In a speech addressed to the communist party members at the 19th party congress, Xi Jinping, who has centralised the political power during his first term and now been re-elected as the Secretary General of the Central Committee of the Communist Party, promised to extend the land contract with rural households for another three decades when the current lease expires. The sustained interest of the ruling elites in rural land tenure underscores the important role of land for the Chinese political economy and the durable dominance of the party.
Over the past four decades, China has experienced a rapid growth at an unpresented scale and intensity. Former socialist cities of production are being transformed into capitalist of consumption, attracting millions of Chinese citizens to search for a better life in cities. In 2011, one year after the World Expo 2010 in Shanghai, urban population in China for the first time surpassed the rural population. Given the unswerving support from the Chinese government, more Chinese citizens are expected to live in expanding cities in the coming decade.
Urbanisation in China is a process that dominated by the local governments. They rigorously pursue urbanisation as city building and land development. Their enthusiasm can be attributed to a host of reforms in the 1990s, which profoundly altered the incentive structure. In a nutshell, local governments become increasingly reliant on land to generate fiscal revenues and to raise funds from the capital market. Benefiting from their monopoly power in the primary land market, local governments can buy land cheaply from denizens and sell it to highest bidders. Known as chaiqian (demolition and relocation) in Chinese, this process often involves power abuse, corruption and excessive violence.
Given the import of land to urban expansion and public finance, little wonder that land becomes a central object of political bargaining in China. For local governments, a main constraint comes from the central government, which simultaneously pursues the goals of food security and social stability, in addition to economic growth. To overcome this political limit, Chinese local governments have demonstrated considerable political craft in finding land for development.
One of my research projects at KU Leuven investigates the innovative policy of land development rights securitisation (also known as dipiao in Chinese) in the mountainous city of Chongqing in southwestern China. Covering 82,300 km2, larger than the whole Benelux region, the provincial-level city of Chongqing has a population of 30.16 million at the end of 2015 and more than half was classified as rural residents under the household registration system (or hukou in Chinese). In the past decade, Chongqing surpassed Shanghai and Guangzhou, and became a national champion in terms of GDP growth. In 2007, the city was selected as a pilot city for coordinated rural-urban development. Land development rights securitisation is part of this experiment. This instrument allows rural households to exchange development rights associated with their homestead land in a market constructed by the government. The condition is that their homestead land will be restored into farmland. But this will not affect their right to use restored land for agricultural purposes nor change the collective ownership of rural land. In return, rural households can receive a sizeable income. According to policy designers and supporters, this income can be invested in finding a foothold in cities, paying for their welfare or starting a business. Once sold, development rights can be used for real estate development within permitted areas.
A key justification for this instrument is inclusive urbanisation. It responds to the growing societal pressure that urban expansion is at the expense of rural households because of the violence and exploitation involved in land requisition. It allows rural households, especially from remote rural fringes, to take advantage of this market-based financial tool and cash on their dead asset. My research seeks to debunk the myth. Inclusion through this development rights securitisation scheme, I argue, first and foremost is about incorporating rural land and rural households into an urban-centric land-based accumulation rather than including them a decent urban live. According to published transaction records, the average payment each household receive from this development right exchange scheme is far from adequate to allow them to settle down in cities or towns. Moreover, they are expected to pay for the inclusion into urban citizenship and associated urban welfare. Therefore, the instrument essentially is to allow the government to acquire additional land for urban construction and circumvent strict land use control.
Of course, by pointing out this problem, I am not denying that this scheme does offer a way for rural households who have secured a strong foothold in cities to generate income from their underutilised homestead land. My point is that policy designers need to pay greater attention to the issues as to how this scheme widens or consolidates existing inequalities and how risks involved are evenly distributed.
One of the key challenges for the party elites ahead is exclusion, marginalisation and exploitation in the process of rapid urbanisation. In 2014, the central government even issued a national-level urbanisation plan in order to achieve a more sustainable, inclusive an equitable urbanisation. More policy innovations to this end are likely to emerge in the coming decade. However, the focus of conceptual and political innovations needed to be shifted from land to people.
About the author:
Dr. Yunpeng Zhang is a postdoctoral research fellow at the Division of Geography and Tourism, KU Leuven. His research on land development rights securitisation in Chongqing is embedded in the ERC-funded research project “The Real Estate/ Finance Complex “[grant number: 313376]. It is part of his research project on the financialisation of urban development in China. From October 2017, he starts to work on his FWO-funded project on the financialisation of land and the transformation of the Chinese state.