The politics of land use conversion in china case study of a guangdong county 7

We have also seen how the revenues – including the land conveyance fee, miscellaneous fees, direct and indirect taxes – generated from the conversion of agricultural land and subsequent

7 Concluding Reflections

Lessons from Land Use Conversion in Sihui

What lessons do we glean from land use change in Sihui? We have seen how the precedence of economic goals in local officials’ career advancement compel some officials to cast land use quotas aside to meet top-down targets on industrialization, economic growth and so forth We have also seen how the revenues – including the land conveyance fee, miscellaneous fees, direct and indirect taxes – generated from the conversion of agricultural land and subsequent land development have enriched local governments Given that various tax reforms in the post-1994 context have constricted local coffers at the county-level and below, land as an alternative revenue source has helped to alleviate the burden of growing expenditures Therefore, local officials’ career-maximizing intention aside, exploiting land resources to raise

revenue may not necessarily be bad for the governance of the society The caveat is,

of course, how the land revenue is expended

There are a few scenarios on how local governments may make use of land

proceeds First, investable surplus from land may or may not be diverted to the provision of collective goods.1 Alternatively, even if investable surplus has been channelled to fund the construction of urban infrastructure, it may not benefit urban residents collectively The proliferation of superfluous image-engineering projects, which results in overinvestment and inefficiency, illustrates this argument As the Asian Development Bank points out, “Local governments, which control 70% of fiscal spending, also contribute to the investment drive by spending on new factories and

1 There is also the likelihood that some of the profits from land may be pocketed by local officials although we lack evidence in the case of Sihui Corruption in land processes is increasingly prevalent in China Gong, citing the deputy director of Land Management and Utilization Bureau of the MLR in a CCTV interview, claims that there were 710,000 cases of illegal land deals under investigation from

1998 to 2003 See Gong Ting, “Corruption and Local Governance,” pp 90.

‘trophy’ projects in their areas, often regardless of whether expansion is warranted on economic grounds.”2

Sometimes, instead of contributing to the collective good of society, ill-conceived infrastructure projects may have costly economic consequences for the society Take

a highway construction project by a Shenyang government for example In 1998, Shenyang embarked on the construction of a 60 kilometres highway Out of the 1.7

billion yuan investment, 1.3 billion yuan was financed by a Hong Kong group Upon

the completion of the highway, the Shenyang government would repay the Hong Kong investor through the takings from the road toll, at the rate of 15 percent of the sum of investment for the first five years and 18 percent for the second five years However, because the daily traffic volume had fallen short of the initial estimation of 60,000 vehicles by about 50 percent, the government had to make up for the shortfall

from its own coffers, a sum amounting to around 70 million yuan annually.3

Another scenario is that land resources are drained from agriculture to drive

development in the non-agricultural sectors The government expropriates land at low cost, depressing or withholding compensation to dispossessed rural land owners but the investable surplus is not channelled back into support for agriculture or into social security programmes that improve the welfare of the rural community.4 Such

2 Asian Development Bank, Asian Development Outlook 2006, pp 122, available at http://www.adb.org/

Documents/Books/ADO/2006/documents/prc.pdf, accessed 12 April 2009.

3 Jiang Min, “Yijie fubai ganbu de ‘zhengji,’ jijie lingdao banzi de jihuang: Nanshouguan de MuMa zhengji gongcheng” (“‘Political achievements’ of one term of corrupt cadres ‘starve’ many terms of

government leaders: clearing up the political trophy projects of Mu and Ma), No 48 (2003), Liaowang

xinwen zhoukan (News Watch Weekly), pp 46-48.

4 There are also rural residents who are enriched by land requisition The monetary compensation for legally constructed houses in Shenzhen is equivalent to either the real estate market evaluation or the

transaction price of commodity houses or shangpinfang in the district, whichever is higher In the second

quarter of 2007, the average price of commodity houses in Shenzhen’s Longgang district was between

3,681 yuan to 7,286 yuan per square meter; that in Bao’an district was between 4,269 yuan to 9,812

yuan per square meter Moreover, the standard land compensation for waterland, fish ponds and

vegetable plots stands at 24,000 yuan per mu This, together with the compensation for various types of crops ranging from 2,000 yuan per mu to 55,000 yuan per mu, means that the government needs to pay more than 10 billion yuan of compensation in order to requisition 260 square kilometres of land in

