Land Tenure System in China: Issues and Challenges


Land Tenure System in China: Issues and Challenges

 

Land tenure is the relationship, whether legally or customarily defined, among people, as individuals or groups, with respect to land. (For convenience, “land” is used here to include other natural resources such as water and trees.) Land tenure is an institution, i.e., rules invented by societies to regulate behavior. Rules of tenure define how property rights to land are to be allocated within societies. They define how access is granted to rights to use, control, and transfer land, as well as associated responsibilities and restraints. In simple terms, land tenure systems determine who can use what resources for how long, and under what conditions.

Land tenure is often categorized as:

  • Private: the assignment of rights to a private party who may be an individual, a married couple, a group of people, or a corporate body such as a commercial entity or non-profit organization. For example, within a community, individual families may have exclusive rights to residential parcels, agricultural parcels and certain trees. Other members of the community can be excluded from using these resources without the consent of those who hold the rights.
  • Communal: a right of commons may exist within a community where each member has a right to use independently the holdings of the community. For example, members of a community may have the right to graze cattle on a common pasture.
  • Open access: specific rights are not assigned to anyone and no-one can be excluded. This typically includes marine tenure where access to the high seas is generally open to anyone; it may include rangelands, forests, etc, where there may be free access to the resources for all. (An important difference between open access and communal systems is that under a communal system non-members of the community are excluded from using the common areas.)
  • State: property rights are assigned to some authority in the public sector. For example, in some countries, forest lands may fall under the mandate of the state, whether at a central or decentralised level of government.

Despite its unprecedented achievements in rural development, China remains a lower-middle income country. Unsound practices in farmland use and management have contributed to farmland loss, rising social conflicts and deprivation of the landless, which perpetuates rural poverty and land tenure insecurity of the weak and poor. The current hybrid land tenure systems characterized by collective ownership and individual use rights exert both positive and negative effects on land governance. China’s approach to land laws, policies and institutional reforms is characterized by inherent weaknesses which impede the strengthening of peasants’ rights and collective action in the process. With the simplistic assumption on the importance of land tenure to facilitate its transferability and scaled agricultural production, the current reform is undergoing a risky transformation that may backfire. In this sense, the Chinese approach bears resemblances with other countries whose experiences have failed the poor and have produced unintended consequences. In essence, the failure to take into account the livelihoods of the poor especially from sustainable land use perspectives exemplifies their pursuit of short-term gains rather than longer-term solutions to complex rural development issues. The challenges confronting China’s rural development require a renewed understanding of what constitutes an appropriate land tenure system that suits the local conditions of a given community. This needs a holistic study of what kind of land tenure systems exist in China, how they have worked in the past, what their problems are, and how they can be redressed to suit the needs of the poor.

  1. The Land Ownership and Land Tenure

All land in China is owned by the state or by collectives. After carrying out the opening policy in 1978, China has transformed its planned economy system into a socialist market economy system, and adopted a land use rights tenure system similar to the land leasehold tenure system in Western countries. Under China’s Land Administration Law, which was firstly drafted in 1986 and amended in 1998, the State owns all urban land, while farmer collectives own all rural land. As the land tenure system was introduced in China only after 1986, land using before this time is all treated as allocated, the user may continue to use them on paying annual land use tax, or transfer the land use right (LUR) into “granted ” by paying the land grant premium. The land ownership and land-use rights (LURs) may be separated, and the state remains the land ownership and local government may transfer the LURs by laws on behalf of the state. It also states that land and buildings are regarded as two separate entities. Land users may use the land and own the buildings and improvements on it, but the sovereignty of the land remains in the hands of the State or farmer collectives. Given the characteristics of the Chinese land tenure system, private land ownership does not exist in China. As far as compulsory land acquisition is concerned, the acquiring authority actually acquires the LURs only.

  1. Allocation and Granting of State-owned Land

In urban areas of cities, lands are state-owned, what can be assigned, sold and resold, leased or mortgaged is the right of using within a fixed term, for example, lots for residential use are usually assigned a use term of 70 years. There are two types of land-use rights in China: the “granted land use right” and the “allocated land use right.” The difference is that granted LURs are limited in time, cost the holder an amount proportionate to the land’s expected return and may be held by private individuals and entities, while allocated LURs are usually given without the exchange of consideration and without time limitations, but may not be held by private individuals and entities. Local governments, who administer LURs for the state, may either allocate or grant state-owned LURs to a user according to the potential use of the land. For example, a project for public interests such as a public school invested by the government may obtain a proper piece of land without paying any thing. The most important features of allocated land are that the user has no right to transfer it and that the state may recover the land at any time when needed without paying compensation for the land allocated but for buildings on it. When land is granted, the user pays the local government a land grant premium for the right to use it for a stated period of years. This granted land use right is transferable by mortgage and lease, and may not be abrogated by the state except for compensation in the exercise of its right of eminent domain.

  1. Contracting of Collective Land

Lands in rural areas and suburban areas of cities excluding those belonging to the state prescribed by law belong to peasants’ collective ownership. House sites, land allotted for personal needs and hilly land allotted for private use belongs to peasants’ collective ownership. As now in the countryside of China, agricultural production is proceeded in individual households other than in collective entities like communes. A land-contracting tenure system is employed, called ‘chengbao’ in Chinese, according to Rural Land Contract Law promulgated in 2002. Land collectively owned by farmers may be contracted out to run by members of the collective economic organizations for crop farming, forestry, animal husbandry and fisheries production under a term of 30 years. The contractees shall sign a contract with the correspondents’ contractor to define each other’s rights and obligations. The land use right of contracting was banned to transfer, but a reform on it is now under contemplation.

