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Land Ownership and Rural Land Expropriation in the People’s Republic of China PRC’s Land Ownership system is inspired in the communist public-owned-property principle. It is therefore different from the land system we know in the west. This land system obviously affects the way administrative expropriation of land takes place in the country. The administration and expropriation of rural land has created numerous violent conflicts in Chinese rural areas in the last years. Chinese peasants who have been expropriated consider that they are being abused and their rights compulsory taken away for the benefits of private companies and enterprises.
Not only this, but they are receiving what they consider insufficient money for their land. This essay will try to explain how the land system in PRC is regulated and underline its main differences with the systems in liberal democracies. Once done this, we will explain how the expropriation of the rural land is done and explain the unconformity of peasants and the possible ways in which this could be changed. The main problems around rural land expropriation are the misuse of public interest when expropriating, and the compensation system.
The former happens by not always attending to the general wellbeing as a purpose for the expropriation. It will be argued that the fact that the only way to convert farming land into constructing land is the expropriation procedure is what creates this problem. The compensation system will be explained, and it will be shown that the farmers receive only a small fraction of what the land use rights are after sold by. We will demonstrate that the reason for this is the value of land by the original purpose system and not the market price. 1. Land Ownership and basic features of expropriation
Land ownership in the PRC is different from land ownership in liberal countries, where private individuals primarily own the land. In the PRC, ownership is public and it was adopted in the form of state ownership and collective ownership. Article 10 of the PRC Constitution defines the framework of land ownership in China: “Land in the cities is owned by the state. Land in the rural and suburban areas is owned by collectives except for those portions which belong to the state in accordance with the law; house sites and private plots of cropland and hilly land are also owned by the collectives. State ownership of land is exercised by the State Council through land administrative agencies established at county, province, and state levels that manage the land in each jurisdiction. Although the state retains the ownership, land use rights to urban land may be granted to private individuals or entities that pay for it. They have specific terms ranging from 40 to 70 years depending on the intended use. Once this rights are acquired, the grantee enjoys a broad range of land rights, including assignment, lease, or mortgage of such use rights for the remaining term.
Upon expiration, land use rights together with structures and other fixtures on the land are acquired by the State without compensation. In the rural areas, there are two levels of collectives: administrative-village collectives and villager-group collectives. An administrative village consists of more than two villager groups. A villager committee represents the administrative-village collective responsible for “managing land and other assets that belong to the village collective,” while the villager-group collective is represented by the head of the villager group.
Land expropriation is an activity carried on by the state that consists in the compulsory transfer of land ownership to itself. Therefore, as the only land that is not already of the state is the collective ownership land (the rural land), expropriation in China means the compulsory transfer from this type of land to state-owned land. Instead of taking ownership rights from private parties, as is the case in liberal developed countries, expropriation in China consists in the government taking ownership rights from another quasi-governmental organization (the collective) and land use rights from private parties.
However, two requirements must be fulfilled: public interest and compensation requirement. With regard to urban land, compulsory withdrawal of land use rights may be enforced by the state under certain situations and entitled to “appropriate compensation”. 2. Rural Land Ownership A) A Historical approach Different ownership regimes for land were established after the Communist Party took control in 1949. In the early years, a big redistribution of land from landlords to farmers took place and the right of farmers to own agricultural land was acknowledged in Article 8 of the 1954 Constitution.
However, the same article also encouraged peasants to join and contribute their land to cooperatives in order to gradually achieve a widespread collective ownership. After the Great Leap Forward the rural land’s possession was divided in teams, communes and brigades, and peasant households enjoyed no rights to possess or use land independently, despite the fact that the Constitution still recognized their right to ownership. It was not until the 1982 Constitution that the higher law actually molded to reality, providing that all rural and suburban land shall be “collectively owned”.
As noted above, the provision is still in effect today. B) Individual Land Use Rights However, at the same that this was established in the 1982 Constitution, individual households regained practical control over the use and proceeds of arable land. An improvement of agricultural productivity was intended by de-communalizing the agricultural production process. The “household responsibility system” granted households the right to farm individual parcels of land in exchange for the fulfillment of certain obligations, including payment of taxes and production quotas.
Once these obligations are met, the farmers have the right to any residual income earned from farming the land. C) Rural Land Expropriation There are some basic features in Chinese land expropriation. However, it will be discussed how in the practice the features discussed are not perfectly fulfilled and important mistreatments happen in the procedure of expropriation, placing peasants in an abused position. As discussed before, land expropriation can only be of the rural collective land, as the other land is already of the state. The notion of Public interest
First of all, land expropriation must follow a purpose. The PRC’s Constitution mandates that any expropriation or requisition of land must be “for the needs of public interest”. The Land Administration Law states the same, without providing further guidance. It is in the misuse of “public interest” where the first grievance is made to the peasants. Article 43 of the Land Administration Law of the PRC states that “all units and individuals that need land for construction purposes shall, in accordance with the law, apply for the use of state-owned land”.
