Company Background
Tuliu is both a land transfer online platform and a land value evaluation system. It created China’s largest land information database where it integrates information such as land area, prices and development trends. Tuliu’s site produces real-time analytical reports about the land transfer market and provides training to land brokers on related laws and policies.
Tuliu started operations in June 2009 led by CEO Wu Yong. The company has about 10,000 rural land brokers, listed transfer of 340 millions of land, and transfer of 96 millions of land has been completed. The business has also established 157 offline land transfer service companies around China, covering vast majorities of the country’s provinces. Tuliu has already taken about 10% of market share in land transfer and retains its leading position in the online transfer internet with 70% market share. It has started its international business by establishing a land transfer service company in Australia and currently working on offline companies to be placed in countries like the United Stated, Russia and parts of Africa.
Stakeholders
Overall Tuliu has improved the land utilization rate in China and has facilitated scientific planting on idle lands, increasing output, quality and the income of farmers. Aside from access to information, farmers are given free land evaluation services and other related services such as legal consulting. The company also assists farmers in terms of financing.
It has been successful because of its partnership with the government. The Chinese government has for a long time, been promoting development of suitably scaled-up agricultural operations in any form. The cooperation of Tuliu and the Chinese government have taken advantage of their respective strengths to share big data and together build service system and land finance services. The government has also committed to providing information on land property rights and to establish a monitoring system.
Tuliu is aware that banks are wary of the risks of mortgaging land. To mitigate bad debt risks, Tuliu has introduced insurance/guarantee companies to cater to farmers. This brings down loan costs for farmers from an average market rate of 12% down to 8%. If farmers cannot return the loan, then these companies will assume the compensation and Tuliu will start the transfer of lands.
Application of technology & its impact:
Technologies applied to Tuliu’s business model is quite simple and straightforward, it involves basic e-commerce platform and bid data analytics. E-commerce platform connects demand and supply of the market together, simplified and increased efficiency of matches between two sides. This enabled the ‘pooling effect’ of agriculture land utilization, allowed efficient use of heavy machines and ultimately improved yield of these farm lands.
Bid data analytics, as mentioned above, helps famers know the condition of soil better, decide what to plant and ultimately maximize their harvest and profit. This also ensured the best utilization of all farm lands in China, so that the country can dedicate lands for industrial use or keep them as green space for environmental benefits.
The other positive impact Tuliu brings to the farmer’s community and the society is to give farmers more choices of lifestyle and provided China a larger labor pool in all industries. Many farmers don’t want to work in farm fields anymore, a lot of farmers instead went into the city and become workers in many different industries for economic, lifestyle and education concern. However, every farmer in China is granted a small share of farm land, if they go into the city, then no one will plant their land. They still need to submit to the government their quota of harvest every year, and a lot of times this creates a problem for those who mainly live in the city. Usually, they ask their relatives to plant these fields for them or rent it out to others to plant. However, when these were done on more ad hoc basis, not all farers can find easy solutions all the time. So, they either choose to completely waste the land and pay for the harvest they had to submit to the government or one of the family members will stay behind to farm the land. With Tuliu’s solution, this solved this problem for the population mentioned above and gave them more easy choices for the lifestyle they desire. On the other side, those farmers became part of the enlarged pool of labor supply to all industries in China that can further stimulate the economy.
Critiques and challenges of Tuliu:
Since the beginning of Tuliu, there has always been one strong critique of the business model – the concern of inequality. By aggregating the lands from small farmers and renting them out to the richer few, in a way, more profit went to the richer few instead of the famers, because now they only get the rent of the land and not all the profit kept from their harvest.
Question here is – will this make rich richer and poor poorer? Also, with China’s political background and history of communism belief, this felt a bit going backwards – didn’t we say that every farmer should have equal rights to farm lands? Why are we enabling people with more capital to have more rights to use and benefit from farm lands? Is this capitalism?
Our view is that despite the above questions and critiques, Tuliu’s solution still largely improved efficiency in agriculture and benefit farmers. What do you think? We would love to hear your view.
Sources
Such an interesting concept, specially for such a huge land market such as China’s! It would be very interesting to see the long term effects this will have on small scale farmers – could potentially wipe all the critics away! As for now, I personally believe the advantages it brings to the market (increase land utilization, give small farmers an option to leave the countryside and pursue other opportunities) are definitely worth giving it a shot.
A very interesting article! For the business concept to sustain, I’d think how government reacts to such land transfers plays a vital role. Inevitably, there will be regulations that prohibit this practice as the Chinese authority has expressed tightening control of lands. Yet whether Tuliu can cope with constantly evolved regulations to come up with a sounding solution to the social issue remains to be seen.