[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                       PROPERTY SEIZURE IN CHINA

=======================================================================

                               ROUNDTABLE

                               before the

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 21, 2004

                               __________

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              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                    LEGISLATIVE BRANCH COMMISSIONERS

House

                                     Senate

JIM LEACH, Iowa, Chairman            CHUCK HAGEL, Nebraska, Co-Chairman
DOUG BEREUTER, Nebraska              CRAIG THOMAS, Wyoming
DAVID DREIER, California             SAM BROWNBACK, Kansas
FRANK WOLF, Virginia                 PAT ROBERTS, Kansas
JOE PITTS, Pennsylvania              GORDON SMITH, Oregon
SANDER LEVIN, Michigan               MAX BAUCUS, Montana
MARCY KAPTUR, Ohio                   CARL LEVIN, Michigan
SHERROD BROWN, Ohio                  DIANNE FEINSTEIN, California
DAVID WU, Oregon                     BYRON DORGAN, North Dakota
                                     

                     EXECUTIVE BRANCH COMMISSIONERS

                 PAULA DOBRIANSKY, Department of State
                 GRANT ALDONAS, Department of Commerce
                   LORNE CRANER, Department of State
                    JAMES KELLY, Department of State
                  STEPHEN J. LAW, Department of Labor

                      John Foarde, Staff Director

                  David Dorman, Deputy Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

deLisle, Jacques, professor, University of Pennsylvania Law 
  School and member, the faculty of the Center for East Asian 
  Studies, University of Pennsylvania, Philadelphia, PA..........     2
Davis, Sara (Meg), researcher, Asia Division, Human Rights Watch 
  and visiting scholar, Columbia University's Weatherhead East 
  Asian Institute, New York, NY..................................     9
Prosterman, Roy L., president, Rural Development Institute and 
  professor of law, University of Washington School of Law, 
  Seattle, WA....................................................    12

                                APPENDIX
                           Prepared Statement

Prosterman, Roy L................................................    34

                       Submission for the Record

Prepared statement of Patrick Randolph, Elmer E. Pierson 
  Professor of Real Estate Law, University of Missouri, Kansas 
  City, School of Law............................................    67

 
                       PROPERTY SEIZURE IN CHINA

                              ----------                              


                         MONDAY, JUNE 21, 2004

                            Congressional-Executive
                                       Commission on China,
                                                    Washington, DC.
    The roundtable was convened, pursuant to notice, at 2 p.m., 
in room 2200 Rayburn House Office Building, John Foarde (staff 
director of the Commission) presiding.
    Also present: David Dorman, deputy staff director; 
Christian Whiton, Office of Under Secretary of State for Global 
Affairs Paula Dobriansky; Carl Minzner, senior counsel; Keith 
Hand, senior counsel; and Susan Weld, general counsel.
    Mr. Foarde. Good afternoon, everyone. Welcome to this 
issues roundtable of the Congressional-Executive Commission on 
China. My name is John Foarde. I am the staff director, and 
work for Congressman Jim Leach, who is our Chairman.
    We pride ourselves on trying to start on time and to finish 
on time, so we are going to get busy and not try the patience 
of our distinguished panelists.
    Today's roundtable seeks to look at property seizures in 
China and we are looking into these because, over the past 
year, urban demolitions and rural land acquisitions have become 
the leading causes of social unrest in a great many places in 
the Peoples' Republic of China [PRC]. Since 1991, nearly 
900,000 families have been relocated in Shanghai. Last year in 
Chengdu, 24,000 families were moved. The same story seems to be 
true across cities in China.
    The rapid pace of development and the high value of land in 
China continues to fuel corruption and abuse in land deals. A 
recent government survey uncovered more than 150,000 irregular 
land transactions in the PRC. Reports of protests, sometimes 
violent, hit the news wires almost daily, and the numbers of 
petitions and administrative lawsuits related to property 
disputes has increased sharply in recent years. This trend is 
clearly causing alarm in the central government, which has 
issued a series of directives in an attempt to deal with the 
problem.
    This afternoon, we want to examine the law and the politics 
of land seizure in urban and rural China and assess whether 
recent reforms are likely to address the problem, including the 
amendment of China's Constitution to explicitly protect private 
property rights.
    To help us this afternoon, we have three distinguished 
panelists with great experience in looking at these issues. 
Jacques deLisle, Meg Davis, and Roy Prosterman are going to 
help us.
    I will introduce each of them in more detail before they 
speak, but as we have over the past two and a half years, each 
of the panelists will have 10 minutes to make a presentation. I 
will remind them that they have two minutes left after about 
eight minutes.
    When all three have spoken, then we will go to a question 
and answer session. We hope to be joined during the course of 
the afternoon by other staff members representing our 
Commissioners, but if not, just the five of us will try to ask 
intelligent questions of the panelists to illuminate these 
issues.
    I would like to recognize, therefore, Jacques deLisle, 
professor of the University of Pennsylvania Law School. He is a 
professor at Penn and a member of the faculty of the Center for 
East Asian Studies. His recent writings have focused on legal 
reform and the law and politics of economic reform in 
contemporary China, the PRC's approach to sovereignty, and 
international law. His publications include ``Chasing the God 
of Wealth While Evading the Goddess of Democracy: Development, 
Democracy and Law, in Reform-Era China.'' So, welcome, 
Professor deLisle.

    STATEMENT OF JACQUES deLISLE, PROFESSOR, UNIVERSITY OF 
 PENNSYLVANIA LAW SCHOOL AND MEMBER, THE FACULTY OF THE CENTER 
      FOR EAST ASIAN STUDIES, UNIVERSITY OF PENNSYLVANIA, 
                        PHILADELPHIA, PA

