In China, it is envisaged to reserve farmland through a compulsory acquisition system of rural land. The goal of this paper is therefore to examine its effect through the investigation of the nature of land supply behavior under a compulsory acquisition system of rural land. The results show, however, that the compulsory acquisition of rural land, in contrast to its original purposes, results in more land transactions from farmland to urban use than that under land market mechanisms. The results show that the constant compulsory acquisition price of farmland shuts down farmers' expectations of capital gain in regard to farmland reservation. When farmers can get only an agricultural income from farmland reservation, the compulsory acquisition of farmland becomes beneficial rather than when the land is reserved for agricultural use. As a result, farmers are very enthusiastic about the compulsory acquisition of rural land. The results show that local government agencies also have great incentives to transfer farmland to urban use more and earlier under a compulsory acquisition system of rural land instead of under market mechanisms. The reasons can be summed up as follows: First, these agencies have a relatively lower expectation of the benefits of farmland reservation because they cannot generate agricultural income with it. Second, because of financial difficulties and concern about policy changes, the agencies intend to have higher expectations of risks to delay the compulsory acquisition of rural land until later.