Bao’an and Longgang Refer to Shenfuling document no 161 (2007), “Shenzhen shi gonggong jichu sheshi jianshe xiangmu fangwu chaiqian guanli banfa” (“Administrative measures for the construction of public infrastructural projects and housing resettlement in Shenzhen”), Article 33; Dong Chaowen,

“Shangpinfang jiaoyi junjia shoudu liangxiang, jiang zuowei Shenzhen zhuzhai fangwu chaiqian

urban-biased or pro-urbanization policy may be a boon to urban residents but rural residents benefit only if industrialization absorbs surplus off-farm labour, or if intra-county rural-urban migration allows them to enjoy better standards of infrastructure and utilities in urban areas.5 In Sihui, however, there is no evidence that the

government’s pro-urbanization growth strategy has narrowed the rural-urban income

gap In 2001, a Sihui worker’s average annual salary was 9,763 yuan while that of a farmer is 4,376 yuan As of 2004, the average annual salary of a worker had risen to 16,096 yuan, more than three times that of a farmer’s at 4,961 yuan.6

Moreover, there is also the question of how necessary and feasible it is to

marginalize agriculture for development, especially if the society is predominantly agricultural In the case of Sihui, two-thirds of its population are agricultural.7 Given its population composition, what is the rate of industrial growth required to transform

it from an agricultural to an industrial society? In other words, to assess if the

conversion of agricultural land is indeed urban-biased, some questions remain to be answered: Has land development in rural China reinforced its underdevelopment?

buchang yiju” (“Debut of average transaction prices of commodity housing: prices shall be a guide for

the compensation for residential housing demolition and resettlement in Shenzhen”), Shenzhen

shangbao (Shenzhen Business News), 6 November 2007, pp A08; Ouyang Mijian, “Shenzhen moshi:

‘mingyi’ beihou de zhengzhi zhihui” (“Shenzhen model: political wisdom behind the name of

urbanization”), Nanfengchuang (Window to Southern Trends), 16 October 2004, pp 28-31.

5 China displayed signs of urban bias in the depressed prices of agricultural products and a hukou

system that more or less contributed to the widening urban-rural divide The Chinese government, in its

11 th Five-Year Plan, has put more emphasis on rural development It pledges to improve the welfare of peasants through increasing their income, grant more direct subsidies, tighten control on the collection

of ah hoc village fees In addition to developing a social security system in rural China, it plans to increase government spending on agriculture and villages, to improve education, healthcare and basic infrastructure However it is doubtful if the central government’s well-intentions cascade to local levels For the full text of the 11 th Five-Year Plan, go to http://theory.people.com.cn/GB/41179/ 41232/

4210880.html, accessed 10 May 2009.

6 Sihui nianjian 2002, pp 13; Sihui nianjian 2005.

7 This is a question that Robert Bates raised back in the 1980s Bates points out that “given the sectorial composition of such developing countries as China, India or Kenya, for example, the rates of industrial growth required to transform them from rural societies is so massive as to be virtually unattainable.” As

of today, although the contribution of agriculture to GDP has been fast declining in China and India, the rural sector remains important because the majority of their populations are still rural Refer to Robert H Bates, “Agrarian Politics and Development,” Social Science Working Paper 513 (April 1984), California Institute of Technology, available at http://ideas.repec.org/p/clt/sswopa/513.html, accessed 10 April

2009 See also Robert H Bates, “Agrarian Politics” in Myron Weiner and Samuel Huntington (eds.),

Understanding Political Development: An Analytic Study (Boston: Little Brown, 1987); Li Yuefen and

Zhang Bin, “Development Path of China and India and the Challenges for their Sustainable Growth,”

World Economy, Vol 31, No 10 (2008), pp 1286; Barry Bosworth and Susan M Collins, “Accounting

for Growth: Comparing China and India,” Journal of Economic Perspectives, Vol 22, No 1 (2008), pp

53-54.

Has rural-urban land use conversion led to greater disparities in rural-urban income?

In what ways and to what extent has the process of land development distributed power and resources in favour of certain classes in society, for instance the real estate developers or the ruling class?

