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The Land Property Rights System and Land Administration
The Land Property Rights System1
China’s land system is different from that of most other nations in the world. Land property rights are subdivided into the right to use, the right to earnings, and the right of disposal. The Law of Land Administration of the People’s Republic of China stipulates that:2
and that:
After the founding of the People’s Republic of China (PRC), urban land ownership changed from private ownership to state ownership. However, urban land accounted for a very small proportion of the national territorial area. It had been owned by the bureaucratic bourgeoisie, feudal landlords, native industrialists and businessmen, self-employed workers, and non-nationals. In the early days of the PRC city governments took over batches of urban land possessed by the Kuomintang government and confiscated a large number of urban properties occupied by foreign powers and the indigenous bourgeoisie. Land remained in the ownership of native industrialists and businessmen and self-employed workers.
State-owned land and private land coexisted in cities. Until 1955, urban private land could be sold, leased, pawned, and exchanged. On 18 January 1956, the Secretariat of the CPC Central Committee issued Suggestions on the Current Situation of Urban Private Housing Property and the Socialist Transformations, which stipulated that ‘all private ownership of urban open space, street premises and other real estate should be returned to the State through appropriate means.’ And the use of state-owned urban land ‘shall be allocated by the local government without compensation and no rent need be paid’.3 This was the nationalisation of urban land, so the urban land use system was characterised by no compensation, indefinite duration, and no liquidity.4
When China entered a period of reform and opening-up in 1978 it became necessary to rethink the urban land system. The Regulations of the PRC on Chinese–Foreign Equity Joint Ventures issued by the State Council in 1979 stated that:
These regulations and policies changed the rules of using urban land without compensation. They were a prelude to the reform of the urban land use system. Shenzhen began to impose land use fees in 1982. By 1988, more than 100 cities levied such fees.
The Provisional Regulations of the People’s Republic of China on Land Use Taxation in Cities and Towns was issued by the State Council on 7 September 1988. It stated that land use tax would be collected in cities and towns from 1 November 1988. Taxes on domestic land users would be collected by central government, and those on foreign-invested and foreign enterprises in China would be collected by local governments. The practice of collecting land use fees put an end to the non-compensation land use system, providing valuable experience for further reform. Shenzhen took the lead in exploring such reform by separating the ownership of land from land use rights.
Under the premise that urban land is state-owned, the local government sold urban land use rights by public bidding and tendering. There were three relevant cases that sold the use rights of state-owned land respectively by agreement, public tendering, and public auction on 9 September, 29 September, and 1 December 1987 in Shenzhen. Just prior to this last case, in November 1987, Shenzhen, Shanghai, Tianjin, Guangzhou, Xiamen, and Fuzhou had all been approved by the State Council as pilot areas for land use reform.
The National People’s Congress modified the Constitution in April 1988. The original provisions on ‘forbidding land transfer’ were amended to ‘land use rights can be transferred in accordance with law’. Subsequently, the Land Administration Law also made appropriate amendments to provide a legal basis for the transaction of state-owned land use rights.
Figure 3.1: Simulation of the First Auction on Land Use Rights in Shenzhen
The State Council issued the Provisional Regulations of the People’s Republic of China on the Assignment and Transfer of the Rights to Use State-owned Land in Urban Areas in May 1990, in which provisions for the assignment, transfer, lease, mortgage, and termination of the rights to use state-owned land were defined. In 1994, the Administration Law of Urban Real Estate was issued, clearly stipulating that ‘the State shall practise a compensatory and terminable system for the use of state-owned land in accordance with the law’. Then the 1998 Land Administration Law came into force, making it clear that land use rights could be transferred. All these laws constitute the essential institutional framework of the Chinese land property rights system.
The Administration System for Land Utilisation
Cultivated Land Protection System
Protecting cultivated land is the primary task of land use administration. The CPC Central Committee and the State Council issued Views on Strengthening Land Administration and Prohibiting Unauthorised Occupation of Cultivated Land on 3 March 1986, which for the first time clearly stated the basic national policy to ‘cherish and rationally use land, and make practical efforts to protect cultivated land’.6 Regulations on the Protection of Basic Farmland was promulgated by the State Council in August 1994, stating that farmland protection was included in the legal system. The Land Administration Law was revised in 1999, emphasising two rules: to reclaim the equivalent amount of land should cultivated land be used for other purposes, and to strictly control the use of cultivated land.
Figure 3.2: Relevant Certification for the Right to Use Stated-owned Land
The control system of land use is the core of the land management system. Land is divided into three basic categories: agricultural land, construction land, and unutilised land.7 The central government establishes a general plan on land use. The dynamic balance between occupying and reclaiming cultivated land is an important measure to ensure that the total amount of cultivated land shall not be reduced. Those who occupy the land for non-agricultural construction should be responsible for reclaiming the same amount of cultivated land of the same quality. Provincial governments are responsible for maintaining the dynamic balance of the total amount of cultivated land within provincial areas.
