The land tenure system, as a fundamental institution in agriculture, plays a very important role in farm production and natural resources use. Since the 1980s the transition from a communal to an individual land rights system has taken place in China. However, while the reform was by and large successful the reform did not generate all of the expected benefits.
The reforms provided farmers with only very weak on-farm investment incentives and local stakeholders with weak incentives to develop land rental markets. In light of the experiences from the previous reforms, the Rural Land Contracting Law (RLCL) was introduced in 2003, which is considered to provide farmers with the most individual land use rights up to date. While most policy-makers hold high expectations on the RLCL, it is still ambiguous whether it provides farmers with higher investment incentives, will stimulate land rental market development, and as a consequence, will increase production capacity and have a positive effect on land sustainable use.
The main objective of this thesis is to improve our understanding about the effect of the RLCL on investment incentives and land rental market development, and hence, on farm production and sustainable land use. The research will mainly concentrate on Gansu Province and Jiangxi Province in China and assess investements in water conservation. A better understanding about the RCLC, on the one hand, can be used for analyzing the implications of future reforms of the land tenure system; and on the other hand, contribute to improve policies for increasing agricultural production capacity and sustainable land use.