Curbing Excessive Land Use Change: The Limitations of Policy Suggestions

Given the challenges the State faces in managing land use change, one question pertinent to China as well as other developing states is, in the words of Weiss: “What are the structural attributes and environmental conditions that enable a bureaucracy

to pursue collective goals rather than disintegrating into a collection of self-serving revenue-maximizers?”8

Weiss suggests that the level of institutionalization is of major importance since institutions impose constraints on the exercise of arbitrary power.9 This coincides with various policy recommendations by scholars, experts and practitioners to rectify the failings of China’s land use regime Some of these are outlined below:10

1 Define and clarify collective ownership of land and corollary rights Among the issues to be established are: who owns the land, in whole or in part; in what ways may the land be used; who may use the land and who may stop it from being used; who may change the characteristics of the land or add value to it; who is entitled to

8 Linda Weiss, The Myth of the Powerless State (Ithaca, New York: Cornell University Press, 1998), pp

18.

9 Weiss, The Myth of the Powerless State, pp 18-19

10 Of the numerous works, see, for instance, Lichtenberg and Ding, “Assessing Farmland Protection Policy”; Lin and Ho, “The State, Land System”; Ding Chengri, “Policy and Praxis”; Ho, “Who Owns China’s Land?”; Qian Zhonghao and Qu Futian, “Zhongguo tudi zhengyong zhidu”; Zhang Baohui and Ding Feng, “Difang guotu ziyuan guanli”; Guotu ziyuanbu tudi liyongsi diaoyanzu, “Chonggou tudi shouyi”; Huang Zhongxian, “Jiti tudi”; Li Ping and Xu Xiaobai, “Zhengdi zhidu gaige”; Zhongguo tudi kance guihuayuan dizheng yanjiu zhongxin, “Cong tizhi shang xiaochu defang guodu yilai ‘tudi

caizheng’” (“Reducing local over-reliance on ‘land financing’ through the system”), Zhongguo tudi (China Land), No 7 (2006), pp 11-12, 22.

profit from the use of land and so forth.11 Concurrently, systematic registration of rural land and the replacement of lost land ownership titles have to be carried out.12

2 Raise the compensation for dispossessed villagers to competitive levels based on the market value of land instead of agricultural prices

3 Define and clarify the scope of “public interests” in the Land Administration Law as

a legitimate reason for land expropriation

4 Integrate city planning with the land use master plan at each level, align the time-frame of the plans and adopt a standard set of criteria in forecasting land use needs

In drawing up the two plans, facilitate cooperation, dialogue and consultation

between the two departments to take into consideration local developmental needs

as well as the land use quota imposed from top-down

5 Legalize the direct circulation of land use rights of collectively-owned land Within the parameters of the local land use plan, allow village collectives to lease rural land

on competitive markets without going through the State Make the villagers’ assembly the mandatory vehicle for decisions on land lease and how villagers partake in rental income This has to be carried out in tandem with measures to increase returns to farming and provide greater incentives for farmers to retain farmland

6 Impose strict limits on land transactions through negotiation to reduce arbitrage in the conveyances and transfers of land use rights Further restrict state allocation of land with the ultimate aim of abolishing the dual-track land system

7 Grant greater autonomy to the land bureaus at all levels Implement full vertical management so that each land bureau comes under the direct leadership of that at the next higher level instead of the local government in terms of its personnel,

remuneration, and funding This eliminates problems arising from dual-leadership and conflicting interests between land bureaus and local governments and eases enforcement of land regulations

11 Peter Dale, “Land Tenure Issues in Economic Development,” Urban Studies, Vol 34, No 10 (1997),

pp 1626.

12 Ho, “Who Owns China’s Land?” pp 413.

Based on the observations on institutional dynamics and the engines of change, however, this study suggests that the efficacy of these policy recommendations is limited First, testifying to what Thelen’s dynamic constraints model advocates, the thesis finds that institutional changes trigger new rounds of power struggles between the central and local governments, which induce further modifications to existing institutions.13 The central-local fiscal system and piecemeal reforms to revenue-sharing arrangements over the years exemplify central-local power struggles as each strived to increase its share of revenue Specifically, for instance, the new revenue-sharing system implemented in 1994 had resulted in the growth of local taxes such

as the enterprise income tax and personal income tax This, in turn, propelled the central government to demand for a share of these tax revenues, reclassifying them

as shared taxes in 2002

Secondly, while the central government has the upper hand in initiating institutional changes favourable to itself, local governments are no passive bystanders resigned

to be disadvantaged by these adjustments The practice of buying land quotas from a less developed neighbouring region, of breaking down a tract of land into smaller parcels to bypass higher level approval, of substituting arable land with land of

inferior quality, are just some examples of the manoeuvrings of local authorities under the institutional constraints imposed by the central government in order to protect their own interests and incentives In the words of Thelen and Steinmo,

Groups and individuals are not merely spectators as conditions change to favour or penalize them in the political balance of power, but rather strategic actors capable of acting on ‘openings’ provided by such shifting contextual conditions in order to defend or enhance their own positions.14

13 Kathleen Thelen, Union of Parts: Labor Politics in Postwar Germany (Ithaca, NY: Cornell University

Press, 1991).