    Mr. deLisle. Thank you for the kind introduction and for 
the invitation to be here today.
    This panel has a big topic, and I have been asked to 
address an especially broad swath of it, and therefore I will 
approach the subject more shallowly than my colleagues.
    I want to set some of the background and context for the 
issues we are talking about today.
    Any discussion of property rights in the People's Republic 
of China is in some ways an odd topic. After all, everywhere 
throughout the formal Constitution and legal code in China one 
sees reference to it still being a socialist, Marxist-Leninist 
system in one form or another, with property presumptively 
owned by some collectivity, and indeed, often the state.
    In a technical, legal sense, of course, land in the urban 
areas 
remains state owned, and land in the countryside remains 
collectively owned. And, of course the Chinese policy is 
officially a system that operates under the dictatorship of the 
proletariat, with the Chinese rendering of proletariat 
literally meaning ``property-less classes.'' Yet, now, in 
recent years, we are talking about something of a property 
rights revolution, as its proponents would have it, although 
the revolution has not yet triumphed in practice.
    The most recent striking development in this area, of 
course, is the constitutional amendments that were adopted at 
the National People's Congress session in March. Here, there is 
a good deal of new language that raises private property to a 
status previously not held. Some will tell you that the new 
provisions accord private property equal status with state 
property or socialist property. That is actually not true, but 
the gap in status is a lot smaller than it used to be. If time 
permitted, I would be happy to go through the amendments 
chapter and verse.
    Failing that, I think it is fair to summarize the reforms 
as saying that private property has been raised from a 
grudgingly acknowledged sector to a fully accepted one in the 
Constitution, although one that is still somewhat inferior to 
various notions of collective property.
    Many of the amendments address the right to private 
property. They also address the protection of the rights to 
private property by promising compensation for takings of 
private property by the state.
    Such innovations are also linked to other constitutional 
amendments that are not specifically about property. One is 
that ``the builders of socialism'' are added to the preamble's 
list of the ``good guys'' in the official perspective. This 
addition is generally taken as a reference to the first of 
Jiang Zemin's ``Three Represents''--a reference to the 
entrepreneurial classes, who own a disproportionate share of 
the new private property. This status for important private 
property holders and, in turn, their private property is 
further underscored by the ``Three Represents'' itself being 
put into the preamble.
    The other areas of significant amendment to the 
Constitution this time are provisions dealing with ``states of 
emergency,'' protections of human rights, and social security 
rights. The first largely builds on existing law governing 
martial law and expands it to deal with a wider range of 
crises, some of which, in particular contexts, might have 
implications for the protection of property rights.
    The second, ``human rights'' amendment, for the first time, 
offers a general statement that the state respects and 
safeguards human rights. For some proponents of relatively 
radical reform in China, the protection of property rights is 
of a piece with the promised protection of human rights--
whether this be based on a theory that the right to property is 
a human right or that secure rights to property are a 
precondition to the effective enjoyment of core human rights. 
The third amendment could be similarly interpreted as linked to 
matters of human rights, and certainly there are potentially 
positive implications for some types of property rights--a 
``new property'' with Chinese characteristics--in the notion 
that the state shall establish a social security system to 
guarantee a minimum standard of living.
    These constitutional reforms, which are still quite modest 
and quite general, were politically dicey. It was a long, hard 
road to get them into place. They had to reach their final form 
in the final moments before the NPC session and against the 
backdrop of the ``three unmentionables,'' which is not a 
reference to Chinese lingerie, but is rather a reference to the 
political directive prohibiting discussion of revising official 
judgments on the June 4, 1989 Tiananmen Incident, 
constitutional reform, or political reform during the crucial 
months that were the run-up to the constitutional amendments.
    There certainly were more radical proposals for 
constitutional reform on the table that were eschewed. There 
was discussion of ``big'' as opposed to ``small'' 
constitutional reforms. There were conferences in Beijing and 
Qingdao and other places that talked about a more thoroughgoing 
attempt to address rights more broadly, and structural reforms.
    The irrepressible Cao Siyuan trotted out his latest book on 
constitutional reform and, interestingly, drew very tight 
connections among property rights, economic reform, political 
reform, and human rights. He sees those as very linked, and he 
is not alone in that view.
    For the relatively modest reforms that were adopted, the 
argument was largely that they were justified on economic 
grounds. That is, the way the changes were officially presented 
was, roughly: you need stronger property rights, and you need 
clear property rights with stronger legal underpinnings, in 
order to have an effective market-oriented economy.
    That was the main selling point for the constitutional 
reforms, and that, of course, is the general direction that 
China has been going for some time. On this view, property 
rights protection is a way to reassure, energize, and bring 
into full play the energies of the ``builders of socialism'' 
and others who do or might respond to market signals.
    Greater official and legal acknowledgement of private 
property is also a way of dealing with the growing unrest over 
the expropriation of, if we cannot call them property rights, 
at least property interests, and in some cases, property 
rights. What has been going on in the countryside, what has 
been going on in the city, the expropriations or disregard for 
property rights and interests in rural and urban China, are 
matters that the chair has already noted. And the regime has at 
least partly recognized the dangers that the failure to protect 
such property rights or interests can pose.
    The question is, if property rights recognition or 
protection has such compelling justification in terms of 
economics and political stability, why was it seemingly 
politically so hard to adopt as a matter of constitutional or 
legal principle? There are several answers to that. To suggest 
what some of them are, I want to give a brief overview of the 
arguments, pro and con, of how much reform or enhancement of 
property rights needs to be done in China.
    One view says that the ambiguous, limited, vague, informal 
property rights that arguably have characterized reform-era 
China are just fine, thank you. After all, it is hard to argue 
with success. Look at the growth rates. Look at the sectoral 
transformation of China's economy. Look at the investment, 
domestic and foreign, that has flooded into the Chinese 
economy. It is a remarkable story of growth and development.
    This economic transformation has happened despite some 
fairly weak elements in the property rights system. What 
exactly rural land-use rights holders had, especially in the 
early days of reform but even now, has been, at minimum, a 
little uncertain and a little insecure.
    So, too, in the urban land-use sector, and so, too, with 
enterprises across the spectrum from state-owned behemoths to 
spontaneously arising private firms. There has been an 
ambiguity, a weakness, a vulnerability, and a paucity of 
enforcement mechanisms, at least by Western standards, to 
property rights in all these areas.
    Yet, people have raised capital, people have invested, the 
economy has grown, and it has transformed with, indeed, some of 
the greatest growth occurring in sectors--such as IP-intensive 
industries or projects with complex financing--in which clear 
and strong property rights often are thought to be especially 
important.
    This has happened despite legal lacunae, and despite an 
approach to relevant legal reforms that can perhaps best be 
described as backing and filling. Many of the features that we 
associate with market-based property rights and their 
protection grew up as practices before the legal underpinnings 
were put in place--in effect recognizing them retroactively-- 
and that continues down to this day.
    Some argue that China's economic success despite the 
absence of a robust legal regime for property rights does not 
show merely that what China has was ``good enough''--that China 
``satisficed'' on property rights. In some views, the 
informality or vagueness of property rights was a good, perhaps 
optimal, arrangement . It was functional and adaptive. The 
literature adopting this view is fairly vast, but many of the 
arguments boil down roughly to the following:
    In the context of a half-reformed economy, which China has 
had through much of the reform period and still has today, 
where state or political actors can still step in and stop 
certain things from happening, there is an argument for letting 
the state and its various pieces be a residual interest holder 
and a residual risk holder in a way that would be unlikely to 
occur--or complicated and costly to sustain--under a regime of 
clear, formal property rights.
    So, ambiguity and informality actually work better, given 
the context. They give such potentially growth-undermining and 
efficiency-impeding government or political actors a material 
share--or stake--in the development of new economic 
undertakings that in other systems might be better supported by 
clearer property rights, more formally enforced.
    There is also an argument that, with such ambiguous or 
informal rights, it is possible to avoid additional, related 
perils to growth. One can avoid the tragedy of the anti-
commons, which hit many post-Soviet economies--the problem of 
there being so many actors who held some piece of the claim to 
control an asset--be it land or something else--that they could 
block its use, transactions costs being so high that markets 
were unlikely to provide a cure for the trapping of assets in 
suboptimal uses, or simple non-use. The ambiguity and 
informality of property rights characteristic of the Chinese 
reform-era system may make it possible get around those 
problems, giving potential hold-outs fewer rights to block 
usage of assets, and giving a key potentially impeding set of 
actors--state or political entities--economic incentives to see 
assets used productively and efficiently.
    There are also narrowly legal factors--ones that are not so 
purely economic in their focus--that enter into this argument 
for the functionality of vague or weak or informal property 
rights. First, things are changing so fast in China on the 
ground, and legislation is a slow process, and the number of 
lawyers and lawmakers are so few, and getting changes through 
the NPC is so hard, that optimal or effective legal change must 
be pursued in a flexible, pay-as-you-go, make-it-up-as-you-go-
along way. Otherwise, legal rules will get badly out of sync 
with economic reality--by running too far ahead or lagging 
leadenly behind--and the attempt to write the ``right'' clear 
and formal rules on property rights--or other matters--will end 
up retarding market-oriented development.
    Second, property is a hard ideological nut to crack in 
China. At least for much of the reform era, it seemed likely to 
be much easier to do all the things one could do functionally 
with clear, formal legal property rights through some other 
means. There was thus much apparent wisdom in reformers' 
avoiding a path that required an unambiguous endorsement of 
private property or formal mechanisms for protecting private 
property rights.
    Consider how, during the Jiang Zemin era, we saw the step-
by-step hollowing out of what it meant for the state-owned 
sector to be the dominant sector of the economy. There was some 
clever and protracted ideological finagling here, and much 
reform was achieved and legitimated in this way. And still, 
tackling the question of private property and some forms of 
ownership reform remained hard even in the mid-2000s.
    Think of the Russian disease, rapid, bare-knuckled 
privatization leading to the rise of the notorious oligarchs 
and, in turn, the controversial prosecution of media and oil 
kingpins. While such a path was hardly inevitable, it serves 
proponents of a Chinese-style approach well by illustrating 
that there can be a variety of problems with privatization 
where relatively clear rights are handed out early in a 
transition from a Soviet-style economy.
    Third, adopting a clear, formal regime of legal property 
rights would require reaching decisions on how best to handle 
some of the tough questions with respect to which there appears 
to be little consensus in China today, much less in earlier 
phases of the reform era: How do you sequence providing a 
social safety net, establishing alienable-in-the-market 
property rights and other interrelated property-relevant 
reforms? There are social justice questions, and growth-vs.-
equity questions that I think have not been worked out, and 
that an agenda of establishing clear legal rights in property 
and related fields would demand be answered.
    Finally, I want to turn briefly to the other side of the 
argument--to the argument that says, basically, China does need 
to do more. China does need to have clearer and more formal 
property rights, and the urgency, the need to create these, is 
increasing.
    Part of the argument is simply based on the assertion of a 
counter-factual. Yes, China has done spectacularly well 
economically during the reform era. But it would have done even 
better with clear, formal property rights. This is the old, 
classical argument for the functional value of property rights 
in a market-based economy.
    But beyond that, there is a claim that China needs--and 
increasingly needs--clearer property rights because much of the 
argument for the virtues of ambiguous or informal property 
rights is an argument about what works in a transitional 
system, and an economic system cannot be in transition forever.
    If you go through a transition far enough, you must 
eventually come out the other side, and you need laws and 
institutions appropriate for the post-transition economic 
order. This view is, in effect, the revenge of the classical 
view. The argument is that, as the economy gets more de-state-
ified, the notion of the state's having an active and 
discretionary hand, holding a residual economic interest, in 
relatively fully marketized economic sectors does not make the 
sense it might once have made, and becomes a threat to growth 
and further development.
    In addition, the pressure for more unambiguous and formally 
protected property rights may be accelerating with 
globalization and China's accession to the WTO. On this view, 
there are growing pressures on China to play by world rules, 
and perhaps more 
importantly, there will be pressure on Beijing to unify and 
make uniform rules and practices across China, which now vary 
substantially between rural and urban areas, and across 
different regions of the country.
    Further, there may be much force to the argument that, as 
China becomes a more sophisticated economy--which is a somewhat 
different point from China's becoming a post-transitional 
economy--it needs clearer and more formal property rights. The 
easy gains from simply getting State planning out of the way 
have been reaped. Growth and progress now depend on the 
development more sophisticated financing vehicles, more complex 
product and factor markets, and advanced technological sectors 
where the ability clearly to define, effectively to protect and 
freely to alienate property rights will be vital to realizing 
potential economic gains.
    Much of this is a long way of saying that features that 
used to be plausibly praised as showing the virtue of ambiguous 
and informal property rights in China may now constitute the 
burden of complex and fragmented property rights. That is, 
changes in the conditions and context of China have made it 
necessary or at least desirable to make the contours of 
property rights crisper, to make it easier to bundle fragmented 
property rights, and thereby to encourage or at least permit 
them more easily and efficiently to migrate to their highest 
value uses through markets rather than through a mixture of 
markets and gatekeeping by state or other political actors.
    On this side of the debate too, the arguments are not 
limited to economics, and do include legal-political 
considerations. The trajectory or momentum of legal change--and 
underlying policy changes--in China strongly favor more 
expansive, clearer and more formally protected property rights. 
There are, to be sure, considerable shortcomings, some of which 
I have noted and some of which will be addressed in detail by 
my colleagues on this panel. But compared to what?
    Think of the baseline. You can tell a story of remarkable 
legal change from the General Principles of Civil Law in the 
1980s, and legal reforms undertaken even before that, down 
through property laws and related laws that are being drafted 
now, including the general Property Law which is in draft form 
and about to be passed, innovations in mortgage law, laws 
recognizing private ownership of economic assets, and many 
other areas. If you want to look beyond the kinds of property I 
have mostly been talking about, think of shareholders' rights 
and private securities litigation and things of that ilk. These 
are areas of substantial and substantive legal change, and 
there is an agenda of significant further change going forward.
    In addition, there is a plausible set of arguments that 
politically China may need clearer and more formal property 
rights--more than one would otherwise think--because of 
peculiarities in the Chinese system. First, because so much is 
in flux politically and economically and, for that matter, 
legally, the system may need some fixed point, some pole star, 
and property is a good place to start, especially given reform-
era China's long-standing core commitment to developing a 
market economy. With property rights in place, greater 
ambiguity and more extensive tinkering with other economic laws 
and policies, forms of government structure and regulation and 
so on may be more smoothly accommodated.
    Second, the law, in many ways, including the assertion of 
legal rights to property interests asserted by individual 
owners, provides a substitute for pressures for political 
democracy. It creates a steam valve. It allows the regime to 
monitor, and sometimes to address on its own terms and in its 
own way, problems that otherwise could create greater pressure 
for political accountability.
    Third, a political need to go unexpectedly far in making 
property rights clearer and more formal in China may arise from 
the lack of trust in the regime that we have seen develop over 
a variety of issues, particularly including property rights-
focused complaints arising from the expropriation of property 
in the countryside and in the cities.
    The final point I would make in this regard, brings us back 
full circle: formal commitments to greater protection for 
property rights have been put in constitutional form, not 
because we are on the eve of constitutional litigation in a 
meaningful sense in China, but rather because writing such 
commitments into the Constitution provides an important 
political lever.
    Once the regime says it is alright, a member of civil 
society, an elite intellectual, a policymaker below the top 
levels can push for further change, at least around the edges.
    Outsiders can play some role here. One thing the United 
States can do is help with such officially tolerated pushing, 
and property rights is a particularly good area to do so. A 
property rights reform agenda now is ideologically acceptable 
in China. Foreign advice or advocacy for it can be put in 
technocratic, technical, legal assistance terms, not 
potentially rankling political or ideological forms. A property 
rights agenda permits foreign advice and advocacy to draw upon 
the prestige and power that American and Western models have as 
successful models of property-rights-supported, market-oriented 
economic growth. Simply, the argument is: we have property 
rights and it has worked for us; it has worked for the world. 
Thus, U.S. policy and advice can push for property rights 
without pushing buttons as much as would be the case with, say, 
a straightforward political or human rights agenda.
    If U.S. policy goes forward with such an agenda, I think it 
is important--as it would be with any agenda--to listen to 
allies within the PRC system who share the same basic reformist 
ends. I think it is important to emphasize implementation, 
enforcement, and monitoring mechanisms, for those currently lag 
behind the existing and impending property laws on the books.
    Thank you.
    Mr. Foarde. Thank you very much, Professor. A lot of 
provocative ideas to take up in the question and answer 
session.
    I would now like to recognize Meg Davis, researcher in the 
Asian Division of Human Rights Watch, who joins us from New 
York City. Meg earned her Ph.D. from the University of 
Pennsylvania in 1999, and she has taught and held post-doctoral 
fellowships at the University of Pennsylvania, Yale, and UCLA. 
At Human Rights Watch, she has written ``Demolished: Forced 
Evictions and the Tenants' Rights Movement in China,'' and she 
is also the author of a forthcoming book, ``Song and Silence: 
Ethnic Revival on the Borders of Southwest China.''
    Her articles and op-eds have appeared in Modern China, the 
Asian Wall Street Journal, and the South China Morning Post, 
and she is an old friend of ours at the Commission. Thank you 
very much for sharing your expertise this afternoon.

STATEMENT OF SARA (MEG) DAVIS, RESEARCHER, ASIA DIVISION, HUMAN 
               RIGHTS WATCH AND VISTING SCHOLAR, 
  COLUMBIA UNIVERSITY'S WEATHERHEAD EAST ASIAN INSTITUTE, NEW 
                            YORK, NY

