Fubing Su: Land and Urbanization Reform

Fubing Su is Associate Professor of Political Science at Vassar College and a member of the college’s Asian Studies Program.

Fubing Su

As a new pillar of China’s economic development in the new century, urbanization has received much attention. The Decision on Several Important Questions about Comprehensively Deepening Reforms, rolled out during the Third Plenum of the 18th Party Congress, called for dismantling the unequal and unfair rural and urban divide in the country. In particular, a unified land market would equalize the rights and prices between urban and rural land holders, allowing rural population to benefit directly from modernization. Moreover, the decades-old hukou system would be phased out so migrants could settle in cities permanently and enjoy better public services. In the spring of 2014, the Party Center and the State Council published the National Plan for New Urbanization (2014-2020) and laid out more specific targets and objectives. While these policy proposals are welcome, the devil is in the details and in the implementation. Based on current government documents, the depth of these reforms falls short of the rhetoric, and many challenging issues are left untouched. The following is a brief discussion of a few major issues.

First, the Decision insists that rural construction land should have equal rights as state-owned land and that rural collectives should be allowed to lease land directly on the land market. Left unclarified is the status of rural residential land. Rural construction land only refers to rural land reserved for industrial purposes and does not include farmers’ housing land. In reality, the majority of rural non-farming land belongs to the latter category. Local governments in recent years have been inventing all kinds of tricks to grab this type of land from farmers. One example is the national movement of “demolishing villages and centralizing houses” (chechun bingju). This policy fails to address one serious concern about land rights in the countryside, which is that rural collectives have already leased their land on the market, despite the illegality of doing so. How should they secure legality under the new policy, through grandfathering or paying some fines? These details will have serious economic and political consequences.

A second major problem with the current land requisition system is the discretion of the local governments. Oftentimes, local officials interpret the public’s interests very broadly and take farmland cheaply from rural communities. This has become a significant source of rural discontent and violent conflicts. The Decision suggests narrowing the scope of land requisition and increasing compensation to farmers. But what would be a reasonable scope? It is hard to find any clear definition in all the documents. Moreover, this is not the first time that the center has called for this change. Since the last revision of China’s Land Management Law in 1998, policy makers and scholars have fiercely debated the proper scope of land requisition, with local governments standing up as strong defenders of a larger scope. Lacking a clear definition of what the scope should be, this Decision will not limit the abuse of land requisition power by local officials.

Third, the government encourages migrants to settle in cities but tries to steer them to small and medium-size cities. For mega-cities (larger than 5 million people), the government in fact sets up higher barriers. This poses a challenge. Most migrants are drawn to mega-cities because of the good job opportunities and better public services found there. Some coastal cities have rolled out their hukou reforms, which offer hukou to migrants who earn enough points in scoring systems that evaluate their employability and economic contributions, among other factors. This system is geared toward more educated and higher-income migrants. Hundreds of millions of migrants already living in Beijing, Shanghai, Guangzhou, Shenzhen, and many other cities do not really have a chance to quality for hukou. In fact, these cities have started to push migrants out through tighter regulations over school ID, residential permits, and other considerations. Can small and medium-sized cities accommodate these people? How can they create jobs? How might they come up with funds to provide services? Some public services are beyond local governments’ capacity. For example, many migrants are drawn to large cities because of higher college admission rate, which is a national policy.

Last but certainly not least, these reform policies will be implemented by local governments. But do they have incentive to carry out these major changes? Leasing land based on land monopoly has become a major source of local revenues since the tax reform in 1994. A lot of urban infrastructure is provided through land leasing fees or bank loans using land as collateral. Now local governments will be required to pay for public services for incoming migrants. Where will the additional money come from? Understandably, local governments have been a major force resisting these changes. In recognition of this, the Decision has pledged to reform the central-local fiscal system and increase central transfers to support urbanization. However, no details are provided. It is doubtful that massive transfers will be forthcoming considering the central coffer is squeezed under current economy.