Ethics of China’s Land Expropriation Rules and Reforms

July 9th, 2016 by Kara in News

China's land expropriation

By Nina Yi Zheng 

Under China’s current rural land expropriation process, local governments make arbitrary decisions on expropriation, paying little compensation to peasant owners. The current process is a violation of procedural justice, corrective justice, and distributive justice according to the moral principles of John Rawls. Nor can the process be justified on utilitarian grounds. The marketization reform in Shenzhen, which allows rural land planned for certain purposes to enter the market without the expropriation process, has improved procedural justice and increased the good consequences. However, the implementation of the reform lacks legitimacy as it is the result of purely administrative decisions and goes against current Chinese land law.

China’s Land Expropriation Process in Rural Areas

Land disputes around forced expropriations have been a prominent social issue in China. In 2006, more than 60% of large public protests were land-related (Tao, 2015). In response, the Chinese government has been gradually reforming the process of rural land expropriation on an experimental district-by-district basis, where Shenzhen is one example.

For historical reasons, China practices a dual land system in which urban and rural lands are treated differently. The most relevant difference is the state has ownership of all urban land and that land can be develop for non-agricultural purposes directly through sales to developers. Rural land is collectively owned and cannot be transferred for non-agricultural purposes. Since 1981, the authorities have gradually separated all land use rights from this collective ownership.

Under the 2004 Constitutional Amendment Article 22 and Land Administration Law Article 2, the government can convert collectively owned land (rural land), into state owned land (urban land), for purposes of “public interest.” However, the definition of this “public interest” is absent in the laws. In 2007, when China first promulgated its Property Law, this rule, albeit ambiguous, was still kept in Article 42.

When the government converts “rural” land to “urban” and residents are forced out, the residents are supposed to collect what are called resettlement fees. These fees for residents are set at 4 to 6 times the average annual output of the land in the previous three years, with 30 times of the average as the ceiling.[1] This calculation method fails to reflect the real value of the land and unsurprisingly, local governments usually do not fully implement the law. Research reveals from 1999 to 2011 on average, the amount paid by developers for land is over 40 times the compensation a rural resident received per acre[2]. Of residents surveyed, 12.7% did not get any compensation at all, and 9.8% only got a promise of compensation.[3]

In addition to unfair compensation, there also is a pervasive absence of appropriate procedures for land expropriation. In 2008, 43.2% of the expropriated reported that no notice was received in advance (Ye et al., 2010). Local governments are required to hear the opinions and concerns of the expropriated, but that procedure is set after the compensation and resettlement plans are finalized.[4] Because there is no independent judiciary in China, the expropriated can hardly get fair compensation through the judicial process.

Local governments have massive incentives to conduct land expropriations. With the almost unlimited power to make expropriation decisions, local governments have de facto control over the primary market for development land. The market is monopolistic, solely consisting of sales of land use rights by these bodies. Prior to 2002, 95% of sales were done through private agreements between local land bureaus and grantees, inviting corruption (Wong, 2014). Also, local governments heavily rely on land sales for revenues. The transfer fees paid by private developers to the governments according to law[5] comprised 50-74% of local governments’ income (Cohen, as cited in Wong, 2014). The reform of the tax distribution system in 1994, which allowed local governments to retain the income from land, has further encouraged them to expand land financing. In addition, as Chinese officials are predominantly assessed on GDP growth rate (Xinhua, as cited in Wong, 2014), urban land development, which is expected to bring economic growth is impacts official promotions. Estimates from 1990 to 2003 alone, show there were at least 65 million rural residents who lost their land (Du, as cited in China Labor Bulletin, 2010).

An Ethical Analysis of the Existing Process

The existing land expropriation process can hardly be justified on ethical grounds. First, the process lacks procedural justice. According to Justice Marshall in Marshall v. Jerrico, Inc.[6], procedural due process concerns the prevention of unjustified or mistaken deprivations and the promotion of participation and dialogue by affected individuals.[7] These two points serve as standards to examine whether procedural justice is done. In China, the administrative decisions of land expropriation are largely arbitrary and usually the link to “public interest” is weak. Moreover, the compensations are sometimes reduced and often no notice is issued to the expropriated. This goes against the constitutional commitment to protect private ownership[8] and leads to deprivations that cannot be justified on grounds of “public interest”.

