County, Zhejiang

Abstract Guaranteeing households’ equal access to land has long been advocated as paramount to implement development policies in Rural China. Given the chronic land scarcity in densely populated regions of China, finding a compromise between private and collective land rights has been important to protect livelihood safety nets and to address poverty issues in rural areas, especially in the initial stages of reform. In this sense, land reallocations in a context of demographic changes within households used to be a common practice in the agricultural sector as a way to protect the equal-per-capita land access right, whereas other mechanisms were required for longer-rotation forest resources. In this case study, we present the Inter-household Forest Compensation Scheme (IFCS), a local innovation in forest management that originated spontaneously in Anji county, in which households that have gained disproportionately large per capita forest resources due to a decrease in household members compensate households that have smaller per capita endowments due to expanding household size. Based on field interviews and household and village socioeconomic data from Daxi village, we analyze the effects of population, economic, household and opinion dynamics on the IFCS as well as its evolution and implementation problems. The compensation, which represents between 7% and 9% of household forest income and less than 2% of current total household income, has allowed for a significant increase in land productivity. The IFCS has proven to be an effective instrument to adjust a system based on a per-capita land allocation without resorting to potentially unsustainable forest reallocations, thus achieving a valuable compromise between equity and efficiency during a major transition from a planned to market economy. Increased population, off-farm income growth and differences in household structure bring new challenges to the policy.