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Since the Chinese regime made the decision to drive its economy through real estate development, researchers, including myself, have been cautiously observing for how long it would last, or, in other words, when the regime’s land dependent financial policy come to an end.
Analyzing such an issue involves taking into consideration that land is a limited, non-renewable resource. According to a 2007 survey by Peking University professor Ping Xinqiao, the land along China’s coastal region would sustain real estate development only for the next three to five years. That a portion of the land needs to be left out for food production restricts further the amount of land available.
The government would, one expects, honor the contracts made with the real estate developers—in China, this is that the developer can use the land for 70 years. The deal, after all, affects the real estate developers as well as the millions who invest their lifetime savings on such homes.
Lands Sold Twice
The Chinese regime, however, has a different way of thinking about economic growth. Many provincial governments take an approach of expropriating land before the 70 year lease expires in the name of the “public interest,” regardless of whether it is residential or industrial. The land is then re-sold to make a profit on the land-value increment.
The following are two such cases:
1. On Aug. 29, a report in Xinhua said that before the Lunar New Year of 2010, residents in the Fifth Huyuan District in Jiangsu Province’s Changshu City learned from a notice on the local official paper, Changshu Daily, that their rights to the land where their housing units are situated would be rescinded by the government in 15 days, and their housing units would be demolished shortly thereafter. These housing units were less than ten years old, and some had just moved in about four years ago.
Over 800 households were subject to demolition, in an area of 340,000 square meters. The local government argued the appropriation of the state-owned land was to undertake the so labeled “Qinhupian Area Comprehensive Development Project,” which would include a business and leisure center there in the future. The legal basis, the government claimed, was public interest.
What the residents find themselves thinking about is: What enables the government to casually expropriate real estate purchased by the people; what enables the land-use planning in urban areas to be revised at will; whether this kind of profit-oriented business development can truly be regarded “public interest;” whether the compensation for demolition is reasonable; and whether the Land Reserve Center is a legal organization. To defend their rights, owners of the demolished households have filed lawsuits against the Changshu City government’s Land and Resource Department, the Development and Reform Commission, the Bureau of Housing and Construction, as well as the Planning Bureau. To date, there seems no chance that they will win the lawsuits.
2. On Sep 2, when Taiwan’s Straits Exchange Foundation (SEF) Deputy Chairman, Kao Koong-lian, led a delegation to mainland China, many Taiwan businessmen requested the SEF to help negotiate with the government on various issues. These included concerns of Taiwanese businessmen exchanging their lands with the government.
Taiwanese businessmen who invested in mainland China were mostly manufacturers whose plants were on industrial land in the suburbs; the period of their right to use the land was usually 30 years. However, with the rapid economic development in the Yangtze River Delta Economic Zone, the population density there sharply increased. Local governments thus planned to transform the areas developed for industrial use into residential or service-oriented commercial areas. For that, the existing factories had to be relocated.
Although their right of using the land was yet to expire, Taiwanese businessmen were willing to support the government's policy. However, the compensation provided by the government turned out to be much less than what the Taiwanese businessmen needed to build new factories. In addition, many Taiwanese firms have had serious disputes with local governments on the distribution of the land value increment. Both sides differ greatly in the methods of calculation—the result being that the amount of compensation offered by the government ends up being much less than what is calculated by the Taiwanese businessmen.
Land for Public Services
Under Chongqing governor Bo Xilai’s leadership, another story is playing out in Chongqing City, southwest China, a household registration reform: farmers who relocate to Chongqing would enjoy the benefits of employment, social insurance, housing, education, medical care, but they would, in return, give up their contracted farmland, residential land, and woodlands. The plan has it that the policy would lead 3 million farmers to relocate to urban area in two years, while an additional 10 million will follow suit in the next 10 years.
The Central Rural Work Leading Group’s deputy head Chen Xiwen points out that the nature of such a policy is deprivation of rights: “Who would dare ask the residents in urban areas to exchange their residential land for housing and contracted farmland for social insurance? According to laws governing contracted farmland and residential land, farmers’ housing units are their legal properties, while social insurance is public service that the government is supposed to provide for the people. It is not advisable to tell people in any country, or anywhere, that they should exchange their property for public services. It is something that I’ve never heard about in the past. Therefore, this policy is creating a new discrimination.”
Meanwhile, the central government has been finding other excuses for expropriating land. According to a list jointly disclosed by the NetEase Real Estate Company and the First Financial Daily, there are 1,457 parcels of idle land. Among them, 849 parcels are idle due to governmental factors, while 608 parcels are idle due to enterprises’ factors. The excuse that the regime has given to appropriate the land is that some well-known listed housing enterprises, state enterprises, and state-owned enterprises are suspected of speculating in real estate. It is reasonable to deduce that these illegally recovered lands will be resold with a higher price again.