Legal and Policy Framework for Land Tenure Security in China

 

  1. Main Law on Land Tenure

China pays high attention to the legislation on land and real estate, and more than 30 land laws and Regulation have been formulated and promulgated in the past 50 years. The land legislationin later 1980s’ was to regularize various legal relationships of construction land use, enrich and consummate the legal system, bring into effect the nationalization of urban land. In 1990s’, the key of land legislation lies in the reform of the system of the use of land, i.e., to establish and foster the land market and to strengthen the legislation on the management of land property. In 1988, as part of the government’s goal of establishing market transactions, China amended itsConstitution and Land Administration Law (LAL) to permit the transfer of LURs to private persons and entities. And so the LURs may be assigned in accordance with the laws and regulations. In 1990, China enacted regulations allowing the conveyance of long-term LURs to businesses for the purpose of development. New land registration rules also were enacted. To further promote the development of a market for real estate, the National People’s Congress promulgated additional laws for the administration of urban real estate in 1994. Since 1986, LAL’s implementation in the next 10 years exposed a number of weaknesses that caused serious problems especially the excessive conversion of agricultural land for urban development.

  1. Land Use and Compensation Policies

The Land Administration authority has taking control over the land policy reform, land allocation and acquisition, monitoring of land development, comprehensive land-use planning, and implementation of land laws. The Land Administration Law made it possible for private 3 organizations and individuals to lease and develop state-owned land, which catalyzed the development of the land market in China. With access to the land market, developers started to convert unused land or land for agricultural uses to construction land that supports industrial, energy, and transport projects, as well as city and real estate development plans.

  1. The Current Chinese Land Title System

Land registration is the process of recording information about land parcels for the purposes of property rights and land transactions. Various laws and regulations have clarified and accelerated land titling, and enhanced the protection of LURs and personal assets. The land title security provided by a nation’s public land title registration system may be sufficient to encourage mortgage loans from local banks and mortgage lenders. Thus, with the rule of law and a public registration system, the land title security has been enhanced for the risk reduction and promise Of indemnification for China’s mortgage-backed debt in the securities markets. In the 1980s, the current system for land and housing registration was re-established. It was intended to bring the records on property ownership status up to date, to confirm legal titles for property owners, to define the new private property rights introduced by the reforms, and provide the records of title deeds and related instruments for public examination. Land registration was tentatively introduced in 1987, and gradually extended nationally. The government can reduce title risks to purchasers, lenders, and investors by legislation and by improvements to China’s land registration system.

 Problems on Land Tenure System

Registration is required for the creation, release, or modification of a mortgage, a mortgage on a LUR is not effective without registration and will not be protected by law. In this case, land registration and titling system must include all rights and restrictions with regard to all lands in 4 the country. This means all state, municipal, private, customary, and forest land should be identified and registered in a consistent and complete cadastral system. Unfortunately, the situation is not so, but fortunately more and more people have realized the importance of property right registry, complete property registration could be reasonably envisaged. The development of computer system for registration is nation-wide practiced in China, most cities now use information system to maintain register data. From the point of view of technology, Chinese registration system is quite advanced, but   the availability of register data to public is still a problem, partly because of the cost of getting them, and partly because of the strict authorization to go through to get them. Another problem is the status of multiple registry office      which must be improved. Under the current system, Land Administration Bureau (LAB) is in charge of the re e of the registration of land use rights. A second system exists for the registration of interests in buildings, including ownership, leasehold interests, mortgages, and other security interests. The Housing Administration is in charge of registration and certificate issuance for ownership of buildings and interests in buildings. A title risk exists if an owner registers ownership of a building, but fails to registersimultaneously an ownership interest in the LUR to the land under and around the building. Insome cities, such as Shanghai, Shenzhen, Beijing, Chongqing, and other business centers, theregistration records for buildings and LURs are maintained together. In other locations, they aremaintained in separate offices, creating additional inefficiency and difficulty in determining whether a purchaser, lender, or investor may acquire a right to the building. Among the others, possibly the most important problem is the abusive expropriation of rural lands for urban expansion. These deeds in the name of development requirement, in fact, trespass severely farmer’s interests and rights in rural areas. The Central Chinese Government has formulated a series of policies to encourage rural farmers to proceed agricultural production, to prohibit unauthorized illegal rural land expropriation, to raise the compensation standard of land expropriation for countryside farmers.

Summary

All land in China is owned by the state or by collectives. China has adopted a land use right (LUR) tenure system for the demand of socialist market economy system. By the Land Administration Law, Land users may use the land and own the buildings and improvements on it. The LURs may be assigned in accordance with the laws and regulations. The land-use rights have two types of allocated and granted LUR. The Law of Property Rights is under drafting. China has been carrying out the severe land use governing system for arable land protection and effective land use.

References

Chan, N. 2003. Land Acquisition Compensation in China – Problems & Answers. International Real Estate Review, 6(1):136-152.

Ding, C. 2003. Land policy reform in China: assessment and prospects. Land Use Policy, 20:109-120.

Palomar, J. 2002. Land Tenure Security as a Market Stimulator in China. Duke Journal of

Comparative & International Law. 12:7-74. The Standing Committee of the National People’s Congress of the People’s Republic of China.

1986(revised 1998). Land Administration Law of the People’s Republic of China.

The State Council of China. 1999. Implementing Rules for the Land Administration Law of thePeople’s Republic of China.

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