China's rubble-strewn path to land reform
By Stanley Lubman, The Wall Street Journal
The Chinese government’s recent pledge to reform land laws and expand peasants’ rights is going to be a major challenge to carry out.
The expropriation and sale of communal land by local governments has long provoked discontent among peasants in many parts of China, helping to fuel a rural rights movement that threatens to undermine the Communist Party’s legitimacy. As one rights lawyer in Guangdong recently put it, “Right now, the majority of places have land disputes, and more than half of them are the subject of rights campaigns.”
In an effort to diffuse tensions, authorities have vowed to improve protection of peasants’ rights. In a major reform blueprint unveiled in November, the Party promised that farmers would be granted more control over their land, allowing them to mortgage it or transfer use rights. The next month, Beijing announced that it was considering new rules that would make it easier for peasants to use the courts to challenge local authorities over land disputes.
The need for real reform of rural land law, not just promises from the central government, is illustrated by the highly publicized case of Wukan, a fishing village in Guangdong Province that had once fueled hope for change but which now languishes as an example of the intractable difficulties faced by China’s farmers in defending their rights.
Wukan attracted nationwide attention in 2011 after angry village residents physically ejected the village committee, which had entered into contracts with developers. In 2012, a novel solution allowed the villagers to elect a new village committee composed of leaders of the protest. This was highly unusual. But a year later, there was no progress in efforts to unwind the transactions and retrieve the land. Moreover, although some Chinese observers had referred to the Wukan “model” as a concept for political change at the grassroots, it eventually faded from national discourse.
The Wukan villagers had been supported by Wang Yang, then chairman of the Standing Committee of Guangdong Province. Wang, however, has since been replaced by a successor who favors replacing the village committee with party members. It is no surprise that political activism in Wukan continues to decline. A retired cadre who was a leader of the 2011 protests left the committee in October 2013 and has since given up politics. A new election is slated to be held in coming months, and the local township government will neither favor keeping the current committee members nor try to solve the continuing land disputes. It is clear that the Wukan experiment has faltered and will not serve as a model for other communities.
The problems confronting officials who will address rural land reforms are complex. As the Economist noted just before November’s Third Plenum policy conclave, some provinces have already started conducting experiments with rural land rights. In Gumian, a village in Guangdong, mortgage loans have been legalized, allowing residents to borrow money in order to finance housing construction in the same village, but details such as the consequences of foreclosure have yet to be worked out. The magazine quoted a “nervous local official” telling local residents that they would “risk leaking state secrets if they talk to a foreign reporter about the new borrowing scheme that lets them make use of the value of their houses.” Similar trials have also been conducted in the city of Chongqing and the provinces of Guizhou and Yunnan.
Expanding rural landowners’ rights would limit the ability of local governments to expropriate communal land for infrastructure, industrial projects and housing and to then sell the land to real estate developers for large profits. In recent years such transactions have been a much-welcomed resource for otherwise cash-strapped local governments that are not allowed to borrow from local banks and have had to resort to “shadow banks,” which require high interest rates and have been poorly regulated. Local governments will attempt to resist attempts to curtail what has become an essential revenue stream.
The communique issued after the Third Plenum declared “We must…endow peasants with more property rights.” It was followed by a more detailed Central Committee resolution that provided for establishing markets for “rural collective and construction land” and stated the Party’s goal:
“We will narrow the scope of land expropriation, regularize the procedures for land appropriation, and improve the rational, regular and multiple security mechanisms or farmers whose land is requisitioned."
It is unlikely that the Party can attain these goals any time soon simply because of the difficulty of dealing with the well-known problems that must be overcome. Even ascertaining who owns what land will be difficult. As the China Economic Review recently noted, if a market for certain kinds of rural land transactions is created, “vast income would be transferred to property holders instead of government officials,” but creating the rural land markets “will be arduous and time consuming.”
One approach to replacing the income generated by land transfers to local governments would be to institute a property tax in more areas besides Shanghai and Chongqing, where they were initiated in 2011. Up until now, the tax revenues from those two cities have not been large, and property taxes have not been instituted elsewhere. Furthermore, a registry for home ownership, a prerequisite for levying a broader tax, is not yet completed. One real estate expert quoted by the China Economic Review thought that developing a “more substantial tax base could take five to 10 years.”
Given the complexity of implementing changes and resistance from local governments, the reform policies promised by the Party in November, may not be addressed quickly or effectively. At this juncture, however, among the reviews of major institutions and polices formally launched after the Third Plenum, work on rural land reform seems to be high on the list of priority project. Nothing more can be said with confidence about the likely reforms, when they will be announced and how long it take for specific measures to be implemented. At the least, China’s rural dwellers will have to wait a bit longer, along with Wukan’s villagers.2/7/2014