Land policy reform in China: assessment and prospects (2022)

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Land Use Policy

Volume 20, Issue 2,

April 2003

, Pages 109-120

Abstract

China has launched a series of land policy reforms to improve land-use efficiency, to rationalize land allocation, to enhance land management, and to coordinate urban and rural development. These land policy reforms have yielded positive impacts on urban land use as well as negative socioeconomic consequences. On the positive side, they have contributed to emerging land markets, increased government revenue for the financing of massive infrastructure projects and provision of public goods, and improved the rationalization of land use. On the negative side, problems such as loss of social equity, socioeconomic conflicts, and government corruption have emerged. This paper reviews China's land policy reform in a historical context and then examines the impacts on urban development and land use. Policy implications are discussed at the end.

Introduction

Land policy in the People's Republic of China has changed dramatically in the past two decades. Not long ago, the constitution banned all land transactions and land was allocated free of charge. Land was neither considered as a commodity nor as an asset for producing economic wealth. The land allocation system produced enormous land-use deficiencies, which manifested in low and flat land density curves, the disconnection of land use and transportation, and the presence of warehouses in central locations (Dowall, 1993; Bertaud and Renaud, 1992; Li, 1999). For instance, in the City of Changchun with a population in excess of two million people, for instance, the average height of buildings was only 1.74 stories. Residential and commercial properties were only slightly higher, at 1.99 stories. The average floor–area ratios were 1.36m for commercial properties, 0.33m for industrial properties, and 0.69m for residential land uses (Li, 1997). Low and flat land-use density curves and the presence of warehouses in Chinese cities suggested that economic efficiency was not a factor in site determination. There was no incentive for businesses to choose sites where their profits could be maximized. The acquisition of a prime site was more or less reflected in the sequence of development, which was a random event that could not be explained by rational behavior models and which depended upon the political atmosphere prevailing at the time when the application for land was made. It, thus, was not surprising to find warehouses in the city center in many Chinese cities.

Industrial use was one of the most dominant land-use categories in Chinese cities.1 Industrial land use, including storage facilities, accounted for 20–30 percent of the land (see Table 1). Residential land use accounted for less than 50 percent of all urbanized land.2 Table 1 reveals a land-use pattern unlikely to be observed in western countries where industrial use accounted for only 4–10 percent of built-up areas (Hong Kong 5.3 percent, Seoul 6 percent, and Paris 5 percent) (Bertaud, 1992). The share of industrial use in planned economy countries was more than twice as high as that in industrialized countries (Bertaud and Renaud, 1992).

These land-use patterns directly resulted from China's longstanding national policy. In the early stages of the Chinese Community Party's regime, industrialization was among the top priorities. In order to achieve this, the nation had taken several concrete measures. First of all, massive economic and human capital was channeled into industrial sectors. Second, the system of the “tong goutong xiao” (the state monopolized the purchase and sale of crops) was developed and prices of industrial goods were set much higher than that of crops. And finally the nation advocated the propaganda of “Sheng Chan Di Yi, Sheng Huo Di Er” (“production first and living second”). As a consequence, China was distinguished from other countries by: (1) rapid industrial growth at the expense of the agricultural sector, (2) a mismatch of industrialization and urbanization, and (3) an imbalance of industrial sectors. More specifically, the industrial sector grew faster than the agricultura sector; the economy grew more quickly than the expansion of urban areas; heavy industry grew faster than light industry sectors and the housing and real estate sectors. Urban and housing development lagged far behind economic development, compared to the trajectories of developed countries. Lack of investments in urban and housing sectors resulted in inadequate infrastructure, an over-crowded population, poor housing conditions, and a worsening urban environment. In terms of land allocation, industrial use was over-allocated whereas the housing sector was under-allocated compared to developed countries.

Many land-use problems in Chinese cities were deeply rooted in the land tenure system that was adopted since 1949. In cities, the state confiscated land and proclaimed state ownership. The state allocated land-use rights free of charge to socioeconomic units, called Dan Wei. Since these Dan Weis were also state owned, land-use rights and land ownership were institutionally inseparable and land transactions were considered unconstitutional. Land markets virtually vanished. The location and amount of land allocated to a Dan Wei depended on its political connections as well as the political environment in which socioeconomic functions and productions were planned and organized (Wong and Zhao, 1999). The lack of economic and administrative channels for the transfer of land-use rights and ill-defined property rights not only resulted in land-use deficiencies but also created social conflicts and land disputes.

These problems can be better understood in a historical context. Hence, this paper provides a review of urban land policy in the People's Republic of China over the last 50 years. Its purpose is to illustrate how far China's land policy has come toward developing fully functional land markets, to examine the impacts of land policy reforms on urban development, and to highlight lessons that might be valuable for international communities and scholars. This paper is organized as follows. First, there is a discussion of land policy in China before 1978, after this introduction. A presentation of the land policy reforms in China and an initial assessment of these policy reforms follow. Finally, potential land policy reform is discussed and policy recommendations are made.

Section snippets

The land policy system before 1978

Before 1949, private land ownership existed and land transactions were quite frequent. A household's wealth directly correlated with the amount of the land it possessed. After 1949, land reform (Tu Gai) was launched in a bid to reduce social inequality by confiscating land from the rich (landlords) and then redistributing it to the poor. By 1958, all land was either state- or collectively owned. Urban land was state-owned whereas farmland was collectively owned with a few exceptions (Yang and

Land policy reform after 1978

Land-use systems in China have gradually evolved over the last two decades. Changes included the adoption of the land leasehold system—land-use rights, land taxation and use fees, farmland protection, land administration, and regulations on land markets (Liu and Yang, 1990; Tang (1989a), Tang (1989b); Zhang, 1997). These changes will be discussed in the following section.

Primary assessment of land policy reform

In general, the goals and objectives of these land policy reforms are to improve land-use efficiency, to enhance land management, to increase government revenues, to finance urban infrastructure, and to protect farmland. These land policy reforms have produced both wanted consequences and unwanted effects. Unwanted effects include the loss of social equity resulting from income redistribution effects of land policy reforms, negative impacts on economic growth associated with the increasing

Prospects and challenges of land policy reform

Land policy reform in China has brought initial success in improving land-use efficiency, rationalizing land allocation, increasing financial support for the provision of urban infrastructure, and establishing land markets. It has also boosted real estate development and created job opportunities. There are, however, a number of important issues and challenges that policy makers have to deal with. The first challenge is how to balance the demand for land due to rapid urban growth and increasing

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