How does the rural land management right mortgage loan programme affect rural household land renting-out? Evidence from China

Credit constraints can limit land consolidation in developing economies, even when land rental markets are formally available. This paper studies China’s land management right mortgage lending pilot programme, which allows rural households to pledge land management rights—rather than land ownership—as collateral. Using household panel data from China’s National Fixed Observation Points from 2009 to 2019 and a difference-in-differences design, we find that the programme increases land renting-out by rural households. The effect is larger after the 2019 revision of the Rural Land Contract Law, which codified the use of land management rights as collateral and reduced legal uncertainty. The programme also changes the allocation of rented-out land: land is increasingly transferred to larger and more capitalized agricultural operators rather than to ordinary smallholders. Evidence on formal bank credit and village-level land rents is consistent with a collateral-value mechanism. The reform improves access to credit for households with greater scale potential and raises rental returns, strengthening incentives to supply land to the rental market. These findings show that legally secured land collateralization can facilitate land reallocation, but may also shift market power towards better-capitalized operators.