    Ms. Davis. Thank you very much. A special thanks both to 
the Commission for the invitation, and also to staff, including 
Keith Hand, for pulling this roundtable together and bringing 
us together.
    My comments today draw on my recent report for Human Rights 
Watch, which is available in full on our website, www.hrw.org. 
The report details the growth in protests and lawsuits over 
forced evictions in urban areas in China in recent years, 
especially the past two years.
    As we all know, China's rapid growth, especially for the 
2008 Olympics in Beijing, also more recently in Shanghai, has 
really sparked a land grab in many urban areas. In fact, 10 
years ago, many people welcomed having their homes knocked down 
and being moved to new apartments, because of the improvement 
in their lifestyles. But over the past 10 years, millions of 
people have been evicted around China. Quite a few have wound 
up homeless, and we are really beginning to see that this is 
not just a natural stage in the process of development, but 
that in some respects it may even be development out of 
control, development that the central state is not able to 
regulate to the degree that it may even wish to. The problems 
around forced evictions are beginning to point up weaknesses of 
the court system which could really threaten the long-term 
stability of the state.
    So, I am going to talk a little bit about what happens to 
people who get evicted from their homes. What we are seeing, is 
especially problems with due process. People often have little 
to no notice of their eviction. They come home, in some more 
extreme cases, to find the character ``chai,'' ``demolish,'' 
written on the walls of their homes.
    Others are approached in advance by developers. They are 
offered some form of meagre compensation for their homes. They 
begin to negotiate over this because they have no hope of 
actually stopping the development, so instead, they negotiate 
over the compensation. Some are actually are forcibly evicted 
before the negotiations are concluded.
    Those who feel that their negotiations have reached a dead 
end can seek arbitration in local government offices that 
``manage'' demolition and eviction. But what they encounter 
there are problems with corruption, which are endemic in the 
system. Local officials often have financial interests in the 
projects. Some of them run companies that actually do the 
demolition, others are investors in development projects or may 
be profiting from fees associated with the process of 
demolition and eviction.
    Some residents then try to take the developers to court in 
an effort to obtain fair compensation or to stop the 
development project. I and my Chinese research assistant, who 
asked to remain anonymous, so unfortunately I cannot give him 
full credit, reviewed dozens of laws around the country, 
provincial and metropolitan laws. We found that, 
overwhelmingly, these laws tend to favor developers. The courts 
are also often subject to Communist Party interference at every 
level, so even judges who may be tempted to find in favor of 
evicted residents and homeowners may find that they are 
encountering political pressure that prevents them from doing 
so.
    In most provinces, you cannot get an injunction to stop the 
process of demolition during a pending court case, so you can 
actually win the case, but have already lost the home. Perhaps 
worst of all, lawyers face harassment, and even jail. The most 
famous case is a case in Shanghai, where some of the biggest 
protests have erupted in the past couple of years. This was the 
case of lawyer Zheng Enchong, who assisted a number of evicted 
residents and homeowners to file suits, and then got involved 
in filing a case alleging official corruption in Shanghai, and 
sent some faxes to an international human rights group about 
what he was doing. He received a three-year sentence for 
circulating ``state secrets.''
    After the Zheng Enchong sentencing, a number of Chinese 
lawyers and residents told Human Rights Watch that lawyers were 
afraid to take cases that had to do with forced evictions, and 
certainly they were very nervous about talking to us, with good 
reason.
    In some of the worst cases, we hear about what is called 
``yeman chai qian,'' ``savage or violent evictions,'' in which 
people wake up in the middle of the night to find bulldozers 
knocking over their homes or wrecking crews knocking down the 
walls of the house while they are still in the home. Many 
people have been injured, and some have even been killed, 
during the process of forced eviction.
    It is this combined lack of redress, this kind of Orwellian 
lack of any route, that is driving people to the streets to 
protest in unprecedented numbers. In Tiananmen Square last 
year, there were sometimes almost daily protests. There have 
been some extreme protests, as I think most people on this 
roundtable know, suicide protests, people attempting, and 
sometimes succeeding, with self-immolations. Numbers of 
protesters have been jailed and sent to labor camps. For some 
of the Shanghai protestors, we have had credible reports of 
torture in detention.
    Perhaps the one great success story here is the success of 
the Internet as an emerging political tool in these protests. 
We are beginning to see really great numbers of people posting 
stories about their individual experiences, exchanging 
information, seeking consultation about the law in their areas. 
We have seen circulation of large numbers of open letters, 
petitions which thousands of people sign onto, people 
circulating news from different areas that previously did not 
circulate. Really, our report could not have been written 
without the emergence of the Internet as this kind of tool.
    And Chinese news media have become increasingly critical, 
openly critical. The China Economic Times has run a scathing 
series of editorials about forced evictions, and the People's 
Daily has actually been critical about this issue. And we have 
seen senior legal scholars sending letters to the government 
requesting reform. So, we are really beginning to see 
mobilization at many different levels of society around this 
issue.
    There has been quite a bit of government response, and I am 
sure we are going to talk later on about the degree to which 
this has been effective or not. I tend to come down on the 
glass-half-empty side, which probably will not surprise anyone 
here.
    But there have been a series of State Council circulars, 
what Keith Hand has been calling the ``this time we really, 
really mean it'' circulars, mostly urging local governments to 
follow national law. We have seen, of course, the expanded 
constitutional language protecting property rights. But the 
problem is that the Constitution does not yet really have the 
force of law. It is not justiciable.
    My favorite case in this regard, which I will close with, 
is the case of Liu Jincheng, a retired teacher in Hangzhou who 
decided to use the previous protections of property rights that 
were in the Constitution in order to challenge the local 
Hangzhou government regulations.
    Of course, the Constitution also protects freedom of 
speech, free assembly, free association, and so forth.
    Liu Jincheng got a white medical coat and painted ``Protect 
the Constitution'' on it in black paint, and marched to the 
local city government to protest, and was promptly detained for 
illegally demonstrating.
    So, what we have seen is that the Constitution does not 
really provide the kind of protection that it needs to provide. 
We have this fundamental problem of a weak court system, which 
10,000 State circulars is not going to address.
    The Party is continuing to interfere at every level of the 
court system, and until there is a truly independent and strong 
court system, we are not going to see significant change, I 
would argue, on this issue. That is, I think, where the United 
States could probably also lend some assistance, in terms of 
technical assistance, programs that would push for a stronger 
court system. The government wants protestors to take their 
complaints to the court and not to the streets, but in order 
for the court to function as a pressure valve, it has to be a 
place where they can find justice.
    Thank you.
    Mr. Foarde. Thank you very much, Meg. Also lots of thought-
provoking concepts in your presentation.
    We are gratified that we have been able, particularly on 
this panel, to draw panelists from a number of places other 
than the Washington, DC area, where we of course have a number 
of China experts.
    I think the one who now has come the farthest, at least, in 
any of our roundtables so far is our next panelist, Professor 
Roy Prosterman, president of the Rural Development Institute 
and professor at the University of Washington School of Law. 
Professor Prosterman is a leading expert on land reform and has 
spent over 30 years conducting field research and consulting on 
land reform issues throughout the developing world. He and his 
colleagues at the Rural Development Institute have worked with 
China's central policymakers on rural land tenure issues since 
1987 and have been the principal foreign advisors for a series 
of reforms under which millions of families have received 
secure 30-year land use rights.
    So, welcome to Professor Roy Prosterman. Thank you for 
being with us.

 STATEMENT OF ROY L. PROSTERMAN, PRESIDENT, RURAL DEVELOPMENT 
INSTITUTE; PROFESSOR OF LAW, UNIVERSITY OF WASHINGTON SCHOOL OF 
                        LAW, SEATTLE, WA

