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Lincoln Institute of Land PolicyUniversity of Maryland
Land Taking for Local Public Financing
Chengri DingChengri Ding
Associate Professor and Director of China Program at University Associate Professor and Director of China Program at University of Marylandof Maryland
Workshop on Land Policies and Legal Empowerment Workshop on Land Policies and Legal Empowerment World BankWorld Bank
Nov. 2-3, 2006Nov. 2-3, 2006
Contents
• Introduction
• Practice of Land Taking
• Fiscal Reality for Sub-national Governments
• Land Taking for Local Government Financing
• Issues and Challenges
Introduction
• Rapid Urban and Industrialization
• Rapid Urban Spatial Expansion
• Land Ownership in China: Urban vs. Rural
• Dichotomous Urban-Rural Structure
Dichotomous Structure
By Hukuo Urban Rural
Subsidied Agricultural Goods Y N
Access to well-Provided Urban Services Y N
Retirement and Pension Y N
Health Insurance Y ?
Wages H L
Social Welfare/Status
• Non-land market leads to adoption of compensation package in land taking
• The package includes compensations for land, resettlement, and land attached investments
• Job offering, urban hukou granting, provision of social security funds may also be part of the package.
Practice of Land Taking
Practice of Land Taking
• Land requisition/taking is predominant way in providing land supply for urban development
• Roles of land taking in China
• Derived demand
• Used as a policy instrument to induce investment
• Financing local governments (after 1994)
• Non construction except for farmer residency is permitted in rural/farmland
• Construction is allowed only on state owned land
• Land Taking (Requisition) in which land ownership changes is mandated priori to land development
Mandated Land Taking
Fiscal Difficulty for Local Governments
• Centralized power of tax policy after 1994
• Increasing fiscal deficits after 1994
Fiscal Difficulty of Local Governments
Fi scal Bal ance (RMB 100mi l l i on), 1978-2003
-8000
-6000
-4000
-2000
0
2000
4000
6000
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Central Government Sub-Nati onal Governments
Figure 1: Fiscal Reality of Governments (Modified from Xie, Long, and Ding, 2005)
1993/4 Fiscal/Tax Reform
Figure 1: Performance of “Two Rates”(Zhang and Liu, 2003)
Reasons
• Strong fiscal need for local governments to find alternative revenue sources after 1994
• Unchecked “policy power” in land taking for local governments
• Monopolized “first-level” land markets---Land Use Rights System
• Controlled total amount land supply (farmland protection, tough approval procedure of land development in rural areas, and limited quota of land conversion etc.)
“cheap in” “pricing out”
Land Acquisition/Taking
• “Only” legal way to increase land
supply in urban areas• Both the Chinese Constitution and the
1999 Land Administration Law (LAL)
specify that the state, in the public
interest, may lawfully requisition land
owned by collectives compulsory
land acquisition
• No-market data compensation package for land acquisition
• It is composed of • compensation for the land; • resettlement subsidies; • compensation for attachment to the land
and for crops growing on the requisitioned land; and
• Job offering and/or hukou granting• No-worse off of living standard required
Land Acquisition
• Amount of compensation• Land: 6-10 times • Resettlement: 6-10 times• The two combined: up to 30 times
Land Acquisition
Fiscal Impacts
• In one village in Fujian province, LG paid about
10,000 RMB per mu to farmers and resold to
developers for 200,000 RMB per mu if zoned
industrial or for more than 750,000 RMB per mu if
zoned residential
Land AcquisitionPositive Impacts
Fiscal Impacts• In the Jianggan district of Hangzhou, land
compensation and resettlement subsidies were
120,000 RMB per mu from 1997 to 1999 and then
were raised to 160,000 RMB per mu after 1999.
The average price of land use rights for housing
projects was 2 to 4 million RMB per mu.
Land AcquisitionPositive Impacts
Land Revenues for Financing Urban Expansion
Shaoxing Jinhua Yiwu
Investment Proportion Investment Proportion Investment Proportion
Investment from Financial
Revenue and Government
Fund
2.48 4.13%
Leasing of the Use Right
of State-owned Land 19.2 32% 20.77 51% 17.38 22.3%
Loans by using land as
collateral 38.32 63.87% 20 49%
Social Investment and
Investment from
Property Owner
60.62 77.7%
Total 60 100% 40.77 100% 78 100%
(From Liu, S., 2005, in Li Guo’s AAA project, 2005)unit: 100 million RMB
How does this happen?
Impacts on Industrial and Economic
Development• By the summer of 2004, there were 6866 zones
across the country, covering more than 38,600 km2
(Cao, 2004)• The average national GDP growth rate in these ED
zones was 25.7% in 2001 (45 zones) and 29.4% in
2002 (49 zones), respectively. Their growth rates
were two to three times the national average growth
rate.
Land AcquisitionPositive Impacts
Impacts on Urban Spatial Development• Urbanization 3.15% and urban built-areas 7.1%
from 1986-1996
• Both grew around 5% from 1996-2005
Land AcquisitionPositive Impacts
Impacts on Urban Spatial Development• Shenzhen: <3 km2 in 1979 >140 km2 in 1999.
• Chongqing’s urbanization: 18.99% in 1996
28.5% in 2000 and urban built-up areas
increased from 158 km2 in 1994 to 175 km2 in
2000.
Land AcquisitionPositive Impacts
Impacts on Urban Spatial Development
• Beijing’s urbanized areas increased nearly 30%
in the 1990s, and per capita construction space
rose by two-thirds.
• Guangzhou expanded by 7 to 8 km2 per year in
the second half of the 1990s.
Land AcquisitionPositive Impacts
Scope and justification of land acquisition• Definition of public interest• Capital projects are subject to different
compensation specified by the State CouncilFair and just compensation of land acquisition
• Non-worse off standard• Not concrete measures to ensure non-worse off
standard• Prevalent in unfair practice of compensation• Horizontal vs. vertical justice• Different uses, different compensation
Farmers’ rights and interests • What they are
Land AcquisitionInstitutional Problems
Issues in Land Taking
• Fiscal dependency on land is risky• Rising social tension and conflict between
farmers and Gov. • Source for corruption• Possibility of depriving farmers to benefit from
urbanization • Myopic behaviors of LG in land development
and land use• Long term impacts on inefficient urban form
Questions?
• What justice compensation means
• 30 times is not sufficient? if so, what are
problems?
• Who are entitled to the compensation:
• Farmers vs. governments (which?)
• commune vs. individual farmers
Challenges in Land Taking Reform
• To make it work, should be linked to
fiscal/tax reform that redefines
intergovernmental fiscal relation• How best to divide land revenues among
stakeholders?• Long term security provision for lost-land
farmers due to land taking
Land Development
Summary/Recommendation
Land taking contributes substantially to urban economic advance
Positive impacts make it difficult to reform land taking (implementation issue
Radical/fundamental reform may be needed, that alone may be risky and problematic too
Market development in rural areas is needed
Lincoln Institute of Land PolicyUniversity of Maryland
Thanks