This paper uses the difference-in-differences approach to study how the Chinese land titling reform beginning in 2009 affected rural households’ access to credit. The land titling reform started in 2009 and was implemented gradually across regions. It is still ongoing. The reform aims to strengthen the security of land use rights by granting land use titles to rural households. Specifically, after the reform, each rural household would have a written contract with the landowning collective and land certificates, specifying particular plots of land contracted and their respective boundaries and areas. The land certificates would be registered with the Ministry of Land and Resources. The land use titles can be transferred and used as collateral.

Based on official surveys conducted in 2010 and 2015, we use the probit and tobit models to estimate the credit effects of land titling. We find that the reform had differential credit effects across households. For households with above average economic status (measured by the area of cultivated land, level of income, and convenience of bank visit), access to formal credit improved as a result of the reform. For households with below average economics status, they were less reliant on informal credit. We show that the availability of land as collateral might have enhanced access to formal credit. However, probably the more important channels of the credit effects were income and wealth. We find that land titling had a positive impact on average household income, which would reduce their need for informal credit. For those households with above average area of cultivated land, land titling increased their wealth, and may have encouraged them to invest and expand their operations. As a result, both their credit demand and their ability to access formal credit would increase.

While our analysis shows that the land titling reform did improve rural households’ credit condition, the credit effects were small in magnitude. For land use titles to further improve the credit situation of rural households, other complementary reforms are necessary. For example, the government should continue to remove obstacles for rural to urban migration and to facilitate the development of the rural land rental market. Both would increase the size of cultivated land for households that remain in agricultural production, and make land use titles more acceptable as collateral.