    Mr. Prosterman. Thank you very much. Much of what I discuss 
will be against the background of some 1,000 field interviews 
that we have done directly over the past 17 years with Chinese 
farmers, outside of the presence of local cadre or officials, I 
might add, as well as two extensive sample surveys that we have 
done cooperatively with Renmin University on the implementation 
of farmers' 30-year land rights. Those who may want to look at 
a very detailed presentation of the findings from the later 
2001 survey might want to look at the Columbia Journal of Asian 
Law, fall 2002 issue.
    The question of takings and of security of farmers' land 
rights arises in the context of two particularly important 
background issues or facts. One is that 800 million Chinese 
still live in, and make their living in, the countryside from 
agriculture. It is still 60 to 65 percent an agricultural 
society. When one speaks of progress and development in China, 
one is speaking mostly of progress in development for the other 
500 million, or a bit fewer than 500 million, who live in the 
urban areas.
    That is reflected in the second fact, that the ratio of per 
capita incomes in the cities to the countryside, as of the end 
of 2003, was calculated as roughly 3.24 to 1, which is a 
reform-era high. Zhu Rongji referred to it frequently as his 
biggest headache. The current administration, if anything, sees 
it as an even bigger headache, source of instability, and a 
reflection of the fact that rural productivity is quite low.
    In particular, the utilization of the fundamental rural 
resource, land, is quite low. If you compare it, for example, 
to Taiwan, Taiwan produces 8.5 times as much value added per 
acre as mainland China in its agriculture. South Korea produces 
13 times as much value added per acre. Those are also very 
small-farm agricultures.
    But one key difference, as also in Japan, is that Taiwan 
and South Korea benefited from U.S.-supported land reforms in 
the immediate post-war era, land reforms which gave full 
ownership, full security, full transactability to the great 
majority of the rural population. I would argue that the take-
off in those societies began before they became export-oriented 
economies.
    The development of the internal market was critical, and I 
think the Chinese leadership sees the development of the 
internal market and the creation of greater rural prosperity 
and productivity to be absolutely critical. It is in that 
broader context that the land tenure issue, the land security 
issue, and, as a major part of that, the land takings issue, 
arise.
    Takings of agricultural land clearly cause a whole bunch of 
problems for the central government and for the development 
process. It means in a direct sense that you lose land for 
agricultural production. It means more broadly that you 
undermine the security of farmers' land rights, both because 
what they get paid when the land is taken is generally a 
pittance and only a small fraction of the total amount 
recovered for the non-agricultural use, and also because 
takings are often accompanied by illegal readjustments of land. 
Readjustments are the key source of tenure insecurity. China 
was the first of the Communist societies to physically break 
up, to de-collectivize, the farmland. They did that from 1979 
to 1983 very successfully. But what the vast majority of 
farmers received under de-collectivization was what we would 
call ``at will'' land rights. They could be booted off at 
almost any time by the local cadre in the name of readjustment, 
as it was called.
    Readjustment was justified either on the basis of 
demographic change in the village, the idea being, ``let us 
give absolute arithmetical equality to every person in the 
village,'' or in the name of land takings because one or a few 
households would lose land, often much or most of their land, 
and instead of compensating those families with cash or by 
other means, the cadre sought to spread the pain equally 
through the whole village by taking all the land back, 
redistributing it in new patterns that reflected that there was 
less land now in the village because some of it had been taken.
    Of course, one of the effects of creating this kind of 
absolute equality was creating absolute insecurity, and if you 
are absolutely insecure on the land, as farmers began telling 
us when we first interviewed in 1987, they are not going to 
invest in the land.
    So, for the vast bulk of the rural population for the last 
20 years, they have been absolutely prevented from investing in 
irrigation, drainage, land terracing, tree planting, intensive 
soil improvement, land leveling, you name it, any improvement 
that has a multi-year return. The farmers do not make such 
investments because, they tell us, we do not know if we are 
going to be on these same pieces of land next year or not. So 
the process of ending readjustment looms as an absolutely 
critical one if farmers are to get security or to be able to 
invest in the land and be able to improve their incomes and 
their consumption.
    All of this being closely tied to the process of takings, 
insofar as takings both directly lead to readjustment of land, 
and also because the local cadre will often use as an excuse 
for readjustment that there has been demographic change in the 
village, when actually the idea is to have 5 or 10 percent of 
the land stick to their fingers in the process of readjustment, 
hold that back, and then suddenly, 6 months later, transact 
that to some outsider for a very valuable consideration.
    So takings are closely linked to undermining farmers' land 
security, undermining the value of farmers' land rights, 
undermining farmers' ability to invest in the land, cheating 
farmers out of the income received from takings leading to a 
good deal of instability, as we have already heard in the 
discussion today, and also distorting land markets: to the 
extent that much land then is cheaper or below market value, 
subsidized investments in terms of the land factor distort 
markets and create incentives to invest in times and places 
where those investments should not exist.
    And, finally, it induces corruption of local officials, 
because a lot of the resources that get paid for the 
transaction of land from agricultural to non-agricultural uses 
get taken, either in a directly corrupt way personally or 
indirectly to buy the new ``village'' VW or have a series of 
banquets at the village or township level.
    Let me say then in these last minutes just a word about 
what efforts have been made. In a broader way, the Chinese 
have, since 1993, been trying to introduce so-called one-
generation, or 30-year, land rights. The survey reproduced in 
the Columbia article, as you will see, indicates that by 2001 
they had reached about 40 percent of farm households with 
secure, no readjustment, 30-year rights. But that meant they 
had not reached the other 60 percent, and that is the goal of 
the Rural Land Contracting Law which was adopted in 2002 and is 
beginning at this point to be implemented.
    But related to that, a key part of the implementation of 
that law being the end of readjustment, is the related and 
parallel need to stop or restrict takings, three key elements 
in which are to limit takings to truly public purposes, to make 
the takings process more transparent, and to provide reasonable 
and adequate compensation. There have been some very late-
breaking developments, but I will hold those until the question 
period.
    [The prepared statement of Mr. Prosterman appears in the 
appendix.]
    Mr. Foarde. Perfect. You were remarkably disciplined, and 
therefore we will have the time to come back to those things.
    I am going to let our panelists rest their voices for just 
a minute while I make an announcement or two.
    In connection with today's roundtable, we are delighted to 
also be distributing a written statement for the record by 
Patrick A. Randolph, who is professor of law at the University 
of Missouri, Kansas City. Professor Randolph is an expert in 
property law and the co-director of the Center on Land Law and 
Policy at Beijing University in Beijing.
    He is also the author of a book entitled ``Chinese Real 
Estate Law,'' and he has been a panelist of ours in the last 
year on related questions. So, we are happy to have that 
statement. It is also available on our website.
    [The prepared statement of Mr. Randolph appears in the 
appendix.]
    Mr. Foarde. This leads me to my second point. That is that 
the proceedings of today's roundtable, and all of our hearings 
and roundtables, are available on the CECC website at 
www.cecc.gov.
    Let us go ahead then to the question and answer session. 
What we usually do is give each of the staff panel up here the 
chance to ask and hear the answer to a question for about 5 
minutes, and we will do as many rounds as we have time for 
before we are all exhausted, or before 3:30 comes, whichever 
comes first.
    I will kick things off by asking Meg Davis, I was really 
taken by your description of the lack of alternatives for 
residents whose homes have been taken and razed frequently as 
Orwellian, because it seems that there really is no way out for 
these people. What do the residents that you have talked to or 
read interviews with really want in terms of process?
    Ms. Davis. That is a really interesting question. I would 
say that quite a few of the people that we either spoke with or 
that we gathered through the web would have been happy if there 
had been some kind of redress in the legal system. They are 
used to encountering corrupt officials and so forth. That is 
part of daily life.
    But I think there was a great deal of sense that there was 
some hope, with all the talk about rule of law and so forth, 
that there was going to actually be some kind of answer in the 
legal system. I think they are very disappointed that that did 
not happen.
    Mr. Foarde. So they are not adverse to going to court.
    Ms. Davis. Well, I mean, the people that we speak with, you 
have to understand, are going to be an elite. Right? I mean, 
they are going to be people who, in some way or another, found 
someone who could get them in touch with an international human 
rights group.
    These are the people who tend to be leaders in their 
communities, in certain respects, if they have the courage to 
contact us, knowing that that could send them to jail. So, 
these are people who probably have a little bit more sense 
about the legal system than maybe a lot of other people to whom 
it would not occur.
    Mr. Foarde. And what is the principal goal of going through 
a process? I mean, are they looking principally for just a fair 
shake or looking principally for remuneration, or what are we 
really talking about?
    Ms. Davis. I think most people wind up looking for fair 
remuneration because that is the only thing they have any hope 
of getting. By the time they find out that the project is going 
forward, it is really too late for them to try and stop it, at 
least, certainly in the urban cases that we are familiar with. 
In rural areas, it may be different.
    But they do not really have the sense that it is possible 
to stop a project or that they could have input at an earlier 
stage of the process. That does not even cross their mind. So I 
think they wind up focusing on remuneration because that is all 
there is, really.
    Mr. Foarde. So would you describe that as a legal problem, 
or a political problem, or both? I am interested in your 
perspective on that.
    Ms. Davis. I do not think, in China, it is possible to 
separate the two, because there is no legal system without 
political interference.
    Mr. Foarde. Thank you. Very useful.
    I am going to pass the microphone on to my friend and 
colleague, Dave Dorman, who is the deputy staff director of the 
Commission and works for Senator Chuck Hagel.
    David.
    Mr. Dorman. Thank you, John.
    First, I would like to thank each of you for coming today. 
I studied your written testimonies over the weekend and the 
topic of this roundtable strikes me as one of the most complex 
issues that this Commission has dealt with, so I very much 
appreciate you all taking the time to share your experience and 
knowledge with us.
    I would like to use my five minutes with a quick question 
to each of you, and I think we can probably do that. I will 
start with Dr. Davis.
    In looking at the excellent Human Rights Watch report on 
forced evictions over the weekend, I was struck by one of the 
chapters where it referred to the ``tenants' rights movement.'' 
Social movements of this type are generally not something that 
we see referred to in China. Can you comment briefly on the 
extent to which this is actually a national movement as opposed 
to a fragmented series of events that have some relationship in 
terms of topic, but little relationship in terms of public 
awareness of what is going on 
elsewhere in the country? To what extent is news of the 
protests--rural protests, urban protests--linked nationally 
through the Internet or through the press?
    Ms. Davis. Should I answer that?
    Mr. Dorman. Sure.
    Ms. Davis. That is a great question. I am not a political 
scientist, I am an anthropologist, so I get a little more 
leeway using words like ``movement'' than some of my 
colleagues.
    I chose, and we agreed on the word ``movement,'' because it 
really did seem to be mobilizing across regions, which is, I 
think, a really salient thing about this in terms of Chinese 
political grassroots activities.
    I think, really, with the Internet, with a slightly more 
liberalized news media, we are beginning to see what the state 
has wanted to prevent for a long time, which is people moving 
from one region to the next, organizing protests, people in one 
area knowing what kind of protests are happening in another 
area, people consulting national law centers to ask for 
assistance or advice. So, I think it is fair to call it a 
movement, although I agree, it is right on the borderline in 
certain respects.
    Mr. Dorman. Well, I am a political scientist, and I am 
always pleased to have another social scientist close because I 
am usually the only non-lawyer within 25 feet of the podium. 
[Laughter.] So, this is important.
    Ms. Davis. It is not often that anthropologists and 
political scientists find ourselves on the same side. 
[Laughter]. It is a pleasure.
    Mr. Dorman. Professor deLisle, one of the really 
interesting things about working on the Commission is how often 
we receive comments from groups and individuals throughout the 
United States on what the Commission is doing: what we are 
doing right and what we are doing wrong. We take these comments 
very seriously.
    And one of the things that I have noticed over the last 
couple of days are a few comments that suggest by focusing on 
the issue of property rights, we are, in fact, looking at a 
secondary issue. It is not directly linked to human rights. We 
should be looking, for instance, at freedom of association or 
freedom of speech. If either of these existed in China, 
property rights would not be a problem.
    You mentioned in your opening statement that some have said 
there is a direct connection between human rights and property 
rights. Can you comment on that statement, and I apologize for 
the brief 30 or 35 seconds you have to answer.
    Mr. deLisle. I will try. I think they are linked in, 
possibly, three ways. One, of course, is in human rights 
discourse in the West. Certainly, we think of the Enlightenment 
tradition in which our own Constitution was written, and there 
is a pretty close connection. In the classic Lockean view, 
there is life, liberty, and the pursuit of property. We changed 
the last to ``happiness'' in our Declaration of Independence, 
but that did little to remove the sense that property is part 
of the classically liberal package of human rights.
    Particularly where there is a government that, like 
China's, has historically put its people in a position of 
insecurity, property ownership and secure rights to property 
can offer an appealing defense against some forms of State 
intrusion and undermining of a wide range of rights.
    You can find a lot of people in China who talk that way. 
The issue is one of people who feel vulnerable, in part because 
the kinds of interests that could be protected by property 
rights are at risk.
    Second, as this in part suggests, the discussion has been 
explicitly linked in Chinese policy. Even in the official 
position on constitutional reform, property rights and human 
rights strikingly came together. That is, the private property 
rights provisions were added to the Constitution at the same 
time that the first general statement about human rights, as 
opposed to the list of specific rights that have been in there 
before, was added. They came in as a package.
    Premier Wen Jiabao, after the March 2004 NPC session, gave 
speeches which mentioned both human and property rights. He did 
not link them terribly clearly, but certainly their connection 
is part of the story of constitutional reform in 2004.
    Third, there are unofficial, more radical reformers within 
China who draw the link explicitly. Cao Siyuan, I think, is 
probably the most voluble on this subject, but his views are 
not unique. The 
argument from this perspective is that, until the government is 
restrained from taking people's property, it is not going to be 
restrained from disregarding other rights of citizens, and 
there is not going to be an adequate material or political 
basis on which people will be interested in and willing to push 
for political accountability. Such views illustrate that, in 
the political science world, everything old is new again. We 
are really back to a Barrington Moore-style argument on this: a 
property owning bourgeoisie becomes a basis for pressing for 
political accountability and democratic reforms or, if need be, 
revolution.
    And if we look around at what is going on in China, we have 
seen people who are suffering violations of what they see as, 
in effect, their property rights become quite visible and vocal 
in making demands on the regime and challenging its behavior--
both peasants coming into the city and protesting or burning 
local party or government headquarters, and city people who are 
being kicked out of their houses in areas slated for 
redevelopment complaining through protest marches or other 
demands for legal or political redress. We have also seen the 
urban rich do it, organizing homeowners' associations in gated 
communities or luxury condominia, and taking on developers--
often with strong ties to local government--who renege on 
promises concerning amenities or open space.
    The last of these is one of the more striking examples of, 
if not politically inspiring, then at least truly autonomously 
created and officially tolerated endeavors to assert rights.
    Mr. Dorman. Good. Thank you. I am out of time.
    Mr. Foarde. Out of time, but we will come back. Good.
    Susan Roosevelt Weld is the general counsel of the 
Commission.
    Over to you, Susan, for questions.
    Ms. Weld. Thanks a lot.
    I wanted to ask you all this question. I have been reading 
of many ways in which these land transactions give rise to 
worsening problems of corruption. Could each of the three of 
you tell me: What are the opportunities for corruption in land 
development, urban renewal, and expropriation of lands in the 
rural areas? At what point does the problem of corruption arise 
most sharply? What are the things the Chinese government is 
doing to try to forestall or cure those problems?
    Mr. Prosterman. In terms of the corruption problem vis-a-
vis rural land, it arises in terms of local officials trying to 
capture increased value of such land both for non-agricultural 
and agricultural purposes.
    For non-agricultural purposes, as I have commented, they 
attempt to capture it in the takings process in which the best 
estimates are that only 5 to 10 percent of the cash paid for 
land for non-agricultural purposes ends up with the farmer/
cultivator who loses the land. The other 90 to 95 percent ends 
up with the local cadre and township or higher levels.
    So that is a big inducement if they can get away with such 
a taking. There also have been takings for agricultural 
purposes in terms of taking away farmers' land and allocating 
it to what the farmers call outside bosses.
    There was a very strong central directive, number 18, that 
came out about 18 months ago prohibiting such actions and that 
was also incorporated as part of the Rural Land Contracting Law 
adopted in 2002 which became effective on March 1, 2003. We 
have, in our interviewing, actually seen what seems to be quite 
a substantial decline in those agricultural takings, those 
attempts to allocate to outside bosses.
    In fact, we may have a chance to get into it later in the 
questioning, but we have actually seen several instances in 
which really strongly worded and thoughtfully implemented 
central directives have been quite effective in sharply 
limiting various kinds of corrupt activities by local cadre 
vis-a-vis land.
    Ms. Weld. Thank you very much.
    Mr. Foarde. Please, go ahead.
    Mr. deLisle. I went on too long on the last answer, so I 
will try to be very brief in this one. Two things. One, I would 
second that last set of remarks. One of the best barometers of 