The State owned land mentioned here includes land owned by the state and land originally owned by peasant collectives but expropriated by the state. This provision extends land expropriation rights to all the land used for construction purposes, and does not distinguish land used for public interest purposes and land used for construction purposes. It is important to indentify that land expropriation is not only a means of affecting a transfer of ownership. They are also the only means of affecting a change in use.
Statistical analysis of land expropriation in China has shown that the land expropriated for nonprofit “public interests” only was a small proportion and land expropriation had become the leading way to meet the demands for social and economic development. The use of rural expropriation in China is following a path full of violations towards the peasants, who suffer how corporate and individual interests are substituting the “public interest”, and any unit or individual may apply to the state to use the land expropriation right to meet their demand for land.
In her article, Valerie Jaffee Washburn interestingly points out that the conversion of land from agricultural to other uses “do not constitute an in rem restriction that attaches to the land itself, but more in the nature of an in personam restriction: their application depends not on the location or other characteristics of the land, but on how and by whom the land is owned. It is the fact that the land is owned by collectives rather than the state, and not that is currently arable, that makes it (un)available for construction”.
This idea is interesting and underlines the idea that the administration of land in China is following a random path, not according to a rational distribution and use of the land. When land is constructed it is virtually impossible to convert it back to arable land. These random practices in China may have unpleasant consequences in the future. A more rational approach should be made by China’s leaders in order to avoid land problems in the near future. Compensation for Expropriation of Land A second, and most outrageous, misuse of expropriation happens with regard to the compensation paid to the peasants when their land is expropriated.
It is based on the original use of land to be taken, and not by the standard of market value. This method of calculation has the consequence of paying the farmers low prices for their land. Not only this, but on the moment that the land is transformed to state-owned its price immediately multiplies, further strengthening the mistreatment of farmers. The current legal requirement for compensation consists on three components: (a) a compensation for loss of land set at 6 to 10 times the average annual output value of the land for the three years prior to the requisition.
This will be paid to the collective landowner. (b) A resettlement subsidy set at 4 to 6 times the average output value for each agricultural person. But it must not surpass 15 times of the average of the annual output value per hectare of land of the three years prior to the expropriation. (c) Compensation for structures and standing crops to be determined by provincial governments. Once land is converted, the land loses its intrinsic farming purpose and it gains much more ways in which it may be used. It is common that its rights are granted for construction purposes. Furthermore, the Land Use Rights in his kind of land also adopt more facilities of being transferred –less consideration of the identity of the transferee is demanded– and become possible subjects of legal transactions such as mortgage. The value for the same piece of land is therefore much greater once it is converted to State-owned. However, farmers will not get the increment income from the change of the land use. It is the government who can obtain the increment income by granting land as industrial and commercial land, which has been collected at low prices from the farmers using the calculations of the original purposes.
This has the totally undesirable consequence of land being frequently unreasonably levied by the government, which can get the increment income in the name of public interest. Valerie Jaffee Washburn names this phenomena –the gain from first expropriating and then selling– the expropriation surplus. She writes about a study made by Hou Huali and Du Juan in which they estimate that only one-twentieth of the price of urban Land Use Right fees paid for all formerly agricultural land converted was paid to the farmers.
She identifies three causes for this disequilibrium: the ability of local officials to keep compensation low, the fact that the formula does not calculate properly the agricultural value, and (but not only, this is her point) the price difference between collectively owned land and state-owned land. The expropriation surplus is a very dangerous practice. Its most obvious criticism is that it is not fair or just for the farmers, that are losing their sustain receiving a much lower price than the price the land is bought for in the market after doing a legal maneuver.
Secondly, the expropriation surplus creates too many negative incentives for the public authorities to stay in the path of righteousness and in search of the public wellbeing and people. With a simple administrative act the local entity may see its public treasure highly increase. Not only it is an incentive for the local treasure but there are also a lot of incentives for the public officers for keeping a bit in their pockets. Humans may be greedy and the laws must work in order to hinder the undesirable greed.
In the case of public officers, their righteousness must not be presumed and temptation should be kept away from them. There is no reason why there should be a “transaction cost” between the farmer and the payer of the converted land. It has no economic sense to make this happen, and in just incentivizes the irrational expropriation of land. The losers in this practice are obviously the farmers; and the winners are the state and the construction developers. In the end, the money that the government is earning is money that should go to the farmers.
