By Liao Jiehua (廖杰华)
Issue 605, Jan 28, 2013
Nation, page 18
Translated by Zhu Na
Original article: [Chinese]
On Jan 18, the Shenzhen government held a press conference to announce the release of a new policy document aimed at promoting industry in the special economic zone.
The aspect of the new policy document that has received the most attention states that land used for industrial development that is "owned" by work units formed from what used to be rural collectives, will now be permitted to be sold on the open market for the first time.
A developer from Shenzhen told the Economic Observer that a few days before the press conference, the Shenzhen municipal government held a meeting with some property developers to discuss issues related to the lack of construction land in the city.
That a policy aimed at dealing with this problem was announced so soon after the meeting surprised many people.
The new rule is considered a major breakthrough in terms of the ongoing reform of China's land administration system.
A City Short of Land
The Urban Planning Land and Resources Commission of Shenzhen Municipality (UPLRCSM) described the current land situation in Shenzhen as “extremely limited.”
According to 2010 land survey statistics, Shenzhen’s total land area was 1,991.71 km2 that year - of which 916.17 km2 was agricultural land and 917.77 km2 was "construction land (建设用地)," with the remaining 157.77 km2 being unusable. The area of land available for construction accounted for 46 percent of the total land area in the city. The Shenzhen government has forecasted that by 2020, land available for new construction in the city will fall to just 59 km2.
Compared to other major cities, this is very little land to work with.
According to the nationwide plan approved by the Ministry of Land and Resources, by 2020, the proportion of land used for construction in Shanghai will be about 47 percent – roughly the proportion Shenzhen already had in 2010. But that 47 percent of Shanghai amounts to 2,981 km2 – more than three times the construction area of Shenzhen.
Even of the 917.77 km2 Shenzhen has available for construction, much has been left unable to be effectively used.
According to information provided by the Shenzhen government, in 2011, among that 917.77 km2 of construction land, 390 km2 belonged to former rural collectives. And of that 390 km2, about three-quarters had issues stemming from land rights disputes and illegal construction.
A lack of land means a lack of money. In 2012, the amount of land slated for construction in Shenzhen dropped by more than 40 percent while the city’s land transfer revenue decreased 50 percent year-on-year.
According to the Shenzhen government, insufficient supply of land has a large adverse impact on Shenzhen’s industrial transformation, urban development and fiscal revenue. Therefore, turning to rural collective land for development space is one of the few choices available.
Yin Xiangwu (尹香武), a real estate commentator in Shenzhen, said that while other big cities are raising several tens of billions of yuan from land revenue, Shenzhen is earning very little. If the situation continues, Shenzhen will be marginalized, so it must explore new ways to deal with the competition.
According to Tu Lilei (涂力磊), a real estate analyst at Haitong Securities, the most significant change for Shenzhen’s land reform is allowing some of the land is owned by work units that replaced former rural collectives to be traded in the open market.
Gao Haiyan (高海燕), head of Shenzhen Metropolitan Urban Research Institute, said that under the existing policy, rural collective land normally must transfer to the government before it’s auctioned off. Gao says that this practice delivers revenue to the local government, but farmers hardly get any benefit from giving up their land use rights. So farmers are often unwilling to part with their land, which complicates moves by government and industry to develop rural areas and urbanize the people living in them.
The new land reform attempts to rectify this by letting both farmers and the government benefit from selling land use rights. The policy document lays out two modes of revenue distribution that allow the government and farmers to share the proceeds. But in either case, the government will still receive at least a 50 percent cut.
A Changjiang Securities research report says that with either option, Shenzhen’s reform is currently still at an exploratory stage and won’t yet abandon a system of benefits distribution that’s dominated by the government.
Mr. Tu with Haitong Securities said in a research report that the launch of this policy relates to Shenzhen’s development experience and unique status as a special economic zone. Although there’s no sign yet that the policy will be extended across the country, it’s still a meaningful model.
Links and Sources
China Securities Journal - Land Reform in Shenzhen: Rural Collective Land for Industrial Use to be Tradable