The Land Use Planning System
The Land Administration Law issued in June 1986 stipulated that the ‘governments at all levels shall organise related departments to compile general plans for land use’. Based on the Land Administration Law, China formulated three ten-year national plans for land use covering the periods up to 2000, 2010, and 2020. It is a five-tier land use planning system comprising national, provincial, municipal, county, and township level. The aim is to achieve optimal allocation of land use. The overall system includes a basic agricultural land protection plan, a land consolidation plan, a land remediation plan, a land development plan, and a reclamation plan.
The Administration System for Construction Land
Ways to obtain construction land include: expropriation of rural collective-owned land, allocation of state-owned land in accordance with law, plus measures for transfer and compensation.
Trading System for Construction Land Quotas in Chengdu8
In order to coordinate the development between urban and rural areas, Chengdu and some other cities have explored the improvement of the rural land transaction system. This allows for reallocating construction quotas between urban and rural areas. The construction land quota refers to rural collective-owned construction land, including rural housing and ancillary facilities.
Under the supervision of land management departments, the aim is to consolidate landholdings and improve land economy without changing the overall proportions of land allocation. The basic principle is to keep in line with the premise of land use planning, land consolidation planning, urban and rural construction planning, and industrial distribution planning, and to insist on ‘not increasing the total amount of construction land and not decreasing agricultural land’. Land quality shall not be sacrificed and peasants’ interests shall be respected. Through the implementation of comprehensive consolidation of construction land, the government can turn the original scattered collective-owned construction land into reclaimed farmland and carry out plans to acquire a certain number of collective-owned construction land quotas. This is because the original collective-owned construction land area is larger than the concentrated residential area. And these new collective-owned construction land quotas can be used for urban construction in accordance with the policy of ‘increasing the urban construction land quotas while decreasing the rural construction quotas, and keeping the total construction land unchanged’.
Land Management in Development Zones
With the aim of economic development, China has formed the unique Development Zones policy in order to increase allocation efficiency of industrial land. But many problems have been exposed in the process of attracting foreign investment. Land was sold at low prices or given away, which in turn led to a large number of low-value projects. In 1994, the Ministry of Land and Resource and the State Economic and Trade Commission issued a Directory of Projects with Restricted Land Supply and a Directory of Projects with Prohibited Land Supply to resolve these problems. The Ministry of Land and Resource rectified some Development Zones in 2003. The State Council issued the Decision on Deepening the Reform and Implementing Strict Land Administration in October 2004, stressing that industrial land administration should gradually introduce market mechanisms such as bid invitation, auction, and quotation.
The Administration System for the Urban Land Market
The Current Urban Land Market9
There are two kinds of land market: the land use rights leasehold market and the land use rights transfer market.
Land Use Rights Leasehold Market
The land use rights leasehold market refers to the market whereby governments assign land use rights to enterprises, institutions, or individuals, by agreement, tendering, or auction. What is assigned by government is not ownership but the right to use the land within a specified period. It is the right to use the ground, not including underground natural resources, minerals, buried treasure, or hidden property. If the authorisation period expires, the land use rights and above-ground buildings are returned to the state.
There are two types of transaction in the land leasing market. The first type is a long-term lease. The statutory maximum authorisation periods for the various types of land in China are: residential land, 70 years; industrial land, 50 years; land for education, science, culture, health, and sports, 50 years; land for commerce, tourism, and recreation, 40 years; integrated function land or other land, 50 years. The other type is short-term lease, from one to ten years. A land leasing agreement should be in accordance with the existing land use planning.
Land Use Rights Transfer Market
The land use rights transfer market refers to the market whereby land use rights can be transferred between land users. The original land user can transfer the use rights again within the authorised period. To be a legal transaction, the process must be under the supervision of the appropriate land administration department. The new land user takes the rights and obligations from the original user after the deal.
Regulations for the Urban Land Market
Basic Methods
On the macro level, the Chinese government regulates the land market by means of industrial, fiscal, credit, and tax policies, and through planning and programming. On the micro level, the government takes measures to maintain fair trade and equal competition in the land market.
The Regulation of Supply and Demand in the Land Market
Land use planning, especially the annual plan, is an effective measure to control land supply. The Central Bank directly or indirectly intervenes to measure and stipulate the quality and quantity of land credit business. The state can affect money supply and demand through financial leverage, rent and tax levels, interest rates and loan-to-value ratio, thus regulating the supply and demand in the land market.
Regulation Innovation: The Land Reserve System10
The Land Reserve System is a regulatory innovation through which local governments use market mechanisms to reserve land. There are three main procedures:
- ■ Land Acquisition. Authorised by the municipal government, the reserve agencies shall operate in accordance with land reserve plans. The procedures include acquisition application, ownership verification, consultation, cost estimate, programme approval, acquisition compensation, ownership change, and delivery of the land.
- ■ Land Reserve. The land reserve agencies are responsible for completing the pre-development of the reserved land before it is assigned to new land users.
- ■ Land Supply. Based on urban development planning, land reserve agencies formulate land supply plans. Reserved land can be supplied through bidding, auction, and agreement assignment.
In 1996, Shanghai set up the first land reserve agency (Land Development Centre) in China. Soon after, Hangzhou, Xiamen, Nanjing, Qingdao, Guangzhou, Zhengzhou, and other cities established their own land reserve agencies.