Land sales: burden for rural residents – Sara Hsu

When the Hu-Wen government abolished the agricultural tax, everybody sang high praise. But it robbed local governments from their only source of income, apart from land sales and its corrupt practices. The National Audit Office is now trying to correct some of those wrongdoings, writes financial analyst Sara Hsu in Triple Crisis.

Sara Hsu:

Land takings by government officials have had a highly negative effect on rural residents. In the past decade, the practice of rural land grabs and resales worsened the predicament of farmers, whose only asset is land. This issue has ignited protests throughout China in recent years, even leading in some cases to self-immolation. Rural residents who have lost their land in this process have found themselves plunged into the ranks of the urban unemployed, with even lower standards of living and a bleak future.

The Chinese leadership has attempted to resolve this problem by giving farmers rights to their own land. However, despite the imposition of laws that have attempted to protect farmers’ rights (including the Land Management Law of 1993, the CPC Notice on Rural Land Contracts of 1997, the Rural Land Contracting Law of 2002, the Property Law of 2007, CPC Decisions on Rural Reform of 2008, CPC Opinions on Farmers’ Incomes of 2009, and CPC Opinions on Balanced Development od 2010), land-stripped farmers actually have little legal recourse. In practice, land “rights” are balanced against the “public interest” within the scope of the law. Still-unclear property rights have left the door open to blatant “land grabs” by local officials.

It is hoped that the National Audit Office will uncover some offenses by local officials who used land sales to enrich themselves, but this will not correct the underlying incentive for local governments to use land as an important source of supplementary income and collateral. In order to remove this incentive, particularly since rural residents have so much to lose because of it, China’s fiscal system needs to be revamped, with more revenue flowing back to local governments from the central government or fewer fiscal burdens on local governments.

At the minimum, the practice of using land use rights as collateral should be banned, and the onus should be placed on local governments to adequately compensate farmers for undeveloped land. Without these basic requirements, local officials’ abuse of rural land will likely persist.