The arbitrary decisions of expropriation without obtaining the consent of the individuals concerned constitute a violation of their autonomy. Furthermore, citizens cannot sufficiently participate in the decision-making and negotiation process as currently structured. This offends the dignity of the expropriated because their rights and interests are not taken into account, which in turn makes them less likely to be satisfied with the outcome (Solum, 2004).

Second, the unreasonable laws, together with the complete absence of fair procedures, result in a failure of distributive justice. According to the principles of justice proposed by John Rawls, “social and economic inequalities are to satisfy two conditions: (a) they are to be attached to positions and offices open to all under conditions of fair equality of opportunity; and (b) they are to be to the greatest benefit of the least advantaged members of society” (Rawls, 1993). In the case of China’s land expropriations, the expropriated as owners of the land use rights, even in accordance with the laws, cannot get compensation equal to the market value of the land. Surveys have found the average compensation a citizen can get only equals the cost of living for approximately seven years (“The employment issues of landless peasants,” as cited in China Labor Bulletin, 2010).

Given the poorly drafted “public interest” clause, government officials can freely abuse their power and private developers can easily make huge profits through the purchase of land below market prices as long as they collude with local officials. Therefore, the current land expropriation process is a source of economic inequality. Exacerbating the matter, the distribution of education and healthcare resources in different areas of China also are unequal, creating a situation in which fair equality of opportunity is unrealizable. Thus, this creation of economic inequality is also unjustifiable. Nor can it be seen how this distribution is beneficial to the least advantaged members of the society.

Government officials not only do not suffer any penalty, but they still enjoy promotions as a result of GDP growth or personal networks in the political system, which indicates a failure of corrective justice as well. A system is immoral when a person receiving unearned benefits at the expense of others is not considered as engaging in “criminal” activity, can never eventually be investigated, and will not be punished proportionately.

It is also highly questionable whether the process can be justified on utilitarian or consequentialist grounds. A small number of officials and developers have enjoyed the wealth the current process allows them while hundreds of millions of rural residents suffer. Having lost their land to live on, many landless “peasants” have no choice but to become migrant workers in cities. However, China’s hukou system, under which rural immigrants without an urban hukou cannot enjoy access to legal residence, employment, and healthcare, essentially makes them second-class citizens (Young, as cited in Wong, 2014). As landless peasants are usually not well educated, possess low- level skills, and are advanced in age, they have difficulty finding steady, well-paying jobs.

A survey by Guangzhou University in 2008 reveals that 479 of 732 landless peasants interviewed did not have formal jobs (Xie, as cited in China Labor Bulletin, 2010). These jobless and landless rural residents create a catalyst for social unrest in cities, as demonstrated by the large number of “mass incidents” around land disputes every day in China. Last but not least, the immoderate development of rural land has brought to China a sizeable loss of arable land, which is a threat to food security. Applying the utilitarian doctrine “the greatest good for the greatest number”, the current process fails to maximize the welfare of many members of Chinese society. Though the benefit of economic growth and urbanization following land expropriations is significant, welfare distribution can be improved in an alternative, ethical way. According to the calculation of economist Yang Xiaokai and others in 1992, if China had allowed free trading of land in its rural areas since 1987, the average income of rural residents would have increased by 30%.

Under communist governance, overweening government power is justified by collective welfare. Currently, the gap between the market value of land and the actual compensation peasants get, together with the series of adverse social consequences, indicate the failure of the government to fulfill its duty.

The Land System and Marketization of Rural Land in Shenzhen

The land system in Shenzhen is unique. In early 1992, all the rural collectively owned land in Shenzhen was converted into urban state-owned land and in 2004, the hukou of all rural residents were transferred to urban ones, to facilitate economic development in this first-tier city of reform and opening up (Wu, 2014). However, the divide between “rural” and “urban” carried into the city.

Because of insufficient compensation, many “rural” residents erected illegal buildings on their land that had not been developed, to increase government’s cost of demolition. Residents benefitted because the land was less likely to be developed and they received income from renting the illegal buildings. Shenzhen is a favored choice for immigrants who move to the city. The huge demand for accommodation combined with the relatively low price of these illegal accommodations have made the strategy of erecting illegal structures efficient and prevalent. In 2014, the population in illegal buildings reached 7 million and nearly three-fourths of the “rural” land in Shenzhen had illegal buildings. (Ibid) The de facto dual land system in Shenzhen has not only exacerbated the tension between rural land residents and the government, but also has substantially restricted the economic development in this emerging dynamic city.

