||The pawning or mortgaging of land (diandi) was a popular institution in early twentieth-century rural China. A predominant view sees this as essentially an usurious practice employed by a small group of landlords who dominated the business of money-lending, whose ultimate objective was to accumulate land from the poor peasants through loan default and distress land sales. Conversely, land pawning is also viewed as merely a form of credit arrangement in an economic environment where formal credit markets were basically lacking. Drawing upon two detailed cases, this study sheds new light on the nature of this economic institution. There are three key findings. First, interest rates under land pawning are found to be actually lower those than other associated with forms of lending; this can be attributed to: (a) competition among the lenders, and (b) the higher default rates that would result from higher interest rates. Second, the ulterior motive of the landlords-cum-moneylenders lay not in accumulating more land, but rather in the huge profits made possible by speculations in the grain market in one instance, and higher interest incomes in the context of rising grain prices in another, respectively. In both instances, however, households were allowed to delay their rental or interest payment in times of poor harvests, an arrangement that served the important purposes of risk sharing and consumption smoothing. Finally, evidence suggests that rich peasants had also engaged in pawning activity. and distress land sales was by no means confined to the poor. Depending on the frequency and scale of the natural disasters, many poor households were able to redeem their land.