Chinese Real Estate Development: High Profit and High Violence
Victims of forced demolition in China often lose their lives in protest against it, but such cases have not lead Chinese authorities to make thoroughgoing changes to the system. Much of the issue revolves around corrupt local officials in the provinces, who, unsupervised, collude with criminals and construction companies to make a killing on demolition and reconstruction projects.
In recent interviews, insiders revealed that demolition and relocation is a business with high profit and no risk, and is even referred to as a “gold mine.” Players can make a profit of five to six million yuan (US$736,000 – US$883,000) from a demolition and relocation project at a typical village if it is surrounded by cities with plans for expansion.
New Tang Dynasty Television (NTDTV) once reported an incident in Zhangjiagang City of Jiangsu Province, where demolition continued even during the Chinese New Year. Toward the end of 2009, a large team went to Yangshe Town, ostensibly to redevelop the village, where they dismantled its most prosperous area.
Merely taking one family’s example, the demolition team smashed the door of their house, swarmed in and dragged the family out. The house was taken down and the doors, windows and steel bars were auctioned at the same time.
Daily profits in the millions of yuan
Recently some insiders who have been in the demolition business for over 10 years told Chinese Business that most demolition projects happen at villages situated close to cities. From a single village, the developer can obtain a profit of millions of yuan. Steel bars, doors and windows of demolished houses can also be sold.
One developer boasted that it is very profitable to demolish a village, describing how, “from sun rise to sunset, we earn 100,000 yuan (US$14,700); another sunrise and sunset and we earn another 100,000 yuan.”
To get demolition projects, development companies need to have business connections. Some projects come from state-owned companies and some through key people in a government agency. Commissions to each side are large.
Mr. Li Jiang said that a development company needs to pay over ten million yuan (about US$1.8 million) as a deposit to be let in on a project. The deposit money is collected from the shareholders, with extra shares being given to those in charge. He says that, “Some shareholders do not need to invest money or manpower. They only get paid. But without these shareholders, we cannot do anything.” According to Li, these shareholders include officials, salesmen, village cadres and even criminal elements.
In pursuit of high profit, they raze houses by force and even injure and kill people. A resident’s life costs about 100,000 yuan in reimbursement and can be counted as part of the development cost, according to the insiders.
Mr. Ma Gang in the demolition and relocation business told a story of “a bloody forced demolition.” In 2007 when they were demolishing a village, one family refused to leave. The demolition company hired 50 unemployed people, and promised to pay “100 yuan (about US $15) per person, 200 yuan (about US $30) if they would use violence. Each wore a pair of white gloves and took a rubber baton.”
The developer’s company also informed the police and local government agencies and sent an ambulance to follow the team. The group went into the house and moved things out, or smashed the things that they could not move. Bulldozers went in right away and the house was gone in half an hour.