14 Kathleen Thelen and Sven Steinmo, “Institutionalism in Comparative Politics,” in Kathleen Thelen,

Sven Steinmo and Frank Longstreth (eds.), Structuring Politics: Historical Institutionalism in

Comparative Analysis (Cambridge, UK: Cambridge University Press, 1992), pp 17.

The above insights support the view that as much as institutions shape politics, politics shape institutions too.15 With regard to the institutions examined in this thesis, iterated interactions between central-local governments within institutional settings appear to be the key factor that contributes to the evolution of institutions, situated in

a broader socioeconomic context

Thirdly, some institutions are more resistant to change than others Prioritization of economic growth in the cadre target responsibility system, for one, is a manifestation

of the nationwide pursuit of prosperity Sustained and rapid economic growth is not only driven by nationalistic pride in China’s emergence as a great power in the international arena; it is also a crucial means to alleviate the domestic pressures of a large and growing population and massive rural-urban migration It is suggested that the Chinese government, concerned that high unemployment rates may upset social stability, has been under immense pressure to create jobs to keep up with the labour supply.16 Furthermore, the central government had devolved power to provinces in making economic policies tailored to the needs of the locality, which contributed to the rise of the local developmental state.17 While the Centre has demonstrated its dominance over local governments through the recentralization of power through the revenue-sharing system and others, a retreat of the local developmental state

appears doubtful for the reasons cited above It is likely that local leaders’ ability to promote economic development shall continue to take precedence in their political careers and the way they are appraised

In addition, many existing problems in China’s land system, such as corruption and black markets, emanate from incomplete land markets Local governments’

resistance to the creation of market institutions, however, is hard to overcome The

15 Ibid., pp 10.

16 Lieberthal, Governing China, pp 247-48.

17 Zheng Yongnian, Discovering Chinese Nationalism in China: Modernization, Identity, and

International Relations (Cambridge, UK: Cambridge University Press, 1999), pp 31.

preceding chapters have argued that land conveyance through negotiation is

beneficial to both local authorities and the land buyer On top of opportunities for rent-seeking in the form of an exchange of favours arising from the opaque process

of land apportionment, more competitive land prices through negotiation also attract businesses to settle in one location rather than another, especially when the state of infrastructure, labour supply and other means of production do not differ greatly between localities Due to intergovernmental competition, no single local government has the incentive to reform land markets since higher prices may drive away potential businesses and at the same time reduce rent-seeking opportunities although all may eventually benefit from higher land prices under genuine market conditions As Bates observes, “If one politician renounces the apportionment of special benefits, then that politician’s rivals would be in a position to gain a political advantage by defending the interests that prospered from special favors.”18 Concerted action by local

governments is therefore difficult and the formation of land markets may have to be undertaken by the central government instead

To sum up, motivations for indiscriminate land use conversion lie in the incentive structure presented by the central-local revenue-sharing system and the cadre

appraisal system So long as there is no option more expedient than land use

conversion in fulfilling local revenue requirements and cadres’ self-interests, the trend

is likely to persist despite periodic containment While some systemic flaws can be corrected, it is harder to keep selective implementation in check Local governments have proven to be adept at finding leeway in executing central policies or eschewing

institutional constraints As the saying goes, “shangyou zhengce, xiayou duice,”

meaning policies from the upper levels are confronted with countermeasures from

18 Robert H Bates, “Macropolitical Economy in the Field of Development” in James E Alt and Kenneth

A Shepsle (eds.), Perspectives on Positive Political Economy (Cambridge: Cambridge University Press,

1990), pp 53.

the lower levels Once a new policy or law is imposed to rectify an old problem, local cadres find innovative ways to get around it