where corruption is creeping in is: What is the center is 
squawking most loudly about concerning what is going on or 
going badly at the local level? So, when the official media or 
official spokesman says, ``We really mean it this time; we are 
determined to eradicate X'' or ``There are a very small number 
of cadres or citizens who were going off the track by doing 
Y''--those kind of statements mean that X and Y are matters 
that the regime considers to be significant problems.
    Second, I also worry about a slightly different problem. 
Although the one you point out is more important than the one I 
will mention, the one I mention is in danger of being 
overlooked because it is more obscure. That is, some of these 
laws create loopholes.
    I would predict that if we do see more progress in making 
the new formal rules matter on some of these property rights 
issues-yes, we are a long ways from that happening in full, but 
we do see progress--there are some dangers to watch out for, 
creeping back in through the loopholes broadly reformist formal 
law retains.
    For example, there is the category of ``public interest'' 
and the question of what constitutes a ``public purpose'' for a 
lawful taking of private property. In China, these can be very 
broad concepts. I think we can already see some of this risk in 
the urban areas where they talk about redevelopment districts. 
One example is the expansive master redevelopment plan for the 
Eastern District of Beijing, the business district to the east 
of Tiananmen. Another is the massive tearing down and 
rebuilding associated with the 2008 Olympics.
    When challenged, the necessary acquisitions of land use 
rights are or can be defended as serving a public purpose, even 
if the same developer has benefited at the end through the same 
connection with the same people as would have occurred under a 
simple, old-style regime of declaring the displaced residents 
to be without property rights. Much the same dispossession--
often at not much greater cost--thus can be done through a 
medium that is really unimpeachable, as a formal legal matter.
    Ms. Davis. Just a few cases. One, is in many instances we 
are hearing that officials who are involved in sort of various 
stages of the development process are either owning companies, 
for example, the Demolition and Eviction Management 
Departments, which, according to national Chinese law, are not 
supposed to own demolition and eviction companies, the wrecking 
crews. Often, they do.
    In Shanghai, I think something like half of the companies 
are owned by local officials. In other cases, they may be 
invested in the projects. In other cases, we get reports that 
they are getting paid off by developers. Then there is the 
great system of fees.
    I saw this a lot when I was working in Xishuangbanna in 
Yunnan Province, where a hotel would be given permission to 
build, and you would see a half-built hotel for about three 
years because halfway through the process they then got 
assessed a new set of newly-imposed fees, which the developer 
decided to abandon the project rather than pay.
    Mr. deLisle. One last legal point. In the property rights 
amendments to the Constitution, there is talk of compensation. 
What was dropped, but had been proposed, was market-rate 
compensation, or full and adequate compensation. The language 
ultimately chosen clearly provides another way of driving down 
payments for taking of property and thus weakens protections of 
property rights.
    Mr. Foarde. Useful. Thank you.
    Christian Whiton represents Under Secretary of State for 
Global Affairs Paula Dobriansky. Under Secretary Dobriansky 
sits on the Commission.
    Over to you for questions, Christian.
    Mr. Whiton. All right. Thank you, John.
    Dr. deLisle, in regard to the theory you mentioned that 
moving ahead with legal reform might be viewed by the Chinese 
as a pressure valve for demands for political reform, which 
raises the specter that the international community, if they 
ratcheted up demands for that political reform for human 
rights, that you would actually have an end result of moving 
along legal reform.
    Do you personally believe that is true? Are you seeing that 
at all on the ground?
    Mr. deLisle. I am sorry. I missed the last part of that.
    Mr. Whiton. Well, in your own view, you are ticking off a 
list of theories. Do you view that one as accurate? Do you 
think that is a real possibility, that increasing demands for 
political reform would actually have the unintended result of 
moving ahead legal reforms?
    Mr. deLisle. I think the relationship between legal and 
political reform is neither one of pure complements nor pure 
substitutes. I think that, viewed from the regime's 
perspective, offering a certain modicum of legal rights is seen 
as preempting or postponing greater pressure for political 
change. This echoes the almost classical radical critique of 
rights-asserting litigation: legal rights are problematic 
because they do serve as a steam valve that relieves pressure 
for more radical political change.
    That is, if people have means to bring their own individual 
claims, and they have a reasonable hope get some redress, to 
get some compensation, then they are not going to take it to 
the streets. Instead, they are going to take it the courts, or 
more likely, in China, to an administrative process. Or, still, 
more informally, they can be bought off one by one as they 
raise their complaints to local authorities, and the ones who 
cannot be bought off, and who might lead or fuel organized 
movements demanding more systemic change, will be quashed.
    There is, on this view, some set of plausible political 
circumstances where legal rights, in effect, buy an 
undemocratic regime time, at the very least. Personally, I 
think that ultimately rights consciousness on the legal side, 
in most places and under most conditions, tends to play out 
ultimately in rights consciousness on the political side. So, 
in the long run, people who are used to asserting legal rights 
start to think, ``Gee, I would like to have a role in shaping 
the rules under which I am asserting these rights.'' At the 
level of macropolitical theory, that tends to be my view. I 
think comparative history generally tends to bear that thesis 
out.
    In the best of all possible worlds, authoritarian regimes' 
``defensively'' offering legal rights, including property 
rights, creates a softer landing scenario than one where the 
regime provides no rights of either sort, and then we see a 
revolutionary explosion. I do not think China is terribly close 
to that latter scenario.
    I think the eruptions and the pressures we are seeing now 
in China with respect to property are from people who are 
feeling wronged in a generalized way, and except for an elite, 
we do not have a clear articulation of that as a matter of 
rights consciousness in a legal sense. The gradual recognition 
of some legal rights to property or other interests by the 
regime promises to provide some room for accommodating the 
emergence of a greater popular legal rights consciousness.
    At least for now, the property protesters in China seem to 
have a sense they are being wronged, and whether that means 
political action or legal action in response is a matter with 
respect to which I think we tend to draw the categories as more 
firmly distinct from one another than the people who are living 
in that system do.
    Mr. Whiton. All right. Thank you.
    Dr. Davis, do you have an understanding or a view on the 
land displacement that specifically surrounds the 2008 Olympics 
in Beijing? Does that come into a special category? Are you 
seeing a lot more related to that, especially as it gets 
closer?
    Ms. Davis. It is more of a quantitative than a qualitative 
difference, I would say. There is no question that there is 
just an 
explosion of development in Beijing that is either directly 
linked to the Olympics or is being linked to the Olympics for 
marketing purposes, especially high-end condominiums.
    There is a whole satellite city being built in the north 
area of Beijing that is almost certainly going to involve 
forced eviction that is actually being designed by U.S. 
architectural firms.
    So, especially, I think, this is something I think we 
should be concerned about, is the growing participation of U.S. 
firms in development in these urban areas, and the degree to 
which they are involved in developing policies that are going 
to minimize these kinds of abuses.
    Mr. deLisle. Of course, you have French architects who 
design collapsing buildings. [Laughter.]
    Ms. Davis. Yes.
    Mr. Foarde. Let us go on. I would like to recognize the 
person that is responsible for helping us put together this 
roundtable this afternoon. Each of the roundtables that we have 
are really the product of a vision and a lot of hard work by 
one of our staff members, and in this case it is Keith Hand, 
who is senior counsel. Keith, go ahead.
    Mr. Hand. Thanks, John. Thanks very much to all three of 
you for your time and statements today.
    I have a question for Professor Prosterman. In looking into 
this rural land takings issue, it seems like there is a 
significant gap between the economic value of a 30-year land 
use right and the current legal standard for compensation of 
farmers when their land is requisitioned.
    I am wondering, how Chinese policymakers justify it. Do 
they even try and justify this gap? Are there any new 
regulatory initiatives or measures on the horizon that you 
think may deal with this enormous compensation gap?
    Mr. Prosterman. There are new measures on the horizon. I 
might note that the present provisions of the Land Management 
Law and its regulations call for three categories of 
compensation to be paid when agricultural land is taken for 
non-agricultural purposes.
    One is compensation for standing crops and fixtures. That 
goes to the farmer, but it is a very small amount. Second is a 
resettlement subsidy which goes to the farmer only if no other 
provision is made for resettlement or for some new source of 
livelihood.
    Of course, if they carry out a readjustment, even though 
they have robbed Peter to pay Paul, they will argue that they 
have, in fact, made other provision and they will hold onto 
that cash.
    The third, and usually largest, is the compensation for the 
loss of land, and the regulations under the 1998 Land 
Management Law affirmatively provide that that goes to the 
collective and does not go to the farmer.
    So, one important need for legal reform is to change that 
provision at least to allow it to go to the farmer, better yet 
to say that it must go to the farmer.
    What we have argued, is that since--without getting into 
the formula in detail--30-year land rights at the beginning of 
the term should be worth something like 75 percent to 95 
percent of the value of full private ownership, or fee simple 
absolute, that the farmer should indeed get 75 percent to 95 
percent of the compensation to be paid.
    We have urged that that be the standard put into the law. 
They have now said that they are going to amend the Land 
Management Law, and a number of individual statements and 
directives have come out that suggest that this is the 
direction in which they are going to be going in amending it.
    Mr. Foarde. Does anybody else have a comment on that 
question? [No response]. Keith, go ahead with another one.
    Mr. Hand. Sure. A number of you mentioned efforts the 
central government is undertaking to address problems both in 
the urban and rural areas. It would be interesting to get your 
sense for how serious the central government is about solving 
these problems.
    Is this primarily an issue of local implementation, local 
corruption, and a desire to fuel economic development? Is there 
some other issue at the central level with their basic approach 
to these issues that we should be concerned about?
    Ms. Davis. Well, I do not doubt the sincerity, actually. I 
think there is certainly, at least, a very strong faction at 
very senior levels that sees this as an urgent issue. But the 
question is, local officials, through the network of 
``guanxi,'' of relationships and favors, is able to exert 
control over the legal process, just to keep flogging this 
horse. So, the problem is the degree to which people at the 
local level are really going to be responsive to the series of 
``we really mean it this time'' circulars, and also to the 
degree to which the Party itself is willing to tackle that 
issue, because that really gets at the heart of party 
legitimacy.
    These local officials who are able to wield this kind of 
unrestricted power, who are able to influence judges and jail 
lawyers, and all the rest of it, the Party really needs to 
tackle that, and they have not shown themselves able to yet, 
though maybe a crisis will force them to.
    Mr. deLisle. I think there is a lot of seriousness about 
it. I think, to be somewhat simple-minded about it, most of 
what the top leadership or the dominant group in the 
leadership, or perhaps more accurately the center of gravity 
within top leadership, is guided by, is really a twofold 
agenda.
    One is to sustain economic development at a sustainable 
pace, which means to cool off, heat up, whatever the 
imperatives of the day seem to dictate, but to keep the GNP 
growing at the rate needed to deliver on the promise of rising 
prosperity. And the second is to maintain social stability 
while doing so.
    Unfortunately, of course, growth sometimes comes with huge, 
dislocating costs, and that is where we see some tradeoff 
between development and social order. I think property rights 
and some of the specific reforms concerning takings, 
compensation, and perhaps social security that we have been 
talking about are seen as a way of squaring that circle, 
permitting the freeing up of assets for alienation in markets 
for property, and paying people enough in compensation--or 
assuring that they have secure claims to sufficient wealth--
that the regime does not face too many people coming and 
protesting for too radical agendas of political change. Now, 
the formula here, and the role of property rights and takings 
law, remain something that the central regime and local 
authorities have yet to work out. I agree that the Chinese 
Constitution is not something that anybody can invoke in a 
direct or formally legal way, but I think it has symbolic and 
programmatic importance, although we are a long ways away from 
judicial or other formal legal enforcement of its provisions.
    If you look at the discussion of the particular 
constitutional amendments adopted last time out, almost 
everywhere you turn--although, interestingly, this is said less 
about property rights than the other amendments--there is a 
discussion that asserts, in effect, that constitutional change 
is step one; what is next needed is implementing legislation 
and other measures.
    So, in that sense, the members of the leadership that 
approved formal legal reforms in property and related areas are 
serious. They have a sense they cannot afford not to do it. The 
question they have not faced yet is, can they afford to do it?
    The cost of reining in local government, the cost of giving 
people these kinds of rights, the costs of having a court 
system with administrative review of government action that 
this will entail, what that will imply, the second order 
political effects--I do not think those issues have been fully 
grappled with yet.
    Mr. Foarde. I would like to recognize our friend and 
colleague, Carl Minzner, who is a senior counsel on the 
Commission staff as well, for some questions.
    Carl.
    Mr. Minzner. Thank you very much.
    I have a particular interest in rural issues, as well as 
migrant issues, and would like to direct this question toward 
Professor Prosterman. But to the extent that our other 
panelists can address it as well, I would be very interested in 
your opinions as well.
    I would like Professor Prosterman to talk a little bit 
about exactly what the boundaries and extent of collective land 
ownership are in the countryside. Let me give you a specific 
example. I have been noticing an increase, particularly in 
Shaanxi Province, in the number of legal cases involving the 
rights of migrants, as well as women who have married out of 
the villages from which they come, but these migrants and these 
women still retain a rural residence identification with the 
village itself.
    When land is seized and compensated, often these 
individuals are excluded from distribution of the compensation 
on the theory that many people in the village feel they are 
outsiders now, that they do not belong to the village and the 
compensation does not belong to them.
    I wonder, is there any clear identification as to, what 
does it exactly mean to have collective ownership of the land 
in the villages? When compensation comes, who should get 
compensated? Who should receive the money? If there is no clear 
answer to that, what are the trends that are taking place?
    Mr. Prosterman. Very complex legal issues. Their 
collective, of course, is somewhat ambiguous in itself because 
it could mean either the old production team level, which is 
essentially the natural village, the old brigade level, which 
is the administrative village, or the old commune level, which 
is the township, currently.
    It is quite unclear, even in the minds of local officials, 
often, as to which of those levels is the collective owner. But 
usually the allocation of land shares takes place in terms of 
the population in the hamlet or natural village.
    The unit is the household. Remember, it is a household 
responsibility system, so every person in the household gets a 
land share. Now, up until the recent legal reforms, it was 
typical in those provinces, the great majority of provinces 
which had readjustments, that when a daughter married out to 
another village, she would lose her land share in the next 
readjustment. The household would lose that portion of land. In 
the next readjustment in her husband's village, she would 
receive a land share.
    Now, the new Rural Land Contracting Law has two important 
provisions on this issue. One, is Article 6, which for the 
first time explicitly recognizes that men and women have equal 
rights with respect to land in rural China. The second, is 
Article 30, which basically says that, when a woman marries 
out, if there is land--now, there is not supposed to be any 
readjustment, but there might be flexible or other land--that 
she can get land in her husband's village, and in case of 
divorce or death of the husband, she can choose between keeping 
that land or taking land in her maiden village, retaining that, 
because that is not any longer to be readjusted away. That land 
will stay with the household that originally received it in the 
maiden village.
    The problem then is how this plays out in terms of takings. 
That is not provided for at this point in either the Rural Land 
Contracting Law or any other place in the law, insofar as I am 
aware. It is linked to the question of the adequacy of 
compensation and whether there is to be cash compensation, 
which of course should go, and go in its lion's share, to the 
farm household.
    I would think that the best way of resolving that would be 
to allow the cash compensation to go to, first, the household 
which lost land, and then probably to allow the wife to make an 
election, if she wished, to participate in that. But then you 
would have a kind of double dipping question as to whether she 
could do that and also maintain her rights to a land share, if 
she had received one, without readjustment, which would be 
illegal, in her new village. But as one of a number of issues 
that will have to be decided, probably this one can be decided 
in regulations under the Rural Land Contracting Law.
    Mr. Foarde. Really interesting.
    Let me pick up the questioning now. Jacques deLisle, you 
have brought up an issue that is of great interest to each of 
our Commissioners, and also to us on the Commission staff. That 
is the whole question of the pace of legal development and 
legal reform in China and the extent to which, if any, it is 
driven by Chinese's accession to the WTO and the commitments 
that it has made under WTO. Separately, you mentioned 
globalization and the WTO as factors. So I wonder if you would 
tease that out a little more and tell me if you think that the 
pace of legal developments with respect to property, and real 
property, have any relationship with WTO commitments and the 
changes that have been wrought by them.
    Mr. deLisle. I think they do, although, of course, they are 
much less dramatic than in things like the Foreign Trade Law, 
the new version of which takes effect July 1. Obviously, the 
WTO does not specifically demand changes in those areas, but 
the indirect links are there, I think, in a variety of ways.
    First of all, I think the general ``WTO mania'' in China 
matters here. You cannot go into a bookstore without finding 
half the shelves crammed with ``China and WTO.'' In fact, you 
do not even have to read Chinese to know this. You can see 
``WTO'' on the spine of everything. SARS and WTO are the two 
English acronyms that recently have made it into the 
contemporary Chinese lexicon.
    Mr. Foarde. And ``website'' as well.
    Mr. deLisle. Right. ``WTO'' is all over the place. 
