China's leadership will be discussing over the next four days whether to allow farmers to trade their land titles, a move that many analysts and policymakers said will lead to the eventual privatisation of rural land.
Details of the reform remain sketchy but China's top leaders are expected to maintain the rights of rural farmers to transfer or rent their 30-year land leases to other individuals or companies and possibly allow the land to be used for collateral to access loans.
All land in China has been state-owned since 1949 and direct private ownership is unlikely to be introduced soon under the Communist Party's gradualist approach to reform.
"The current land contractual relations will be kept stable and unchanged for a long time, and we will allow farmers to transfer the right of land contract and management by various means, in accordance with their will," said Hu Jintao, China’s president, in a statement last week.
The government had insisted that collective ownership of land in the countryside hinders growth of agricultural productivity and achievement of scale efficiency, said Citigroup economist Huang Yiping.
"Many economists have urged the government to privatise land ownership and that is likely the direction we are now heading in," Huang said.
Reform supporters said the parcelling out of small land plots to households and strict laws that disallow private sale or purchase of contracted land mean agriculture remain small-scale and inefficient, tying down China's more than 730 million rural residents at a time when the government is encouraging rapid urbanisation.
Although many of the more than 150 million rural residents who have moved to the city have leased their contracted land on an informal basis to neighbours or agribusinesses, there is little or no legal protection for these arrangements.
However, the government's expected rural land reform is not popular even among the Communist Party's leadership. Many government advisers said China's current system has avoided the problems experienced by countries such as India, Brazil and Indonesia, where there are a large number of landless farmers.
In China, migrant workers who lose their jobs in the cities are usually able to return to a plot of land in their village.
"This reform will allow real capitalists into the agricultural sector but we cannot use the words 'privatisation' or 'capitalism' because they will just provide ammunition to hardliners to fight this reform," according to a Chinese analyst who declined to be named.