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Katharina Otte
Beijing wants to end excessive land grabs and evictions of Chinese farmers. But the planned reform of the land administration law does not remove the root causes of the problem: urbanization pressure and fiscal problems at the local level.

Nail house in Shanghai

The Chinese government has long recognized the need to stop excessive land grabs and evictions of Chinese farmers by subnational governments. During this years’ annual session of the National People’s Congress the Minister of Land and Resources Jiang Daming announced changes to the Land Administration Law, which would be made public after approval. The announcement was preceded by heated debates among NPC delegates how to address the core problem of the current law: unclear farmers’ land rights.

Due to China’s socialist past, land property and management rights are a complex issue. In China there is no private ownership of land. All land in the cities is owned by the state and leased out to citizens for 70 years for a fee. Land in the countryside is owned by the village collectives and the usage rights are assigned to the members of the collective free of charge. According to law, collectively owned land is prohibited from being circulated. Therefore, subnational governments need to expropriate and convert it into urban land in order to utilize it for non-agricultural purposes.

Forced evictions in the name of “public interest”

The law in its current form is criticized by academics for its vague terminology, which does not sufficiently safeguard farmers’ interests. According to Article 2 of the Land Administration Law, “[t]he State may, in the interest of the public, lawfully expropriate or requisition land and give compensation accordingly.” The phrase “in the interest of the public” is not clearly defined, giving the government wide discretionary power.

The resulting wrongful treatment of famers in China in the form of land grabs and forced evictions by local governments causes regular protests, which sometimes take extreme forms. Homeowners’ resistance to leave their properties has led to the widely photographed phenomenon of “nail houses,” structures sticking out like nails in the middle of an area slated for re-developments. All over rural China, desperate farmers have murdered village authorities or committed or attempted suicide in dramatic self-immolations.

The scale of these problems is huge. Land disputes trigger half of an estimated 100,000 social protests in China every year, making them the second leading cause for public unrest after labor disputes. In 2013, the number of expropriated farmers was estimated at 50 million, and as growing by some three million per year. Farmers also suffer from unfair and insufficient monetary compensation for their land loss. The compensation is calculated based on former agricultural output, but the authorities then transfer the acquired land use rights to developers based on much higher market prices.

“Land financing” makes up for gap in local tax revenue

As China’s urbanization proceeds at tremendous speed, more land is needed for infrastructure projects, industrial, residential and commercial purposes. The CCP’s “New-type Urbanization Plan” (2014-2020) sets the urbanization target of 60 percent by 2020 (compared to 36 per cent in 2002 and about 56 per cent now), which means that another 54 million will need room in China’s cities. As state-owned urban construction land has become a rare resource, subnational governments rely heavily on the acquisition of rural land.

Fiscal constraints are another driver for the conversion of rural into urban land. Subnational governments have to some degree become financially dependent on expropriations after a tax reform in 1994 decreased their share in China’s total tax revenue. Some significant taxes like the consumption tax flow mainly into the central state’s coffers, and property taxes are an unstable and inadequate revenue source, accounting for only 15.7 percent of local tax revenues. “Land financing” – meaning the described practice of expropriating collective land for a low compensation and transferring the use rights to developers at a considerably higher price – thus became a new method of financing at the local level. As of 2007, the nationwide land leasing income made up 50.7 per cent of total local revenue.

Legal change offers insufficient protection against expropriation

The announced revision of the Land Administration Law, based on local experimentation in 33 counties around China, is expected to introduce a system in which each member of a rural collective has an additional management right for his or her allotted part of the land. Under current laws there is no general distinction between the land usage right (承包权) and the land management right (经营权). Since 2016, the central government has allowed village collectives to lease their land to agricultural corporations in order to foster more efficient corporate farming.

The planned amendments would enable these collectives, but also individual farmers, to transfer land management rights directly to developers. According to the official announcement on the draft, this novelty aims at a) increasing the amount of accessible land on the real estate market without relying solely on expropriations and at b) strengthening farmers’ legal position and opening up new venues for potential profit from leasing out their land use rights.

The main flaw in the system however would remain as even the revised law would not protect farmers from expropriation and the conversion of collective-held into state-owned land. For this to change, there would have to be a clear legal definition of the term “public interest,” which allows government land grabs. Such a definition seems to be lacking in the proposed reform.

The central government would also have to remove the incentives for the excessive use of land grabs to finance local budgets. Beijing would have to help subnational governments generate other forms of revenue or to come up with a new formula for revenue sharing.

The announced revision of the Land Administration Law could be an important step towards a better protection of farmers’ rights. But as long as the root causes of the problem – urbanization pressures and fiscal constraints – are not addressed, China’s farmers will be at the losing end of the battle with land-hungry developers and local authorities.

Katharina Otte worked for the Society and Media Program at MERICS from January to March 2017. She is a graduate of Modern China Studies at University of Cologne.