Actually, people are reading those books, unlike the selected 
works of whomever among the present or departed political 
leaders, which are gathering dust over in the corner.
    So I think WTO accession has created this atmosphere of 
thinking about laws and thinking about how the outside world 
handles the regulation of economic activity. I think there is 
something to the argument that the WTO, despite all its 
professed neutrality on things other than trade law narrowly 
defined, assumes a heck of a lot.
    It clearly demands that member states provide a degree of 
judicial review of government action, and it clearly assumes, 
as an underlying substrate, some form of property rights. So, I 
think there is that kind of link between property rights and 
China's WTO membership.
    Beyond that, I think that the question of whether China 
provides a level playing field for foreign traders and 
investors is becoming a real issue. We are used to thinking of 
such issues in this country as an American complaint about how 
American companies are 
discriminated against, and certainly that is a perennial and 
sometimes a valid concern.
    But there is a curious structure that has emerged in 
China's foreign trade and foreign investment law throughout 
much of the reform era that gave foreigners certain advantages 
to foreigners over Chinese actors. True, there were many 
informal factors that clearly benefited Chinese firms, but if 
you look at the formal regulatory structure and many practices, 
foreigners have been privileged: there were tax breaks, there 
was streamlined government approval of applications, and there 
was preferential access to key inputs. There were even clearer 
property rights for foreigners, certainly compared to those for 
private ownership in China.
    With China's entry into the WTO, the aspects of the 
preexisting system that discriminated against foreigners are 
under pressure for change. Seeing their former advantages thus 
eroding, Chinese parties are now among those insisting that 
there must be a level playing field. They want the property 
rights and other protections that the previous system provided 
in greater abundance to foreigners. So, there is a Chinese 
domestic constituency, certainly outside the most traditional 
State ownership sector, that says we need to be ``leveled up'' 
to create a level playing field by providing us with clearer 
and stronger rights of ownership.
    More simply and more conventionally, the foreign investors 
who are being asked into joint ventures with Chinese firms or 
who are coming in as competitors with Chinese firms are 
expecting, and are relatively successful-though not perfectly 
successful--at getting, some property rights protections. 
Especially in the joint-venture context, the ``spillover'' 
effects to the ``domestic'' Chinese economy are hard to contain 
in post-WTO-accession China. You cannot keep the ``domestic'' 
and ``foreign'' economies very separate any more.
    Mr. Foarde. So I just want to make sure that I understand. 
You think, in a lot of ways, the demand of Chinese, say the 
Chinese business class or property owning class, to have the 
same sorts of privileges that have existed up until now in, 
say, foreign joint venture enterprises, foreign invested 
enterprises, is part of what is driving this?
    Mr. deLisle. I think it is part of it. Foreigners demand 
property rights protection as the price of providing their 
capital, and that protection can be provided more or less 
formally. The trend is toward providing it more formally. 
Chinese counterparts to foreign firms and investors say, ``We 
have to be able to compete on a level playing field.'' Chinese 
in positions of political power realize that they have a 
problem if the foreigners come and take huge swaths of the 
economy, especially if their ability to do so is enhanced by 
legal rules and policies that favor foreigners. It is a 
political problem; it may be an economic problem.
    I do not have a theory about precisely how these factors 
and concerns determine policy, and I would be grateful for 
anybody out there in the political science or legal world who 
can tell me how the politics of this actually works in China. 
It is hard to tell what is pull and what is push, but there is 
a Chinese side to this story along the lines that you 
suggested.
    Mr. Foarde. Really interesting.
    Anybody else have a comment? [No response]. No. All right. 
Let me ask Dave Dorman if he wants to pick up the questioning.
    Mr. Dorman. Professor Prosterman, just a comment and a 
question. I was recently in China and had the opportunity to 
speak at length with an official who was a senior official in a 
provincial-level reform and development office.
    This official described his primary function as finding 
ways to compensate those whose land had been taken for bridges 
and roads and railways, and he was quite satisfied that in each 
case, month by month, he was able to either compensate these 
individuals and families through the funds available to his 
office, or go directly to the province and get what money was 
required to satisfy all parties. But what struck me in the 
conversation was, although he was representing a reform and 
development function at a rather senior level, his 
responsibilities did not include addressing the issue of rural 
incomes, or increasing agricultural efficiency for farmers. Is 
there a disconnect between rural reform policy and the current 
status of the legal system?
    Let me explain. I was looking at a statistic in your paper 
pointing out that perhaps 1 percent, understated, of arable 
land is disappearing each year in China. When you look at that 
number and think of how long this has been going on, you almost 
have to wonder whether the problem of land taking will be 
solved by other means before the legal system catches up.
    But the question to you is, and I know you have been 
dealing 
extensively with the organizations involved in rural 
development, to what extent are policies in this regard 
focusing only on converting arable land to other uses as 
opposed to looking at the interests of farmers in terms of 
raising incomes or raising agricultural efficiency and 
productivity? Is there a disconnect in policy? What 
organization is responsible for ensuring that rural development 
is responsible and equitable?
    Mr. Prosterman. Well, two points, perhaps, worth making. 
One, is that I think, at the very highest level of the 
government, including the President, the Prime Minister, the 
State Council, that there probably is a pretty strong consensus 
that the key need is to improve rural incomes and narrow the 
gap between urban and rural incomes. They really see that as a 
terrible problem, both in terms of potential instability, 
potential super-rapid and ``hard-landing'' urbanization, and in 
terms of reflecting a lack of development of the internal 
economy of the 800 million who live in the countryside.
    I think they realize that a nation of 1.3 billion cannot 
export its way to developed country status. They must develop 
the internal market. That means that the 800 million who live 
in the countryside, that market has to develop. The only way 
that can really develop is if their principal asset, land, can 
be fully utilized, which cannot happen as long as this 
horrendous process of readjustment or the associated process of 
unregulated takings continues.
    The other point is that there have been two recent and 
important developments. One, is an urgent notice of the State 
Council issued at the end of April on what is called land 
market correction and tightening land management, which is 
essentially aimed at restricting takings. It is essentially a 
moratorium for this calendar year on most takings of 
agricultural land for non-agricultural purposes. Just issued on 
June 10 is an accompanying regulation which basically limits 
takings of agricultural land to a specific list of seven public 
interest needs.
    It is an approach that, in comparative law terms, you might 
call it a ``list approach'' to takings, a very, very strict, 
restricted approach where you cannot count on a judicial system 
to narrowly interpret the meaning of ``public purpose'' or 
``public interest'' takings. These listed takings also must be 
approved by the State Council, so at least for this year they 
are going to have a very strict restriction on takings for non-
agricultural purposes.
    The next step, hopefully, will be to extend this moratorium 
beyond 2004, perhaps make it permanent in terms of using the 
expropriation power for any but a narrow list of clearly public 
purpose takings.
    There have been other straws in the wind that very much 
suggest they are going in this direction, so that any 
commercial, or industrial, or residential development takings, 
any for-profit takings, would have to, beyond getting approval 
for the change in use of land, rely on direct negotiation and 
paying a market price to the user of the land, which is 
definitely the direction in which they should be going.
    I think there is overwhelming central support, as far as we 
can see, for this overall approach to the problem. Now, there 
are undoubtedly pockets of resistance. There are constituencies 
both at the center, and certainly at the local level, that are 
doing their own thing, but I think they are being pretty 
sharply reigned in at this point.
    Mr. Foarde. Good. Thank you.
    Susan Weld, more questions?
    Ms. Weld. Thank you.
    I wanted to ask about the role of banks and credit unions. 
One reads a lot about the urban situation where there is sort 
of a malignant combination between the banks, the officials who 
might not be very pure, and the developers. The people who just 
get rolled over are the holders, the residents of those land 
areas. Can you tell me how that can be improved? What are the 
ways that that might be alleviated in the cities? In the 
countryside, one way, I would suppose, to let the farmers get 
their bit of value out of the land would be allowing them to 
use the land as collateral for a mortgage. Is that something 
that is in the wings?
    Mr. deLisle. We are passing a hot potato around here. I 
will not purport to speak to the rural areas at all on that, 
because I probably know even less about that than about urban 
areas on the banking issue, and because there are two panelists 
who know a lot about the rural sector.
    In the urban area, I think it is part of the generic 
problem with banks in general. I think there have been sincere, 
and in many ways Herculean, efforts to fix the banks.
    But the policy loans are still there, and until you get 
banks out of an environment where they are being told to do two 
different things--policy loans and commercial loans-- you are 
going to see a lot of very sloppy banking behavior, and I think 
that means the continuation of lending based in part on 
bankers' personalistic connections with developers for urban 
development, and that sort of thing. And, yes, there is a real 
estate bubble, by nearly everybody's reckoning.
    Ms. Weld. So, there are rules for disclosure of those 
things, but they are just not being enforced? What is the 
situation on disclosure?
    Mr. deLisle. I do not know much about it. My impression is 
that the answer is, quite weak. Again, I do not have much to 
say about the specific narrow questions you are asking, but I 
think it is going to be very hard to fix the problem, absent 
dealing with the broader problems of transparency and hard 
budget constraints and such on the banks. I think that is 
partly just because there is not a culture of disclosure. The 
banks are not listing on the exchanges yet. A couple of them 
are getting close, and that will help. So too will the expected 
formation of joint ventures with foreign banks.
    Of course, when some of the big State banks do list on 
exchanges, enter into joint ventures, and particularly when 
they try to raise capital abroad, there will be all sorts of 
tighter restraints that will develop, and that may improve 
things. But I think what you have got now is banks in the 
curious position of juggling these portfolios in very different 
undertakings--policy lending, commercial lending and so on-- 
and it is all under one roof.
    There are categories of loans and investments that nobody 
expects ever to be profitable, and then there are banks' quests 
for opportunities that hold out promises of being profitable, 
and that leads to a risk of speculative loans. The collapse of 
the TICs was in part a problem of bad and speculative real 
estate lending. I think that is at least a small piece of what 
is going on here, but I do not know enough about the details of 
real estate finance to go any farther than that.
    Mr. Prosterman. On the rural situation, the rural credit 
union offices have mainly acted as a recipient of farmers' 
savings to be channeled to urban lending. It is very rare that 
you find a farmer who is able to get credit. They will say in 
interviews, only if you have really got good connections or a 
brother-in-law at the bank, or something like that. But the 
government is getting very close to allowing mortgage of land, 
that goes naturally with giving long-term, 30-year rights, 
which, as I say, have something like 75 to 95 percent of the 
value of full ownership, to allow their use as collateral. That 
almost got into the Rural Land Contracting Law. We think it 
very likely will get into the forthcoming Property Law. That 
should allow, hopefully, the beginning of a modern rural 
banking system.
    Mr. Foarde. Christian, would you like to pose another 
question?
    Mr. Whiton. Sure. Just one last one.
    Dr. Davis, I was struck that you said last year there were 
almost daily protests regarding property seizures, and these 
were in Tiananmen Square. Do you see anything happening with 
momentum? Has this fizzled out? Do you think they will be back? 
Do you see any events on the horizon that may spark this to 
become something larger?
    Ms. Davis. At the moment, it is difficult to say because we 
had real significant crackdown around June 4, which is, of 
course, the fifteenth anniversary of the Tiananman Square 
massacre. Around that period, the whole square was shut down. 
Lots of people were jailed or put under house arrest. Internet 
activists, especially, were put under lockdown. Websites were 
shut down. So, there has really just been a kind of drying up 
in terms of information coming out of urban areas. Also, I 
think a lot of people have been laying low until that period 
passed.
    So, now that that is behind us, we may, in the next month 
or so, begin to see some more protests emerging. I mean, I 
doubt they have really shut that down permanently, but it is 
not uncommon around major holidays or anniversaries of big 
protests.
    Mr. Foarde. Let me give the last questions of this 
afternoon to Keith Hand. Keith.
    Mr. Hand. Thanks, John. Jacques, it is interesting that you 
mentioned all the WTO books in bookstores, because I always 
find bookstores to be a fascinating touchstone for what is on 
people's minds in China. I was recently in Beijing, Shanghai, 
and Chengdu, and the bookstores were full of books on urban 
demolitions, and also how farmers protect their rights, these 
sort of how-to books with form documents and very simple 
answers to some basic legal questions.
    One last question about the problem with urban demolitions 
and the related legal framework. We see a lot of abuses in 
terms of procedure and people getting their homes knocked down 
before they have had a chance to raise an issue about why their 
land is being developed or about compensation. In a lot of the 
conversations I had, compensation does seem to be the very 
central issue.
    Another problem that I sense relates to this compensation 
issue is that people's property rights themselves are a bit 
unclear. People do not own the land itself, of course. That is 
all owned by the state. They may have been allocated a place to 
live by their work unit at a subsidized rate. Or they may have 
been allowed to stay on land that they never paid use rights 
for. I think it was in the 1982 Constitution that declared that 
land all belonged to the state.
    So it seems that these people are angry because they have 
been living on land for a long time and the compensation that 
they get is not enough to buy new housing in the central part 
of a city where housing prices have gone up very quickly. On 
the other hand, if they did not own their apartment, or their 
shack, or wherever they lived in the first place, what would 
they be entitled to even if all these process issues were 
worked out?
    Ms. Davis. We may all have different answers to that one. 
Our touchstone on this tends to be international law. The 
International Covenant on Economic, Social, and Cultural Rights 
actually allows governments to exercise eminent domain. It 
allows forced evictions. But the problem is, forced evictions 
have to be conducted according to law and they have to have 
certain procedural protections which are supposed to include 
consultation with the people who are going to be affected. 
Whether they are residents or homeowners, Chinese law does not 
distinguish, as you know, between the two. It has to give 
people adequate notice of their eviction. It has to give them 
information on the proposed use of the land from which they are 
being evicted. Government officials are supposed to observe the 
eviction process to make sure there are no abuses.
    There is supposed to be proper identification of the people 
doing the demolition and eviction, which of course is often not 
the case in China where you have wrecking crews of guys from 
the countryside come in to do it. And, most crucially, there 
has to be some kind of legal remedy available.
    A lot of these protections are not existent in the letter 
of Chinese law, and most of them are absent in practice. I 
think these kinds of minimal protections would go a long way 
toward easing some of the problems.
    Mr. deLisle. I would second that, in general. In addition, 
I'd offer a couple of specific points. There are people who 
face displacement who do not clearly have whatever rights 
people might have living in those positions. There is a 
spectrum running from quasi-squatters up to people who have as 
good a claim as one can possibly have in Chinese property law, 
but you are right, that claim is still not one of underlying 
ownership to the land itself.
    There is also the compensation problem. Compensation to the 
displaced generally is offered at well below market rates, if 
by market you mean what this land is going to be worth if you 
were selling it--the right to occupy this space-in a fair and 
efficient market.
    I am struck in looking at the Reform and Development 
Commission's, the national one's, statement of reform 
objectives for the 
current year. What is striking is how little it addresses these 
problems, despite talking about a lot of other property rights 
related issues.
    I think that reflects either that the leadership has not 
been able to come to an agreement or that they are in denial. 
Seemingly everything else is in the official agenda. There is a 
statement about the need to address the compensation problem in 
the rural areas, to have such takings compensated at something 
closer to market rates.
    There is a statement of recognition of the need for a more 
sophisticated, transparent, functional market system for 
property rights in the urban areas. This is seemingly a pro-
developer item. There is a statement of the need to make land-
related property rights alienable and to create markets. Even 
mortgage-backed securities are on the agenda.
    There is discussion of the need for a social security 
system, of some floor for the material wellbeing of people that 
include the displaced, but is not tied to their rights to the 
particular apartment that they are losing. And there is a 
statement of the need for better State administration of State 
assets, to address the asset stripping problem. That is the 
agenda. Where is the piece of it that addresses the concern you 
raise?
    Mr. Prosterman. Perhaps, finally, one small step in the 
right direction that came out at the end of May. The Ministry 
of Land and Resources announced the creation of an Internet 
hotline for accepting complaints about, and reports on, illegal 
land takings, both rural and urban. So, that is the kind of 
incremental movement that we very much like to see.
    Mr. Foarde. It is certainly welcome.
    We are out of time for this afternoon. So, it is my 
privilege, on behalf of all 23 members of the Congressional-
Executive Commission on China, and particularly Chairman Jim 
Leach and Co-Chairman Senator Chuck Hagel, to thank, first, our 
three panelists, Meg Davis, Jacques deLisle, and Roy 
Prosterman, for coming from out of town, and some of you a very 
great distance, to share your expertise with us this afternoon. 
We appreciate it very much.
    In addition, everyone who came to hear the testimony this 
afternoon, thank you for participating with us. You will see 
the proceedings of this roundtable in a few weeks up on our 
website, and the statements will be available as well.
    Please sign up for our mailing list. That is the best way 
to find out about the next activity of the CECC.
    For this afternoon, we will bring this one to a close. 
Thank you all.
    [Whereupon, at 3:30 p.m. the issues roundtable was 
concluded.]