China’s central government realizes the problems with the current land expropriation process and has been actively seeking reform. Following the long-held Communist Party incremental approach to policy reform which starts with choosing trial areas to test out, (Fan, as cited in Wong, 2014), Shenzhen became one of the first cities to implement marketization of rural land.

At the beginning of 2013, the Shenzhen government announced it “encourages” the previous collectively owned land, which is designed for industrial use to enter the market in accord with urban planning.[9] This means rural land for industrial use can be freely traded in the market and the government gave up part of its control over the primary market of land. The decisions for sale must have the consent of two-thirds or four-fifths of the shareholders depending on the manner of sale[10] (public auction, competitive negotiation or equity transfer)[11]. An independent third party must evaluate the land’s value[12]. On December 20, 2013, the first sale which qualified under the new laws was completed. The land was a 14568.29-square-meter plot which sold at 116 million RMB (People’s Daily, 2013). In accordance with government directive[13], the Shenzhen government placed 70% of the money into the Shenzhen land development fund and granted 20% of the property to the rural residents as a return. Rural residents also have the option to retain 50% of the income from sale but without getting any property.[14] In contrast to the average amount of compensation in 2012 in China which was 18,739 RMB per acre (Zhu et al., 2012), the income from that land sale was 159,249 RMB per acre[15] together with some property. Taking into account inflation and the heated property market in Shenzhen, rural residents still received a significantly higher amount of compensation.

In 2015, the marketization of rural land expanded to rural land designed for affordable commercial housing[16],[17] and old age service facilities.[18] The government is considering further expanding the marketization rule to rural land designed for hospitals and schools (Guo, 2015).

An Ethical Analysis of the Marketization Reform in Shenzhen

Marketization reform has substantially improved procedural justice in land expropriation. As the government has given up control over the primary market, there cannot be any arbitrary expropriation. The requirement of majority consent among shareholders on the sale of land adds legitimacy to sale decisions. The stipulated manner of sale which underlies the principle of transparency can effectively prevent corruption. With a freely trading market, rural residents can fully participate in the process of sale, which enhances their human dignity and raises satisfaction.

From the perspective of utilitarianism, marketization of rural land increases the welfare of society. By receiving greater compensation, rural residents are less likely to fall into poverty. Thus also mitigating the chance of social unrest arising from unjust compensation. In terms of illegal buildings in Shenzhen, marketization reform is an incentive for rural residents to cooperate with the government in reducing the cost of demolition. The government, through sharing of income with the rural residents, continues to collect significant amounts of revenue. The Shenzhen government still decides on the type of land entering the market, allowing adequate protection of arable land.

However, these reform measures were implemented through government directives without public consultations. As subsidiary legislation, the measures did not go through any formal democratic procedures or adequate public discussion. This may affect the legitimacy of the reform because it is not known whether citizens of Shenzhen involved in the reform consented to each and every reform measure. In particular, the method of income distribution between the land development fund and rural residents is as arbitrary as the decisions on land expropriations. Applying John Locke’s theory, rural residents have natural rights of freedom from the imposition of control by any authority unless by consent. Therefore, they do not have the moral duty to obey the income distribution rules set by the government.

Also, the reform measures based on marketization implemented by the government go against the current Land Administration Law and Property Law which prohibits rural land sales for non-agricultural use between private parties. Although the Ministry of Land and Resources and the government of Guangdong Province authorized the land reform in Shenzhen[19], strictly speaking not all the reform measures are legal. Arguably, marketization reform violates the rule of law if one considers the primary requirement of the rule of law is that laws should be obeyed, and that everyone is treated equally before the law. This principle cannot be sacrificed even for good consequences because the slippery slope effect that follows may be deleterious. For example, under the current Land Administration Law, governments use “public interest” to curtail the liberty and autonomy of citizens. If the government can issue laws justified by good consequences, then government may abuse its power, as the definition of “good consequences” can be highly debatable. Limiting the power of the executive branch within the boundaries of law may at least prevent further violations of the rights and freedoms of citizens. As a step towards progressive government, the executive branch should obtain authorization from the legislative branch or should hold public consultations on reform measures before implementation.

