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Not an Easy Bill

The National People’s Congress has finally enacted the "Property Law" after eight years of debating the issue. However, whether the new law will truly protect the property rights of ordinary people remains questionable.

For the Chinese regime, it is never difficult to pass a law as long as the communist leadership needs it. However, it took eight years for a property rights law to finally pass when the curtain fell recently on the National People’s Congress (NPC) in Beijing.

A History of Controversies

In 1994, the Chinese Academy of Science (CAS) submitted a proposal to the central authorities, suggesting that the authorities draft a new property rights law. According to media reports, when CAS was revising the Contract Law, it had difficulties in defining the basic rights of parties involved in the property transactions. Therefore, CAS proposed to draft a property law to overcome the difficulties.

Five years later, the first draft of the property rights law was submitted by the CAS to the Standing Committee of the National People’s Congress (SCNPC). However, voices of objection greeted the first draft. The main objection was that the draft did not "sufficiently reflect socialistic characteristics." In April 2001, another version of the property law came out of the People’s University, and the debates escalated.

Later, the Legal Works Committee under the SCNPC made an "official" draft of the property law based on both versions of the CAS and People’s University. Beginning in 2002, the property law has been subjected to five reviews.

After 2004, when China added a clause to its constitution saying that private property was "not to be encroached upon," the controversies intensified.

In June 2005, a special clause to protect state-owned assets was added to the bill, which stipulated that management of State-Owned Enterprises (SOEs) is responsible for the loss of value of state-owned assets.

In August 2005, a law professor at Peking University, Gong Xiantian, wrote an open letter to Wu Bangguo, Chair of the NPC, calling the proposed bill unconstitutional. Later, Li Chengrui, former chief of the State Statistics Bureau, launched a letter campaign to collect signatures against the bill. The more than 3,000 signers included seven former government ministers or deputy ministers, five former provincial leaders, a few retired senior military officers, and about 50 professors at the Communist Party’s Central School, a place that trains top Party officials.

At the same time, there were others who supported the bill, calling it a show of respect for private property and an aid to reinforcing social stability. Many of them encouraged the passage of the bill to protect the private economy.{mospagebreak}

The debates were so intense that at the NPC in 2006, the bill was not even put on the agenda for a vote. Not until the recently concluded NPC, after the situation had been clarified, did the authorities show their resolve to get the law passed.

Who Owns What?

The question to ask is why the regime needs this law at this moment. The Chinese Communist Party has been ruling China for almost 60 years. It was not necessary to define who owned what, as all property was seized from domestic capitalists and landlords during the "liberation" and rounds of political movements after the regime came to power. In name, all the wealth and property belongs to all the people, but in reality it belongs to the Party. Why should the Party bother to make a law to regulate the ownership of the property?

Now the situation is different. Ever since the "reform and opening up" policy was launched in the late 1970s, capitalists from Hong Kong, Macau, and Taiwan have come to China, one after another. Foreign capitalists from the United States, Japan, Europe, and other countries also came to invest. At the same time, there was a certain degree of freedom for domestic capitalists, many of whom were Party members and princelings who "transformed" the state assets into their private assets and became entrepreneurs. Over the past years, foreign and domestic private enterprises have shared a greater and greater portion of the gross domestic products (GDP). In 2006, half of the 4 trillion yuan (US$519 billion) state taxation income came from those enterprises. Of course, it is impossible for the Communist Party to forcefully take away "new" capital assets as it did to the domestic capitalists back in the 1950s. On the contrary, the Party relies on the tax income from those enterprises to maintain its rule. To this end, it is thus important for the Party to pass a law to make sure the properties of the "new" capitalists are well protected; otherwise, they may just transfer their investments to other countries.

Nevertheless, the bottom line is still to protect the interests of the Party. On March 8, 2007, When Wang Zhaoguo, the deputy chair of the NPC, explained the general principles of the law, he said that "it is guided by Deng Xiaoping’s Theory and Three Representatives and sticks to the correct political direction." In other words, the definition of property right needs to be politically correct.