                            A P P E N D I X

=======================================================================


                           Prepared Statement

                              ----------                              


               Prepared Statement of Roy L. Prosterman\1\


                             June 21, 2004

    The Rural Development Institute has worked in China on issues 
relating to the decollectivization of agricultural land and farmers' 
security of tenure--including the important tenure-related issue of 
land takings for non-agricultural uses--since 1987. Over that time I 
have directly participated in village interviews of more than 1000 farm 
households in some 20 Chinese provinces and province-level 
municipalities (my RDI colleagues have participated in several hundred 
more household interviews), most of which have included questions as to 
land takings. I have also helped oversee and analyze two sample 
surveys, each of more than 1600 farm households in 17 provinces, 
carried out in cooperation with Renmin University (Beijing Peoples' 
University) in 1999 and 2001.\2\ RDI has also carried out comparative 
fieldwork and policy advisory work on rural land-tenure issues in 39 
other countries or settings since 1967, in many cases including land 
takings as a significant issue.
---------------------------------------------------------------------------
    \1\ The witness is Professor of Law at the University of 
Washington, Seattle, and President of the Rural Development Institute, 
a non-profit organization of lawyers which works on land law and policy 
issues in transitional economies and traditional developing countries.
    \2\ The full results of the 1999 survey are described in Roy 
Prosterman, Brian Schwarzwalder & Ye Jianping, Implementation of 30-
Year Land Rights Under China's 1998 Land Management Law: An Analysis 
and Recommendations Based on a 17 Province Survey, 9 University of 
Washington Pacific Rim Law & Policy Journal 3, 507-567 (2000). The full 
results of the 2001 survey are described in Brian Schwarzwalder, Roy 
Prosterman, Ye Jianping, Jeffrey Riedinger & Li Ping, An Update on 
China's Rural Land Tenure System Reforms: Analysis and Recommendations 
Based on a Seventeen-Province Survey, 16 Columbia Journal of Asian Law 
1, 141-225 (2003).
---------------------------------------------------------------------------
    The present testimony is based upon that cumulative work, 
discussions with Chinese government officials, discussions with other 
scholars and specialists, and on an ongoing review of the available 
literature.\3\
---------------------------------------------------------------------------
    \3\ Also submitted for the record is a longer RDI memorandum, to 
Files, from Brian Schwarzwalder, Roy Prosterman, and Li Ping, on ``Land 
Takings in China: Policy Recommendations,'' dated June 5, 2003.
---------------------------------------------------------------------------
             WHY AGRICULTURAL LAND TAKINGS ARE PROBLEMATIC

    Takings of agricultural land in China for non-agricultural purposes 
have been a major source of concern to the central government.\4\ There 
are a number of reasons why such takings are, and should be, of major 
concern:
---------------------------------------------------------------------------
    \4\ See, e.g., Central Committee Document No. 1 of 2004, entitled 
``Opinions of the Chinese Communist Party Central Committee and State 
Council on a Number of Polices for Promoting Increase in Peasant 
Incomes'' (one of the policies to be promoted is to reform the land 
expropriation process to protect farmer rights and provide increased 
compensation when land is taken for development), reported in ``Text of 
Chinese Policy Document on Raising Farmers' Incomes,'' Xinhua News 
Agency, Feb. 18, 2004, available in LEXIS BBC Worldwide Monitoring. 
This was the first No. 1 Document since 1986 to focus on rural issues.
---------------------------------------------------------------------------
  Loss of agricultural land for production. It is difficult to 
    estimate the amount of land being lost, especially to the extent 
    that many takings may not be disclosed to the central authorities. 
    Since China is attempting to feed approximately 20 percent of the 
    world's population on around 9 percent of its arable land, any 
    significant loss of such land is of concern. Perhaps in 
    anticipation of policy and legislative reform on this issue, 
    reports indicate that a substantial land grab has occurred over the 
    past 12 months, with government reports suggesting a staggering 
    total of 168,000 fraudulent land development cases in 2003, twice 
    as many as reported for 2002.\5\ Non-agricultural construction took 
    1,527,000 hectares of arable land in 2003, stated to be an increase 
    of 17 percent from 2002.\6\ These latter figures suggest a recent 
    annual loss rate of roughly 1 percent \7\ arable land per year to 
    non-agricultural takings, but again, may be understated due to non-
    disclosure to the central government.

