Wukan
'solution' fails key land-rights
test By Benjamin A Shobert
Several weeks ago, Landesa, an American
non-government organization focused on land rights
for the rural poor in various emerging economies,
published its sixth study of land rights in China.
As part of their updated study, they surveyed
1,791 farmers in 17 provinces within China and
found, as Landesa put it, "that urgent reforms are
necessary in order for China to promote social
stability and continued economic growth".
If this comes as surprise to readers in
North America, it does not to bureaucrats and
rural farmers in China who have long held
frustrations over the unresolved ambiguities over
property ownership that the Landesa report
highlighted.
Beijing continues to assert
that the country is "ruled by law" and that issues
related to land rights have established legal processes
by which grievances can be
addressed and remedies found. If anything can be
gleaned from the protests late last year in Wukan,
in southern Guangdong province, it is that while
China's land rights may be well promulgated in
form, they are poorly implemented in practice.
Of the many lessons learned from the Wukan
protests, observers like Stanley Lubman have been
quick to point out that ultimately what resolved
the situation in Wukan was not elevating the law
and using it to address complaints, but rather
administrative actions taken by local party
officials.
Whether ultimately China's
legal system is deployed to formally address the
corruption in Wukan or the end-runs around the
country's established property rights which served
as much of the fuel to the fire that flashed up in
Wukan remains to be seen; for now, it appears that
the mechanism for addressing the grievances of the
people in Wukan (population about 20,000) was
administrative remedies as opposed to following
the law.
This underscores the unfortunate
reality in China that for all of the laws already
on the books, how the law is actually implemented
at a local level is the more important factor to
monitor, a realization that closely follows
similar frustrations business has encountered when
dealing with differences between how intellectual
property law is written versus how it is executed
at the local level in China.
This all
underscores much of what Landesa's report
highlighted: land takings continue to be common
place in China, and the disparity between what
farmers are paid for the land appropriated by the
government and what the government is paid by
developers for the said land remains a troubling
gap.
Landesa found that "the mean
compensation paid to affected farmers was 18,739
yuan per mu (approximately US$17,850 per acre)",
while the government fared much better.
Specifically, Landesa determined that on average
"authorities themselves received for the land
778,000 yuan per mu or $740,000 per acre". It
should come as no surprise that Landesa's study
also found that in cases where the government took
land through eminent domain, some 60% of the
farmers reported being unsatisfied either because
of "low compensation" or an "unfair process."
Land sales between local government and
developers in China accounts for a significant
part of the municipalities' revenue, which
partially explains why the government has been so
aggressive and insensitive to complaints from
rural farmers. According to research done by Guan
Qingyou at Qinghua University, local governments
have significantly increased their reliance on
land sales to fund their infrastructure programs.
Qingyou's analysis suggests that towards
the end of the 1990s, land sales accounted for
approximately 10% of local government's revenue,
but that this had increased to 74% by 2010. As a
consequence of this, Landesa estimates that
compulsory land takings in China have actually
increased since 2005.
Local governments
now face three problems, all of which are
inter-related: first, an increasingly vocal group
of farmers and property rights' activists are
beginning to speak up and resist compulsory land
taking and unsatisfactory remuneration as a matter
of local policy. Second, as land prices in China
have skyrocketed, local governments have
benefited, but they have also taken on enormous
debt obligations based on skyrocketing property
values. Servicing these debts is becoming
increasingly difficult given the third problem;
namely, Beijing's policy mandates that are
attempting to clamp down on China's real estate
market.
Cumulatively, local governments
face the challenge of needing to bring their land
policies in line with China's promulgated laws in
order to address grievances, while doing so in a
period where revenue from these very land takings
is more critical than ever before.
China's
top leadership understands the difficulties
inherent in managing the divergent complaints and
issues being faced by both local villagers and
municipal leaders. In early February, Premier Wen
Jiabao stated that a major problem for the country
as, "... the arbitrary seizure of peasants' land,
and the peasants have complaints, so much so that
it's triggering mass incidents." This sort of
candor seems to shed light on the party's
understanding of the need to reform the various
local governments' land taking policies.
Beyond matters of civil disobedience and
public protest, Beijing has other reasons to be
concerned about these practices. Already, as the
Landesa report makes note of, China's land-taking
policies represent a major reason why rural
farmers do not pursue mid- and long-term
investments to improve the productivity of their
land. As Landesa states, "One of the best
indicators of tenure security is whether farmers
make mid- to long-term investment in land they
farm. Typically farmers need to have reasonable
confidence in the long-term security of their
rights to land in order to make such investments."
Given that one of China's pressing needs
is to develop policies that empower farmers to
modernize agriculture in order to help the nation
feed itself, the central government cannot simply
overlook the necessary reforms, or choose to view
land reform as only a political issue. It is, in a
very real sense, an obstacle to the country's
ability to bring agricultural productivity into
the 21st century.
Landesa's analysis
supports this relationship. They noted that when
farmers did make investments in their land, they
were "76.5% more likely to have made investments
when they have law-compliant land certificates
compared to non-compliant certificates."
Landesa estimates that "24.2 million
incremental investments that are attributable to
secure land rights have been made by all Chinese
rural households from 1998 onward". Given these
investments took place in the midst of enormous
insecurities over whether even properly compliant
land certificates might be inadequate, further
reforms and enforcement would likely result in
even more improvements and investments, the sort
of which China badly needs from its agricultural
sector.
Taken together, few policies
illustrate the trap Beijing finds itself in. Local
governments, in pursuit of badly needed revenue
for infrastructure investment, have aggressively
taken land and used the wide gap between what they
paid farmers and what they received from
developers to do so. Both the disparity in these
respective payments as well as what Landesa calls
the "lack of public participation" on the
decisions themselves, creates deep animosity on
the part of villagers who believe local government
officials are enriching themselves at the expense
of land rights the villagers believed were secure.
Beijing understands this issue has the
potential to escalate given the reality that the
party's ascent to power in the late '30s owed much
to peasant frustrations over land ownership. Has
the party made a different mistake in the same
area as China's past leadership did, and if so,
what does this suggest must be done in order to
prevent land issues from again eviscerating the
good that the party has done over the past three
decades?
As the Landesa report makes
clear, improving the implementation of existing
laws about land takings, narrowing the gap between
the prices farmers are paid in cases of eminent
domain and what government receives from
developers both need to be quickly addressed, as
the protests in Wukan make clear.
China's
current leadership has chosen to speak out
regarding the need for reforms in these areas;
however, Wen's candid comments come towards the
end of his tenure. It remains to be seen whether
the leadership transition coming later this year
will result in leaders eager to build on his call
for additional reform or whether, as has happened
in the past, calls for stability and the
status-quo will prevent the necessary reform
process from advancing.
If the latter were
to happen, Wukan could well prove to be the first
in a growing pushback against both the local and
central government which could well spin out of
hand.
Benjamin A Shobert is the
managing director of Rubicon Strategy Group, a
consulting firm specialized in strategy analysis
for companies looking to enter emerging economies.
He is the author of the upcoming book Blame
China and can be followed at www.CrossTheRubiconBlog.com.
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