Cai Jiming: China Must Reform Rural Land Rights
From News, page 12, issue no. 350, Jan. 14th 2008
Translated by Liu Peng
Original article: [Chinese]
In the tranquil and secluded Xinzhai building at Tsinghua University, professor Cai Jiming prepares a rural land reform suggestion package for this years meeting of the National People's Congress and the Chinese People’s Political Consultative Conference.
Cai says that the privatization of rural land will not only smooth over China's modernization process, but will also solve corruption and inefficiency in the way the government acquires land, and lastly, ease the mediation of disputes over "minor property rights". Minor property rights refer to a kind of land rights that can be obtained by rural Chinese. Current law states that the property owned in this way cannot be sold to urban residents.
Aside from his role as a professor, Cai Jiming is the director of the China Association for Promoting Democracy, head of its central economic committee, and a member of the Chinese People’s Political Consultative Conference. The recent cancellation of the Labor Day vacation was also put forward by Cai’s research team.
The Economic Observer: Many forces were behind the development of “minor property rights” law. Opposition to it claims to want to protect arable land. Are there actually any statistics about how much arable land has been used by minor property rights houses?
Cai Jiming: I have yet to see any data, and I am sure that there is illegal use of arable land, but it’s definitely far less than the government’s misuse of land. And compared to arable land misuse occurring at the national level, minor property rights misuse is just a drop in the bucket. It is reported that local governments occupy 80 percent of the total illegal land use cases.
The Economic Observer: Why does arable land expropriation data show rapid increases around 2003? Does it have anything to do with the recent economic boom?
Cai Jiming: To a great extent, the recent decade of economic growth, especially increases in local government’s financial revenues, has been caused by the real estate industry. Local government spent little money to expropriate arable land and went on to sell it to domestic and foreign investors at much higher prices. In turn, the governments then use the land transfer income to invest in large-scale infrastructure projects. Meanwhile, the investors mortgage their land and buildings to the bank to make even more investments. As a result, the real estate industry is growing stronger and stronger, and more and more arable land becomes expropriated in the process.
The Economic Observer: What factors distorted the property market?
Cai Jiming: The fact that the government can acquire land at a very cheap price has many consequences. First, property prices don’t reflect their real value. If one property is valued at 100,000 yuan according the local property market, it shouldn’t be valued by the local government according to its grain output, which would make it worth only 10,000 yuan. A low price doesn’t reflect the property’s scarcity, and only begets more land expropriation and waste. Second, the income isn’t fairly distributed. With the above example, the farmers should make 90,000 out of the 100,000 yuan, but they actually only take home 10,000 yuan, while 90 percent of the income goes to the government and developer’s pockets.
The Economic Observer: only 10 percent for farmers?
Cai Jiming: More or less! Which is to say, though property prices are increasing, farmers are only able to get 10 percent. These kinds of transactions give rise to corruption. Fourth, with this in mind, the government will act on short-term interest. With land prices so cheap, the government would be stupid to not expropriate the land. This results in the excessive expansion of local governments and leaves no available land for the next administrations.
The Economic Observer: So basically, the property market was fair, but now the government is intervening and disrupting it?
Cai Jiming: I didn’t jump to conclusion of land privatization in the beginning. I’m just saying that the present system creates a dualistic, urban and rural land ownership structure. But what is the fundamental reason for all of the problems? It’s land ownership. Take the countryside for example, the land is owned by the collective, but in practice is mostly contracted out to and operated by the farmers. But who works on behalf of the collectivity? The cadres of the village committee? If they represent the collective and exercise power on its behalf, they won’t always reflect the farmers’ rights and interests. Those farmers are always at a disadvantage and have no right to speech in the expropriation process. These deals always benefits village and town cadres.
The Economic Observer: For example, I am a village head, and I sell land for 100 million yuan. I think the money is much safer in the collective than with private farmers, and in accordance with the law, keep the money for the collective.
Cai Jiming: It works in theory. But practices vary from place to place. We need to consider why the collective wants to manage the funds in the first place. If the collective is afraid that the farmers will use up their dividends, it has reason to keep provisions for social security. We always doubt individual’s ability to consider what is in its best interest, always say that only the collective, our leaders and the state are rational. But the reverse may be true.
The Economic Observer: When you put forward land privatization in 2003, some scholars disagreed and called for continuation of the “permanent tenancy” system. While the state-owned enterprises can undergo drastic privatization reforms, why has reform of rural land ownership become such a complicated issue?
Cai Jiming: Many scholars don’t really think about these issues, but the moment you mention the privatization of land, they protest that it will beget large-scale land annexation and the concentration of land.
The Economic Observer: Economies of scale would bring increased production efficiency, but the next problem that worries people is, with China’s massive labor force, what would happen to all of those whose jobs were lost?
Cai Jiming: This is the root of the problem. Right now, China has about 300 million acres of arable land, and each farming household has a little over one acre. The Ministry of Agriculture has said that China’s planting of sustenance crops is not as good as planting cash crops, which itself is not as good as using the land for industrial and commercial purposes. So then how can we let farmers plant on their land? To keep them there, we have to at least double their plots to two acres, only then can they make as much money as they would as migrant workers. This simple exercise shows us that out of the 700 million rural peasants, half will leave.
The Economic Observer: Will such a reform facilitate China’s economic development? Will it readily solve many of China’s current problems?
Cai Jiming: To solve the “three agricultural problems”, urbanization, and modernization, the rural land rights system must be changed.
The Economic Observer: Have you put forward this proposal before?
Cai Jiming: I put forward a similar one before, based on a diverse land rights system, one-part privatization, one-part state-owned. China’s reform process has been step by step, and this reform must be equally tempered. In our research, we went all the way, but when you bring this to the policy level, you have to take it one step at a time; you can’t shake society or introduce too much of a clashing ideology. You definitely want a gradual process.
"Minor Property Rights" Houses
The Economic Observer: Are minor property right houses covered in the proposal?
Cai Jiming: Yes, the proposal will include that. We have set up a research team for that issue just a month ago. The members come from our economic institute, and are doctoral students. We want to turn this into a focal issue.
The Economic Observer: What’s your research direction and scope?
Cai Jiming: Nationwide research is in the beginning phase. We have visited the places like Songzhuang, the Tianjin development zone, Xinxiang and Anyang cities in Henan province. We have formed several research guidelines: first, we define our research scope on the minor property rights houses built on the legal rural housing land. That’s because this action is the most reasonable despite being against the government regulations. In fact, the constitution and property law don’t limit it.
The Economic Observer: So its like a private plot of land. The peasant can plant what they want, do what they want, including building a house?
Cai Jiming: It is legal and reasonable to build a residential house on the private land. It’s not a factory or an underground workshop.
The Economic Observer: But isn’t there a limit to the legality here—if I build a house on my land and sell it, can I apply to build another residential plot?
Cai Jiming: It’s not allowed. According to the land administration law, the peasant can only apply for residential land once. And the new State Council regulation points out if the peasants sell their houses and the land, they cannot apply for more land. We intend to focus on this area. The second principle is to respect reality. By this I mean by how much is the government undercutting the market, and if the government wants to dismantle a house, how will people be concretely affected? What are the negative externalities of its actions? The third principle is the reasoning behind its actions. Is the government accountable? Does the government lose control of supervision? If the government doesn’t fulfill its duties, it should assume responsibility for that. Last, why are minor property rights houses so hot in the market? M
