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  • Alternative Property Systems for China
  • Jonathan E. Leightner (bio)

When Deng Xiaoping took over the leadership of the People's Republic of China in 1980, he changed the course of the nation. He replaced Mao Zedong's emphasis on equality with an emphasis on profits. Deng's favourite slogans included: "to get rich is glorious", "some will get rich before others" and "whatever makes profits is good for China". Deng, and the leaders who have followed Deng, have progressively moved China from a socialist system towards a capitalist system.

During the post-Mao years, progressively longer leases have been offered to those who use land. However, as of June 2010, China had not completely embraced a capitalist property system. The current property system in China is complicated by the two categories used under Mao: a) the government "owned" the property of all state-owned enterprises (SOEs, most of urban China fits under this type of ownership); and b) the people in the Maoist communes (not the government) owned the property used by the communes. This is further complicated by the pockets of communal land in the midst of cities.

When Deng changed the course of China, the government could legitimately sell the property of the SOEs. However, it could not legitimately sell the property of the communes. However, as the communes disintegrated, most local governments have redistributed the property of the communes in order to free up plots to sell or to handle demographic changes. By 1998, approximately 66 per cent of villages had experienced at least one redistribution of their farmland, and 25 per cent had experienced three or more redistributions.1

Under current law, farmers cannot directly sell their land for non-farming purposes. However, local governments can forcefully take the land of farmers, paying the farmers a price based on the value of the crops they raised on that [End Page 346] land in recent years (with an adjustment for the buildings on the land), and then the local government can sell that land to developers for a huge profit or to industries that will pay future taxes. This practice has lead to major unrest. Furthermore, between 1999 and 2002, more than half a million corruption cases were filed based on land takings and 3,800 government officials were placed under formal investigation. The national government of China passed the 2003 Rural Land Contracting Law (RLCL) in an attempt to restrict the taking of lands.2

One recent study found that the selling of land taken from farmers was the single biggest source of revenue for village governments, comprising approximately 37 per cent of their total revenue.3 Thus complicating China's land problem is the fact that many village governments are financially dependent on buying relatively cheap farmland and subsequently selling it for much higher prices (or for relatively low prices to industries that will pay future taxes). In the long run, however, this system cannot be maintained because there will come a time when the village governments cannot take any more land without making the remaining farms too small to be economically viable. The national leadership of China realises that to produce a harmonious society, this conflict between local governments and the users of local lands must be solved.

Many western economists are encouraging China to give complete western-style property rights to agricultural lands. Theodore Panayotou summarises the major reason as follows:

Property rights are a precondition for efficient use, trade, investment, conservation, and management of resources [such as land]. No one would economise on, pay for, invest in, or conserve a resource without an assurance that he has secure and exclusive rights over it, that he can recover his costs through use, lease, or sale, and that such rights will be enforced.4 [End Page 347]

Klaus Deininger and Songqing Jin add:

A legal system that protects contracts and property rights encourages investment and ensures effective use of scarce economic resources … If the rule of law is weak or nonexistent, private actors will need to spend resources to secure their property rights and enforce contracts with strangers, leading to socially inefficient outcomes. The poor may not be able to afford the associated costs...

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