China’s Critical Disconnect

At China Real Time Report, Stanley Lubman examines the “critical disconnect” between China’s national and local governments, its historical roots, and its consequences in areas from food safety to intellectual property protection. He begins with last month’s bombings in Jiangxi, whose perpetrator had for years been denied adequate compensation for the seizure of his property.

Such extreme protest reflects a serious systemic problem in China’s governance: Underfunded local governments frequently dilute and undercut implementation of national laws and policies in their effort to sustain growth and increase local revenues. Some examples of the consequences of this practice include not only illegal expropriation of land, but also tolerance of violations of laws on product safety, intellectual property rights (IPR) and protection of the environment. There is a frequent disconnect between local governments and Beijing that is aggravated by the center’s underfunding of local governments.

This gap in Chinese governance could be partially addressed if the central government increased financial transfers to lower levels of government that might serve to reduce the incentives to pursue growth at any costs. In addition, however, local governments must be more closely supervised, both in their use of funds received from Beijing for use in social programs as well as more generally in their enforcement of national laws.

A major area of concern has been the arbitrary expropriation of farmland, often in collusion with private developers, without adequate notice and/or payment of fair compensation. The extent of the problem is illustrated by a nationwide illegal boom in the development of golf courses. In 2004, there were about 170 golf courses in China, and today there are nearly 600—despite the fact that development of new courses has been illegal since 2004. According to a recent report, golf course development was supposed to have been halted in order to preserve farmland and “reduce the huge numbers of villagers thrown off their land as luxury real estate is developed.” An architect of several illegal golf courses said that local governments “were almost always involved” and “were often the main client” for his services.

Law professor Wang Weiguo recently called for reform of land ownership in China, according to Caixin Online:

People’s land use rights, which have been protected by China’s civil law, can still be rescinded at any time by the land owner, the state, Wang noted.

Since half of local governments’ revenue relies on sales of land, they have turn themselves into land suppliers and embarked on massive land requisitions to deliver better GDP performance, said Wang ….

Currently, only local governments have the right to requisition rural land for urban construction, generally with inadequate compensation to farmers.

The land monopoly by the government amounts to nothing more than a campaign to seize the property of the people, said Wang, adding that it is a trespassing of state rights over civil rights.