Whose land is it anyway?
Normally when I want to bore my friends to sleep, I talk to them about rural land rights and agricultural development. The topic is a fascinating one in China, but it requires a background in agriculture and legal theory that most people don’t really have the patience to acquire. Luckily, I had a little help in the form of my senior thesis, and as a result, get really excited every time the central government tweaks the system.
I can’t promise to keep you awake here, but I’ll try at least…
Yesterday brought a fairly significant announcement from the State Council, reported by China Daily here — think of it as an executive order, because it hasn’t really been codified or vetted through a legislative process yet. Some of the more interesting requirements include:
To stop local governments from giving land to investors free or at throwaway prices, the central government will set a minimum price, which will vary according to what it is used for. Officials who sell land at prices lower than the minimum will be prosecuted.
What incentives do local governments have to take land from farmers and give it away for a pittance? Many are involved as management or investors in the development schemes that receive the land. Even if they’re not directly/legally involved, officials will often receive substantial under-the-table payments in exchange for such land transfers. At minimum, officials believe that having major developments in their (previously rural) jurisdiction will bring them prestige.
There will be a ban of leasing land from farmers for construction purposes, a back-door tactic increasingly used by some local governments and investors to dodge taxes on land sales and approvals by higher authorities.
This one really caught my eye. A BAN on LEASING? I understand that it is intended to prevent permanent structures from being built on the leased land (amounting to a de facto permanent transfer out of agricultural use, regardless of the official designation of the land) but this seems like a notable subtraction from a portion of the property right previously allocated to farmers. In an article in Land Economics from May 2000, Yang Yao describes farmers’ difficulty gaining permission to lease to their neighbors before migration/relocation. I can’t imagine this added layer of suspicion will improve things much.
I also liked this one:
Land sale revenues must be incorporated into local budgets so that they can be scrutinized by higher authorities a major departure from the current practice where local governments have total freedom to spend the money as extra-budget revenue.
Didn’t the idea of preventing local officials from directly pocketing land-sales revenue without any legal ramifications occur to someone before? We political economists like to call this a “perverse incentive.” I know, it sounds dirty, doesn’t it. The change is a good one, but you’ve gotta wonder why it took this long (household responsibility system since 1978, major problems with arable land loss to development since the early 1990s at least) to come up with an innovative idea like this.
The article concludes with this gem:
A survey of 16 cities by the Ministry of Land and Resources last year showed that nearly 50 per cent of new land under development was acquired illegally. The figure was as high as 90 per cent in some cities.
Check out the extended entry for some fun facts about China’s land and property rights! If I haven’t bored you so far, fear not, for I will bore you shortly.
Ownership, or property right, is not a single entity but rather a “bundle” of related rights including various aspects of:
Utilization - right to make daily or long term decisions regarding use, development, and operation, etc
Return - right to the profits from use, right to consume or sell crops, etc
Transfer - right to sell, donate, bequeath, mortgage, lease, etc
These rights are held on a continuum: property rights are never absolute.
In the US, for example, your right to utilization is constrained by environmental regulations, and your right to returns is constrained by property taxes. Thus, legal theorists Alchain and Demsetz note, “It is somewhat arbitrary to pass judgment on when the conversion to private control is said to change ownership from public to private.”
Since the early 1950s, China has been a living laboratory for the political and economic effects of various theoretical definitions and systems of “property ownership.” China’s place on the continuum is still up for debate today, especially if one looks at all the heterogeneity of rights allocation in rural areas.
A key factor to look at when analyzing the degree to which a system of ownership is public or private is received tenure security or lack thereof. Tenure insecurity explains the behavior of the expat who hesitates to open a restaurant due to worries about the stability of a lease. It also explains the unwillingness of a farmer to invest in a new irrigation system when he suspects local officials may re-allocate or develop his land at will.
One last tidbit from the CIA World Factbook, although this should be magnificently obvious to anyone who has looked at a map: The US has roughly 6 times as much arable land as china per person.
China land: 9,326,410 sq km arable land: 15.4% population: 1,298,847,624 (July 2004 est.)
USA land: 9,161,923 sq km arable land: 19.13% population: 293,027,571 (July 2004 est.)
Comments
Very interesting indeed. no, i’m not being ironic!
Actually, I’m looking for some (1 would be enough) articles (scholar’s paper…) about this exact issue: “land rights in China”. Something not too sofisticated, not too old, easy to read would be nice ;-) I ask you because i’m wishing for something more than this. Any favourites?
Posted by: Philippe | September 8, 2006 7:20 PM
Absolutely — first off, as a general rule the stuff written by Scott Rozelle is going to be pretty good. I noticed a few by him on that google scholar search. Anything by Jean Oi on the topic will also be worth the read. I’ll email you over some of my favorites.
Property Rights and Economic Reform in China (Oi and Walder, eds) is a great collection on the subject, but probably impossible to find in China.
Posted by: epay | September 9, 2006 1:43 PM
thank you so much! got your email!
Posted by: Philippe | September 9, 2006 5:10 PM
Hi;
I too am very interested as I am currently living here in the land of Ch-na. I am using land that my friend says is hers. But I still don’t understand. As next year or next crop it may get used by someone else. You never know if you are going to have your field or not. What is up with that? And do I pay them for the use? How much are they usually charged for their land and how do “they” obtain it? I would like a piece to call my own. But I am always told to find someone who will give me some land to use. I never know how to pay them back. I would like to just pay cash and keep the crop, but they usually want a certain amount of the crop, I just don’t know how much, they never say!
Thanks, Dee joy
Posted by: Dee Ly | November 19, 2007 11:15 AM