Nail houses Chongqing 2007 Ballard 2008 Wu Ping

“Nail houses” Chongqing 2007 Ballard 2008 Wu Ping and Yang Wu, the owner of the only two-story brick building, left their house on Monday afternoon after reaching an agreement over the compensation with the developer through six times of mediation of local court, local media reported. Xinhua, 4/3/07 All Edith Macefield wanted to do was live out her days in her small Ballard home, refusing to sell to developers, who simply built around her. She died Sunday at age 86. P-I, 6/18/08

State “rule of law” initiative re: land • Land Management Law (1998) • Rural Land Contracting Law (2002) • Property Law (2007) • 2006, Premier Wen Jiabao – “We absolutely cannot commit a historic error over land problems” • State Council – increasing number of “mass incidents involving… contracted land

Rural Land Contract disputes

Rural land contract disputes • Two major categories of contract disputes over – Conversion of farmland to non-ag uses – Transfer of agricultural land

Rural land contract disputes—the state as party to disputes • Ironically, state structures and interests --economic, political, and legal-are themselves root causes of conflict over land. • Local officials’ incentives shaped by – Economic: fiscal system – Political: cadre evaluation system – Legal: laws governing rural land 5

Fiscal Policy Background • 1994 tax and fiscal reforms – Established National Tax Service (collects central and shared taxes under Tax Sharing System) • Budgetary revenue as share of GDP – 1994 10. 8 percent – 2005 17. 3 percent – Centralized control over fiscal revenue • Center’s share of budgetary revenue – 1993 22 percent – Since 1994 ~ 50 percent – Continued decentralized expenditure responsibility Revenue squeeze on local governments 6

Fiscal Policy Background • in 1993, counties and townships at the bottom of the government hierarchy controlled 32 percent of revenues while bearing responsibility for 27 percent of expenditures. • By 1998, they controlled only 20 percent of revenues while shouldering responsibility for 28 percent of expenditures.

Fiscal Policy Background • Further centralized control over fiscal revenue • 2002 reassigned corporate and individual income taxes from local to shared category with center taking 60 percent • Abolish agriculture tax 8

Fiscal Policy Background • After further recentralization of revenue control in 2002, counties and townships accounted for 17 percent of revenues and 29 percent of expenditures.

Comparison of Hunan and Shandong Sample Counties

Comparison of Hunan and Shandong Sample Counties • Income taxes about 10% of total in Hunan county in 2001; ag taxes 30 -40% • Income taxes in Shandong county 56%; ag taxes 3%

“Land Public Finance” • Local government requisitions land “in public interest” (Land Management Law) • Generates revenue in 4 ways – Use low-priced land to attract investors in industry • Generates GDP growth, taxes – Promote rapid real estate development • Also generates taxes – Generate land transfer fees – Use land as collateral for loans 12

Promote Rapid Land Development 13

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Taxes Indirectly Related to Land • “Taxes from the construction industry followed – land management policies (土地管理政策), – policies to attract investment (招商引资政策), – speed of urban construction (城市建设速度) (Interview zp 072507 a) • Construction and real estate sectors alone accounted for nearly 50 percent of all business taxes in 2005 and 2006—the only years for which data is reported for Zouping 15

Land Transfer Fees: “Off budget” • Land transfer fees concentrated in Guangdong, Shandong, Hunan, Jiangsu – 2004 study (Ping) – National estimate of land transfer fees • 2004 615 billion yuan (Ping) • 2007 900 billion yuan (经济参考报) 16

Land Transfer Fees • “Revenue from land transactions has become a critical fund revenue source for local governments. ” • Zouping: land transfer fees reported to be stable around 100 million yuan over the past several years – Equiv to <10 % of 2006 local budgetary revenue – Hard to assess accuracy • Reports that land transfer fees often rival the size of the budget in rapidly urbanizing counties. (Chen, Sun) • Local land revenues (including primarily land transfer fees) increased at nearly 70 percent per year on average nationwide between 2000 and 2004 17

Cadre evaluation system • Political stability trumps growth targets and taxes (ag tax abolished) – Petitions, disturbances, and court cases that reach higher levels now hard target(一票否决) • “The evaluation for social stability is pretty strict: [they record] petitioning , cases, and disturbances—[especially] whether they have reached a higher-level government. There’s a monthly report, and at year-end, if there’s been a serious disturbance, it’s a single-item veto; you don’t get any other bonus, even if the economy developed well. The problem must be resolved at the lowest level (township party secretary 2007)” 18

Cadre evaluation system • Incentive to keep conflicts out of court; keep conflicts at local level • Mediation as core duty of township and village leaders – Hunan case study village: proactive stance • Deputy party secretary assigned to each village small group – Supposed to actively identify, prevent disputes 19

Legal System • Relevant laws insert party/government officials into farmer’s relationship to land – Local governments can requisition land “in public interest” (Land Management Law) – Agricultural land must be converted to state land prior to non-agricultural development (LML, amended 2004) • County land management bureau necessary player – Village “collective” issues land contracts and approves changes to land contracts (2002 RLCL) • Village cadres and the party hierarchy oversee land contracts and effectively control land takings 20

Cadre incentives contribute to generation of land disputes • Land takings – Example: farmers challenge compensation and resettlement policies offered by local officials • Major source of unrest in peri-urban areas (State Council Notice June 10, 2007) 21

Rural land disputes • Local state directly or indirectly party to disputes • State undermines litigation process – Local state instructs courts not to accept cases – Local state interferes with implementation of judgments – State Council document (2004) No. 21 • Tasks township and village leaders with mediating land disputes • 乡镇司法所、派出所、综合治理办公室 22

Dispute Resolution

Preliminary conclusion • State interests/actions are key causes of land disputes • Where the state itself is a direct or indirect party to the dispute, the role of the courts is undermined