Keeping Selective Implementation in Check

So if institutionalization is not a remedy to counter selective implementation, wherein lies the problem? This study suggests that problems with the enforceability of central policies or state regulations stem from a dearth of effective checks on local

governments This not only signifies inadequacies in the infrastructural power of the Centre but also points to the weakness of societal forces vis-à-vis state entities, evident in the lack of legal and effective feedback channels for civilians to seek redress against local governments for the injustice they suffer.19 For instance,

although China has an established appeals system constituted by task forces,

reception offices, and complainants offices at the various administrative levels and a complaints bureau set up by the Central Party Committee and the State Council, only 0.002 percent of complainants managed to solve their problems through appeals.20

The efforts of complainants are often thwarted by local governments who dispatch cadres to higher-level complaints bureaus to deter complainants and bring them back Furthermore, due to the large number of complaints that authorities have to handle, less important cases brought up to the higher levels are referred back to the local governments.21 This neglects the fact that complainants appeal to higher levels precisely because their appeals have been ignored or mishandled by the lower echelons Similarly, villagers’ complaints to higher levels about the transgressions of village cadres are often ignored or passed from one government department to

19 Michael Mann defines infrastructural power as “the capacity of the state to actually penetrate civil society, and to implement logistically political decisions throughout the realm.” See Michael Mann, “The

Autonomous Power of the State” in John Agnew (ed.), Political Geography: A Reader (London: Arnold

1997), pp 62.

20 Cai Yongshun, "Managed Participation," pp 429-32; Jiang Xun, “Liuwanren gaohan gongchandang wanshui kangzheng” (“Sixty Thousand People Shout Long Live the Chinese Communist Party While

Putting up Resistance”), Yazhou Zhoukan (Asia Weekly) 18, no 46 (2004), http://www.yzzk.com/,

accessed 3 November 2005.

21 Cai Yongshun, “Managed Participation,” pp 445.

another It is only in exceptional cases that villagers successfully seek redress for their grievances.22

After being repeatedly frustrated in their appeal efforts, contenders often resort to civil disobedience to make authorities take heed Evidence shows that protests such

as besieging public offices, blocking roads and buildings are widespread in China.23

The extent to which a society can play a part in checking the excesses of

governments hinges on how liberal and inclusive it is In the recent catastrophe in Sichuan, the prompt and spontaneous acts of self-organizing civilians in delivering aid is a clear demonstration of the benefits of allowing societal forces to make up for what the State may be lacking in its infrastructural power.24 China’s transparency and efficiency in disaster relief and the expansion of domestic media freedom to report earthquake related news was also unprecedented, a stark contrast to its handling of the SARS epidemic in 2003 Yet the subsequent clampdown on media reports and victims’ seeking justice against local governments for shoddily constructed buildings

in earthquake-devastated regions shows that China is still reluctant to let go of its usual modus operandi of sweeping problems under the carpet.25 While the State may persist to use ideological homilies and the upholding of social stability to rationalize its suppression of protests and its aversion to liberalizing the society, it has to be

22 Xing Xuebo, “Cunmin weihe danian chusi ba cunguan” (“Why villagers recalled village cadres on the

fourth day of lunar new year”), Xiangzhen luntan (Forum of Towns and Townships), No 4 (2004), pp

6-7.

23 Murray Scot Tanner, “China Rethinks Unrest,” The Washington Quarterly, Vol 27, No 3 (2004) pp

137-56.

24 Zheng Yongnian, “Zhongguo de zhainan yu chongsheng” (“China’s calamity and rebirth”), Lianhe

zaobao (United Morning Post), 27 May 2008,

http://www.zaobao.com/special/forum/pages6/forum_zp080527a.shtml, accessed 26 July 2008; Jake

Hooker, “Quake Reveals Deficiencies of China’s Military,” The New York Times, 2 July 2008,

http://www.nytimes.com/2008/07/02/world/asia/02china.html?fta=y, accessed 26 July 2008.

25 Zheng Yongnian, “Meiti ziyou yu zhonggong de lingdaoquan” (“Media freedom and the leadership of

the CCP”), Lianhe zaobao (United Morning Post), 10 June 2008, http://www.zaobao.com/special/forum/

pages6/forum_zp080610.shtml, accessed 26 July 2008; Jake Hooker, “Voice Seeking Answers for

Parents about a School Collapse is Silenced,” The New York Times, 11 July 2008,

http://www.nytimes.com/2008/07/11/world/asia/11china.html?fta=y, accessed 26 July 2008; Edward

Wong, “Grieving Chinese Parents Protest School Collapse,” The New York Times, 17 July 2008,

http://www.nytimes.com/2008/07/17/world/asia/17china.html?_r=1&oref=slogin, accessed 26 July 2008.