Under current rural land expropriation process, local governments can make arbitrary decisions on expropriation, paying small amounts of compensation to suffering peasants. The current process is a violation of procedural justice, corrective justice, and distributive justice according to the moral principles of John Rawls. Nor can it be justified on utilitarian grounds. The marketization reform in Shenzhen, which allows rural land planned for certain purposes to enter the market without the expropriation process, has improved procedural justice and increased good consequences. However, the implementation of the reform lacks legitimacy as it is the result of purely administrative decisions and goes against current Chinese land law.

Editor: Eric Witmer

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References:

References in Chinese

Chen, Xiwen. (April 9, 2013). The food, the land and the people in urbanization. Retrieved from  http://comments.caijing.com.cn/2013-04-09/112657053.html on 13 July, 2015.

Circular of the CPC Shenzhen Municipal Committee and the Shenzhen Municipal People’s Government on Carrying out the Overall Plan of Shenzhen for the Reform of Land       Management System Shenfa [2012] No.3.

Circular of the General Office of the Shenzhen Municipal People’s Government on Transmitting  and Issuing the Plan of Shenzhen for Upgrading the Level of Special Education(2015-2016) Formulated by the Education Bureau of Shenzhen Municipality. Shenfubanhan [2015]      No.57.

Circular of the Urban Planning, Land and Resources Commission of Shenzhen Municipality on Printing and Issuing the Interim Provision of Shenzhen on Promoting Land Supply of     Affordable Commercial Housing Shenguitu[2015] No.226.

Circular of the Shenzhen Municipal People’s Government on Printing and Issuing the Regulations of Shenzhen on Land Use Rights Transaction for the Non-rural Land for Construction of the   Original Rural Collective Economic Organizations and the Land of Confiscation and Restoration Shenfu[2011] No.198.

China Labor Bulletin. (2010). The right to food and a life with dignity: A report on the life and career of China landless peasants. Retrieved from

http://www.clb.org.hk/schi/files/CLB-2011-01-11-Report%20on%20the%20Right%20to%20Food.pdf on 11 July, 2015.

Guo, Qiming. (May 7, 2015). The rural collective land is used to build affordable commercial        housing: the income is distributed on a 4-6 basis. Southern Metropolitan Daily. Retrieved from http://epaper.oeeee.com/epaper/a/html/2015-05/07/content_3417044.htm?div=-1 on 13        July, 2015.

He, Zhimin. (2007). A study of the problems resulting from land-requisitioned peasants in mainland China. Retrieved from http://nccuir.lib.nccu.edu.tw/handle/140.119/33741 on 11 July, 2015.

Opinions of the General Office of the Shenzhen Municipal People’s Government on Accelerating the Development of Industrial Supporting Housing. Shenfuban [2013] No.4.

People’s Daily (December 21, 2013). The first successful entry of “rural land” into the market in Shenzhen. Retrieved from

http://paper.people.com.cn/rmrb/html/2013-12/21/nw.D110000renmrb_20131221_8-01.htm on 13 June, 2015.

Ye, Jianping, Feng, Lei., Jiang, Yan., Prosterman, Roy., Zhu, Keliang. (2010). Investigation on China rural area land use rights in 2008. Management World. 2010. Issue 1.

Wu, Luanying. (2014). The causes and current situation of Shenzhen land problems. China Macroeconomic Research Center China Economic Journal. 2014. Summer Issue.

Zhu, Keliang., Prosterman, Roy., Riedinger, Jeff., Ye, Jianping., Wang, Hui. (February 6, 2012). Land rights survey in 17 provinces. Retrieved from

http://magazine.caixin.com/2012-02-03/100353228.html on 10 July, 2015.

 

References in English

Housing and Construction Bereau of Shenzhen Municipality. (2014). What is affordable   commercial housing? Retrieved from            http://www.szjs.gov.cn/hdjl/ywzs/bzzf/201412/t20141211_2755451.htm on 13 July, 2015.