The government is, this way, stealing the money from the farmers after compulsory taking their land. Furthermore, the developers also win, as the increase in supply originated from the irrational buying from the government will presumably make the price fall. What can be done to improve the system? There are three obvious things that can be done to improve and make more rational the expropriation system: keep the public interest condition under a more strict use; change the compensation system; and create another way of converting farming land to constructible land.
When expropriating land the condition of public interest should always be strict. Public interest should not follow private lucrative interests, but what is best for the people. The problem is that in a country that is rapidly developing (like is China at the moment) the demand for construction and housing land may arguably be of public interest. However, public interest is distorted when there are massive pieces of land being expropriated for this matter and millions of farmers are bearing the cost. China must find a less damaging way of finding a way to meet private and public interests.
Changing the compensation system would not create public interest but it would at least make the system fairer. The aim should be to make a way in which the farmers could receive the full market price. This could be done the following way: when the government makes the decision to allow (by expropriating) the construction in farming land, the land should be first paid to the government. They could then transfer the total amount to the farmers when the actual expropriation took place. Then the land would be immediately transferred to the buyers. It may a legal fiction, but it would certainly be fairer.
Also, it would incentive a rational developing plan, as the decisive factors would just be the correctness of the location, and whether it follows the actual needs of the country; and not the public trasure. The final proposition would be somehow harder to implement. It would maybe require a change in the constitution. The idea would be to make possible a category of land that, being farming land, would not require the expropriation mechanism to convert it into constructible land. This way the market could simply transfer the property of this land.
The category could be called “farming land convertible through negotiation”. The idea is that the government could localize the pieces of land that are not indispensable for agriculture or that could be turned into constructible land with no damage to the environment. Once localized and categorized into this type –maybe the categorization could be requested by peasants or possible buyers– it would only require a contract between the collective owners and the buyers of the Land Use Rights. Once done this, the land would immediately be converted to state owned land and the Land Use Rights granted to the payer.
This way, rationality in development would be preserved, the market would just work by its own, and all parties would win (as no one would be unfairly expropriated). This system could still be combined with the expropriation procedure in case of public need. 3. Conclusion Rural land expropriation in China is unfair for the farmers. In the race of development, there is only one class that is paying the costs: the farmers. At least in the construction of rural land, they are the only actors who are continuously losing.
The government and private enterprises are filling their pockets while the farmers see how their land is taken for a misery –at least compared to what they are earning. In order to improve the expropriation system three improvements have been suggested: a strict use of the condition of public interest, a change in the compensation system and a new category of land that does not need the expropriation mechanism to convert the land into constructible land. These measures would alleviate the burdens from the farmers. The private parties would only hypothetically be worse off by higher land prices due to a cut in supply.
The party that would be worse off would be the government, but it is not it job to be rich but to make things work for the whole society. In this essay we have shown why the farmers are losing and why their protests are for justice. They are right and they want a justice that has been taken away from them by a system that incentives greed and easy money, and a government that does not take care of the people. The protests in rural China are understandable and a change must be done in order to seek fairness and stability in the countryside.
China cannot continue to develop leaving aside from the development the rural masses and peasants. Bibliography * Capacity Building for Resettlement Risk Management: People’s Republic of China Thematic Reports. Thematic Report No. 1: The Scope of Land Expropriation Rights. * Jianpeng Chu, Land Expropriation Compensation Based on the Price of Land Use Right Granting. * Liao Junping ,Land expropriation in China- A simple introduction, Institute of Real Estate Studies * Valerie Jaffee Washburn, Regular taking or Regulatory takings? Land expropriation in rural China, 2011, Pacific Rim Law & Policy Journal Association * RETA, II. Expropriation Laws and Practices: The People’s Republic of China, RETA 6091: Cambodia, India and China. ——————————————– [ 1 ]. The Organization Law of Villager Committee, Art. 5. [ 2 ]. II. Expropriation Laws and Practices: The People’s Republic of China, RETA 6091: Cambodia, India and China [ 3 ]. Land expropriation in China. A simple introduction, Liao Junping, Institute of Real Estate Studies. [ 4 ].
Regular taking or Regulatory takings? : Land expropriation in rural China, Valerie Jaffee Washburn, 2011, Pacific Rim Law & Policy Journal Association. [ 5 ]. Ibid. [ 6 ]. Ibid. [ 7 ]. Ibid. [ 8 ]. Capacity Building for Resettlement Risk Management: People’s Republic of China Thematic Reports. Thematic Report No. 1: The Scope of Land Expropriation Rights. [ 9 ]. Ibid. [ 10 ]. Land Management Law, Art. 47 [ 11 ]. Regular taking or Regulatory takings? : Land expropriation in rural China, Valerie Jaffee Washburn, 2011, Pacific Rim Law & Policy Journal Association.