However, some of the extreme leftists inside the Party still strongly oppose the passage of the law because the law clearly acknowledges and protects the rights of private ownership, an even worse backslide from the revision of the constitution in 2004. At the same time, many Party members support the bill in order to protect the assets they obtained legally or illegally.{mospagebreak}

For Hu Jintao and Wen Jiabao, this was really a difficult choice, and why it took so long for the law to finally be passed. After weighing various pros and cons, Hu-Wen took a middle path, which was to make the property law politically correct in name, and protect private property to a certain degree.

A Law for the Urban Areas

Article 10 of the Constitution of China says: "Land in the cities is owned by the state. Land in the rural and suburban areas is owned by collectives except for those portions that belong to the state in accordance with the law; house sites and private plots of cropland and hilly land are also owned by collectives. The state may in the public interest take over land for its use in accordance with the law. No organization or individual may appropriate, buy, sell or lease land, or unlawfully transfer land in other ways. All organizations and individuals who use land must make rational use of the land."

In the newly passed property law, urban land for construction can now finally be privately owned. This was to solve the dilemma that urban housing can be privately owned while the land is subject to only 70 years of usage. [Note: Before the new law, land could not be privately owned based on the Constitution of China. One could use the land his or her house was built on for up to 70 years. After 70 years, the government would take over ownership of the property. Now this new law allows private ownership, which contradicts the constitution.] This created a new problem for legal scholars. The property law now contradicts the constitution. Which should one follow?

On the other hand, the rural land is still collectively owned. Farmers have as long as 30-year leases but cannot purchase or sell lands. The farmers in rural area still constitute the majority of the Chinese population.

In reality, state ownership is a rather vague concept. There is not a law or regulation that clearly specifies which government agency handles the rural lands. The gray area has given rise to the phenomenon that millions of acres of farmers’ lands are being "transformed" by local officials to state ownership at an extremely low price and then sold at high prices to individuals. This has become one of the major sources of widespread corruption and subsequent social unrest as more and more farmers are being unjustly deprived of their lands.

The newly passed property law, which gives more rights and freedoms to those living in the cities, still puts restrictions on the basic and fundamental rights of farmers. More importantly, it does not regulate many interest groups that continue to abuse farmers’ rights in order to acquire land on a large scale.{mospagebreak}

What Really Matters?

Overseas scholars are questioning the real purpose of passing the law in the same way they question the purpose of the regime’s drive to develop the economy. They see the law as helpful in protecting the accumulated wealth of small interest groups, while the standard of living for the majority of Chinese people still falls short.

On March 5, Premier Wen Jiabao gave a Chinese version of a "State of the Union" address, which was focused on people’s living standard. In his report, Premier Wen mentioned that in 2006, the government spent 77.4 billion yuan (US$10 billion) on the development of science and technology, 53.6 billion (US$7 billion) on education, 13.8 billion (US$1.8 billion) on health care, and 12.3 billion (US$1.6 billion) on cultural programs. The latter three expenses, which are directly tied to people’s everyday lives, added up to 79.7 billion yuan (US$10.4 billion). On a per capita basis, in 2006, the average Chinese received 61 yuan (US$8.0) from the government for education, health care, and cultural programs. Compared with the total fiscal revenue of 3.93 trillion yuan (US$510 billion), the expenses directly related to people’s livelihood amounting to about 2 percent.

According to Hong Kong-based Dongxiang magazine, on December 25, 2006, the Chinese Communist Party Central Disciplinary Committee (CCPCDC) submitted a working report to the Politburo. In a joint investigation by the CCPCDC, the Research Office of the State Council, and the Ministry of Supervision, 2 trillion yuan (US$260 billion) or half of the 2006 government revenues were put to corrupt uses: embezzlement, banquets and dinners, vacations and sightseeing, personal education expenses abroad, gifts, and excessive bonuses. If we assume there are five million government officials, on a per capita basis, an average official consumes 0.4 million yuan (US$52,000) of the government’s fiscal revenue—more than 6,000 times that spent on the average person.

Other scholars are taking the passage of the new law lightly: "Anyway, China is still ruled by the Party, which supersedes all laws. Since the Party routinely violates people’s basic rights endowed by its constitution, why should one care so much about mere words on a paper?"

Li Ding is an economist based in Washington, D.C.