Land Reform Top Priority – China Newsweek
The most serious economic, social and even political issues nowadays are all, directly or indirectly, connected with the land system. China’s current land system is getting closer and closer to a tipping point where reform will be necessary.
The main premise of this argument is, nearly all major players involved with land, from local governments to real estate developers, to suburban farmers and citizens and villagers in the country, have motivation to break the land-related laws, regulations and policies.
If a system has come to such a point, it demonstrates that the system itself has got a problem, and the only solution is “reform.”
In recent years, we have noticed that most of downed mid- and high-level officials had land-related problems. And the Ministry of Land Resources has launched numerous campaigns to crack down on land corruption. Nearly 1,500 officials were punished for breaking land laws from October 2006 to early 2007. These cases have a similar story line: illegally seizures of agricultural-use land and illegally approval of land deals. The context of this phenomenon is the official assessment of local officials, the core of which is local GDP and fiscal revenue growths. Thus, officials will of course proactively “manage” the land to spur investments and promote a booming real estate market.
But the law doesn’t say that local governments actually own the land in their jurisdictions. In the mid-1990s when Beijing took away the main tax revenue sources from local governments, local officials were forced to use land to make a profit. For more than a decade, some local governments have thought they could freely use the land in their administrative areas. But not so. Under the current system, the central government has the absolute supremacy and when Beijing realizes the importance of land, it tightens land management.
The other reason why the central government set out to tighten up is that the power of localities must be restrained. But there’s still a misalignment between the central-dominated land management power structure and the incentive mechanism of local officials.
In the land game, local governments have a great right-hand man: the developers. They have a well-aligned common interest.
In the outskirts of cities, farmers slowly start to break the land laws too. As the boom spreads outward from the cities, some farmers who theoretically don’t own their land but have the right to use it, start thinking in creative ways to profit from the boom too, building out new properties for sale or lease. Some lease collective land to developers for real estate projects, also known as “little property-right apartments.” And the returns from these deals are of course a lot higher than having their land seized by local officials at a dirt cheap rate. Although local governments turn a blind eye to these transactions, Beijing sees it as illegal. [Full Text in Chinese]
– UPDATE: See comments on this article and the issues it raises on the Time China blog.