Lamont, Julian and Favor, Christi. (2014). Distributive Justice. The Stanford Encyclopedia of Philosophy. Retrieved from

http://plato.stanford.edu/cgi-bin/encyclopedia/archinfo.cgi?entry=justice-distributive on July 12, 2015.

Marshall v. Jerrico, Inc., 446 U.S. 238 (1980).

Solum, L. B. (2004). Procedural justice. U San Diego Law & Econ Research Paper, (04-02), 04-02.

Tao, Ran. (December 16, 2015). China’s land grab is undermining grassroots democracy. Retrieved from http://www.theguardian.com/commentisfree/2011/dec/16/china-land-grab-undermining-democracy on 14 June, 2015.

Wong, Vince. (2014). Land reform policy in China: Dealing with expropriation and the dual land   tenure system. Occasional Paper No. 25. Centre for Comparative and Public Law, The     University of Hong Kong.

Yang, Xiaokai., Wang, J., and Wills, I. (1992), Economic Growth, Commercialization, and Institutional Changes in Rural China, 1979-1987, China Economic Review, 3, 1-37.

1982 Constitution of the People’s Republic of China. Retrieved from  http://www.npc.gov.cn/englishnpc/Constitution/node_2824.htm on 20 June, 2015.

2004 Constitution of the People’s Republic of China. Retrieved from  http://www.npc.gov.cn/englishnpc/Constitution/node_2825.htm on 30 June, 2015.

2004 Land Administration Law of the People’s Republic of China. Retrieved from  http://www.npc.gov.cn/englishnpc/Law/2007-12/12/content_1383939.htm on 1 July, 2015.

2007 Property Law of the People’s Republic of China. Retrieved from  http://www.npc.gov.cn/englishnpc/Law/2009-02/20/content_1471118.htm on 21 June, 2015.

Endnotes

[1] 2004 Land Administration Law of the People’s Republic of China, Article 47.

[2] Land rights survey in 17 provinces. (February 6, 2012). Retrieved from http://magazine.caixin.com/2012-02-03/100353228.html.

[3] Ibid.

[4] 2004 Land Administration Law of the People’s Republic of China, Article 48.

[5] 2007 Property Law of the People’s Republic of China, Article 141.

[6] 446 U.S. 238 (1980).

[7] Ibid at 242. Justice Marshall cited Carey v. Piphus, 435 U.S. 247 (1978).

[8] 2004 Constitution of the People’s Republic of China, Article 13.

[9] Opinions of the General Office of the Shenzhen Municipal People’s Government on Accelerating the Development of Industrial Supporting Housing, Article 6.

[10] Circular of the Shenzhen Municipal People’s Government on Printing and Issuing the Regulations of Shenzhen on Land Use Rights Transaction for the Non-rural Land for Construction of the Original Rural Collective Economic Organizations and the Land of Confiscation and Restoration. Article 10.

[11] Ibid, Article 8.

[12] Ibid, Article 9.

[13] Opinions of the General Office of the Shenzhen Municipal People’s Government on Accelerating the Development of Industrial Supporting Housing, Article 7.

[14] Ibid, Article 7.

[15] The calculation takes 1 acre as 666.6666 square meters.

[16] Affordable commercial housing, a kind of welfare housing open to eligible families and citizens with a more affordable price as funded by the Shenzhen government. The housing type, floor area and time limit for transfer are stipulated by the law. Housing and Construction Bureau of Shenzhen Municipality (2014). What is affordable commercial housing? Retrieved from http://www.szjs.gov.cn/hdjl/ywzs/bzzf/201412/t20141211_2755451.htm on 13 July, 2015).

[17] Circular of the Urban Planning, Land and Resources Commission of Shenzhen Municipality on Printing and Issuing the Interim Provision of Shenzhen on Promoting Land Supply of Affordable Commercial Housing. Article 5.

[18] Circular of the General Office of the Shenzhen Municipal People’s Government on Transmitting and Issuing the Plan of Shenzhen for Upgrading the Level of Special Education (2015-2016) Formulated by the Education Bureau of Shenzhen Municipality. Article 5.

[19] Circular of the CPC Shenzhen Municipal Committee and the Shenzhen Municipal People’s Government on Carrying out the Overall Plan of Shenzhen for the Reform of Land Management System. Preamble.

 

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