    \5\ See, e.g. Ching-Ching Ni, ``Land Grabs Sow Pain, Poverty for 
Chinese Farmers: As the Economy Grows, Development Deals Are Often 
Corrupt and Victimize the Peasantry,'' Los Angeles Times, March 7, 
2004. See also Elizabeth Rosenthal, ``Factories Bump Rural Chinese; 
Farmers Left Unpaid for their Land,'' The New York Times, March 24, 
2003.
    \6\ Ministry of Land and Resources Declaration or Chinese Land 
Resources in 2003, available at www.mlr.gov.cn/query/gtzygk/2003.htm
    \7\ See FAO Production Yearbook 2002, Table 1.
---------------------------------------------------------------------------
  Undermine the security of farmers' land rights. As we shall 
    discuss subsequently, China's farmers, under the 1998 Land 
    Management Law and the 2002 Rural Land Contracting Law, are now 
    supposed to be in possession of their land under 30-year use 
    rights, in general not subject to ``readjustment'' (take-back and 
    reallocation) by local cadres. Yet takings for non-agricultural 
    uses are often accompanied by illegal ``readjustments'' of all the 
    remaining agricultural land in the village, spreading the pain of 
    land loss (and tenure insecurity) among all the farmers. 
    Underlining the loss sustained by land-losing farmers, farmers 
    themselves typically receive only a tiny fraction of the 
    compensation paid for the portion of land being converted for non-
    agricultural use. Thus land rights village-wide may be perceived as 
    both worthless and insecure.
  Undermine the value of farmer's land rights. To the extent 
    that farmers' land rights are perceived to be readjustable and 
    short-term rather than genuinely secure for 30 years, agricultural 
    land will develop far less market value, and be far less 
    transactable--undermining major goals of the Rural Land Contracting 
    Law.\8\
---------------------------------------------------------------------------
    \8\ Based on the values of agricultural land in comparable Asian 
settings, we have calculated that secure and marketable 30-year land 
rights in China should, as markets develop, achieve an average value of 
between US$3,750 and US$4,750 per hectare (roughly Rmb30,750 to 38,950 
per hectare), suggesting a total value in the range of US$500-600bn 
(roughly RMB4.1-4.9tr) for China's 135m hectares of arable land. This 
value, realized through market transactions and, eventually, through 
mortgage of arable land rights (not yet permitted), represents capital 
that farmers can begin to apply to investments in agriculture, 
enterprise, education, and consumption. See generally Roy Prosterman 
and Brian Schwarzwalder, From death to life: giving value to China's 
rural land, China Economic Quarterly, Q1 2004, p. 20. See also, on the 
importance of bringing, as he calls it, ``dead capital'' to life, 
Hernando de Soto, The Mystery of Capital (2000).
---------------------------------------------------------------------------
  Undermine farmers' ability to invest. An even broader and 
    more immediate consequence of undermining farmers' tenure security 
    is through reducing their ability and motivation to make mid- to 
    long-term investments in the land, which are critical for the 
    increase and diversification of production, the increase of farm 
    incomes (which currently lag behind per-capita urban incomes in a 
    ratio of 1:3.24), and the increase of rural consumption (which 
    would permit enhanced reliance on the development of the internal 
    market).\9\
---------------------------------------------------------------------------
    \9\  Successfully carrying through the implementation of farmers' 
30-year land rights in China may be thought of in parallel with the 
three great post-war land reforms which were supported by the U.S. in 
Japan, Taiwan, and South Korea, each of which gave land ownership to 
what had generally been unmotivated tenant farmers with short-term land 
rights. In Taiwan, for example, in the decade following land reform, 
farmers increased their rice production by 60 percent and (aided by 
further investment and diversification) their average per capita income 
increased by 150 percent . Rural consumption grew greatly across a wide 
range of goods and services. See Chen Cheng, Land Reform in Taiwan 84-
88 (1961). In interviews conducted with farm households throughout 
Taiwan in 2000, we found that Taiwan's small farmers were full 
participants in the island's vibrant consumer economy. Virtually all of 
the farm households we interviewed (most of whom were part-time, rather 
than full-time, farmers) possessed a wide range of consumer electronic 
goods--color TVs, VCRs or DVD players, stereos, cellular phones, 
washing machines, refrigerators--as well as owning automobiles (and 
often motorcycles). Most families also held private life insurance 
policies, had purchased stocks in Taiwan's stock market, had a 
computer, and had traveled off island on at least one occasion. The 
implications for a Chinese rural economy of more than 800 million 
potential consumers are clearly enormous.
---------------------------------------------------------------------------
  ``Cheats'' farmers, creates instability. Takings of farmland 
    for non-agricultural purposes represents a significant source of 
    rural discontent. Farmers usually receive grossly insufficient 
    compensation for the lost land, and without either adequate rules 
    or effective judicial redress, farmers have typically reacted 
    through demonstrations, as was reported in Jinyun county of 
    Zhejiang Province in November 2003,\10\ or by traveling to Beijing 
    to lodge complaints at various ministries.\11\
---------------------------------------------------------------------------
    \10\ South China Morning Post, ``Around 1,000 Villagers Clash With 
Police over Land Seizure,'' November 27, 2003. In the Jinyun case, 
farmers claimed that the local government had illegally requisitioned 
up to 260 hectares of farmland belonging to 6,000 farmers. Farmers were 
compensated through a one-time cash payment of RMB 20,000 
(approximately US$2,500) for their land. At least one farmer from 
Jinyun traveled to Beijing to lodge an official complaint regarding the 
taking. The clash between villagers and officials in Jinyun was 
reported to have involved around 1,000 farmers surrounding the 
industrial park in which the land is located. When local authorities 
intervened, violence ensued, with dozens of people reportedly injured.
    \11\ Officials at both the State Council and the Chinese Academy of 
Social Sciences report that they receive detailed letters of complaint 
regarding land takings cases from farmers on a daily basis. Many of 
these letters indicate that farmers have already made extensive efforts 
to register their complaints with various agencies in Beijing, each of 
whom push them to other departments. See generally on taking-related 
rural instability, Thomas Bernstein, Instability in Rural China, in Is 
China Unstable? Assessing the Factors 96 (David Shambaugh, ed. 2000).
---------------------------------------------------------------------------
  Distorts land markets. To the extent that farmers are 
    deprived of fair compensation for their land rights in part 
    (sometimes in large part) to provide land to buyers or end users at 
    a subsidized, less-than-market price, the result is also a 
    corresponding distortion of factor markets in the Chinese economy. 
    Land as a factor of production is then undervalued--in the most 
    extreme cases, considered as virtually a free input--with 
    consequent distortions in investment decisions and the 
    inappropriate allocation of capital, as well as accompanying and 
    frequent underutilization of the land acquired. Indeed, the twin 
    distortions of artificially cheap credit and cheap land have 
    probably contributed greatly to the recent perceived overheating of 
    the Chinese economy, with its accompanying fallout (such as 
    potential inflationary pressures) for the world economy.\12\
---------------------------------------------------------------------------
    \12\ See, e.g., Keith Bradsher, ``China's Squeeze on Credit Shows 
Signs of Success as Economy Slows,'' New York Times, June 12, 2004:
    Instead of interest rate changes, China's economic policy makers 
this spring have relied on a brute-force approach of restricting loans 
and land-use authorizations for industries that they believe to be 
overheating, notably real estate, steel, cement, and aluminum. These 
methods have drawn scorn from many free-market-economists. (Emphasis 
added.)
---------------------------------------------------------------------------
  Induces corruption of local officials. Low compensation paid 
    to farmers for land takings in combination with the lack of 
    transparency in the land takings process creates an opportunity for 
    local officials to pocket huge profit for their own, contributing 
    to the widespread expansion of official corruption. Three 
    provincial level officials were convicted in 1998-1999 for taking 
    bribes or embezzling land granting fees in an amount up to $20 
    million in offering cheap land to developers,\13\ and a large 
    proportion of all corruption cases tried in recent years have 
    involved illegal dealings with land granting fees.
---------------------------------------------------------------------------
    \13\ Shi Hechang, Investigation on State Land and Resources: Who 
Protects Our Lifeline? Earth [Dadi], Issue No. 20, 2000.
---------------------------------------------------------------------------
    THE LAW AND PRACTICE WITH RESPECT TO AGRICULTURAL LAND TAKINGS, 
                      INCLUDING PROJECTED REFORMS

    Over 800 million of China's 1.3 billion people make their living 
primarily from agriculture.\14\ China was the first Communist state to 
bring about the break-up of collective farms into individual family 
holdings (in 1979-83) but it did so under ground rules that left the 
great majority of individual farmers with very insecure rights as to 
any particular piece of land. Farmers' security on the land, and their 
ability to invest both ``sweat equity'' and financial resources in 
improving that land and its productivity have, however, been issues of 
increasing importance to the central leadership since at least 1993. 
These issues are now seen as being of crucial importance to China's 
overall economic development during the coming years and are key goals 
of the 1998 Land Management Law, the more recent (2002) Rural Land 
Contracting Law, and accompanying central-government 
pronouncements.\15\
---------------------------------------------------------------------------
    \14\ See FAO Production Yearbook 2002, Table 3.
    \15\ The Rural Land Contracting Law became effective on March 1, 
2003. The government's Central Rural Work Conference of January 2003 
had identified implementation of the RLCL to be the highest priority 
for rural work in 2003. See ``Chinese Leaders Hu Jintao, Wen Jiabao 
Address Central Rural Work Conference,'' Xinhua News Agency, Jan. 9, 
2003. Although there has been some concern that the Central No. 1 
Document of 2004 appeared to focus more on short-term ``fixes'' than 
underlying tenure security issues, the most recent developments seem to 
indicate that the latter remain of key importance. See ``The State 
Council Issues an Urgent Notice Requiring Restoration of Production on 
Idle Land As Soon As Possible,'' People's Daily, March 31 2004 (a 
notice also dealing with measures for RLCL implementation).
---------------------------------------------------------------------------
    An extensive sample-survey by RDI and Renmin University in mid-2001 
indicated that about 40 percent of Chinese farm households--85 million 
out of 210 million households, projecting from a sample of over 1600 
households--regarded themselves as having received secure 30 year 
rights by that time, and subsequent village research by RDI and Chinese 
counterparts also indicated that this figure had probably neither 
substantially increased nor substantially eroded by early 2004.\16\ 
Indeed, by that time, perhaps as many as one out of two farm households 
that had received secure 30-year rights had made long-term investments 
to improve the land, investments that they would not make under the old 
regime of insecure land rights.\17\
---------------------------------------------------------------------------
    \16\ See China Economic Quarterly, supra note 5.
    \17\ See id., at pp.22, 24. See also Klaus Deininger & Songqin Jin, 
``The Impact of Property Rights on Households' Investment, Risk Coping, 
and Policy Preferences: Evidence from China,'' World Bank Working Paper 
No. 2931, 2002.
---------------------------------------------------------------------------
    However, the remaining 60 percent of farm households had not (and 
have not) yet received secure land rights, and are subject to what may 
be regarded as four analytically distinct sources of insecurity on the 
land:

          (1) ``Readjustments'' of farmers' landholdings carried out by 
        local (collective) cadres because of either population change 
        in the village over time or population change within individual 
        households over time.\18\
---------------------------------------------------------------------------
    \18\ In a ``big'' readjustment made for population reasons, all 
village land is taken back and redistributed in new patterns, to 
maintain absolute per capita equality of every person's land holding--
this reflects both overall growth in village population since the last 
such readjustment, and individual changes in each household's 
population. In a ``small'' readjustment, only population gains and 
losses in individual households are considered, with the former gaining 
additional land at the expense of the latter.
---------------------------------------------------------------------------
          (2) Readjustments of farmers' landholdings carried out 
        because some farm households have lost land to a taking, in 
        which all the remaining agricultural land is taken back and 
        redistributed to balance out (equalize) the loss among all 
        village households.
          (3) Readjustments carried out purportedly because of village 
        population change, but actually as an excuse for the cadres to 
        hold back some land from reallocation for future or planned 
        non-agricultural use (disguised taking).
          (4) Takings accompanied by low or no compensation to land-
        losing households (assuming there will continue to be no 
        readjustments for the 40 percent of China's households who 
        consider themselves to have secure land rights, this one 
        further potential source of insecurity remains under the 
        existing rules if takings occur that affect their specific 
        land).

    What are the present rules with respect to takings of agricultural 
land for non-agricultural purposes, and what changes may be in prospect 
or desirable? \19\
---------------------------------------------------------------------------
    \19\ The following has been adapted, in part, from Roy Prosterman, 
``Rural China update,'' pp. 19-21 (CLSA Asia-Pacific Markets, Special 
report, May 2004).
---------------------------------------------------------------------------
    Under the existing rules and practices,\20\ there are major issues 
as to low farmer compensation, and also as to the overly broad purposes 
of land takings and the non-transparent procedures which are followed. 
Under existing laws, farmers are entitled to compensation that amounts 
to only a small share of the market value of the land. Under the 1998 
Land Management Law, compensation for arable land expropriations 
includes: (1) compensation for the loss of land; (2) compensation for 
young crops and fixtures; and (3) a resettlement subsidy.\21\
---------------------------------------------------------------------------
    \20\ Principally embodied in the 1998 Land Management Law and its 
accompanying Regulations. See generally the RDI memorandum to Files 
also submitted for the record, supra note 2.
    \21\ 1998 Land Management Law art. 47; People's Republic Of China 
Land Management Law Regulations art. 26 (1998).
---------------------------------------------------------------------------
    Standard compensation for the loss of land is set at 6 to 10 times 
the value of the average annual output of the arable land over the 
three years prior to expropriation. The collective, whose land has been 
expropriated, is required to report to its members (but often fails to 
do so) the compensation received for the expropriated land. 
Compensation standards for surface fixtures and young crops are 
stipulated by provinces, autonomous regions, and provincial level 
municipalities. Resettlement subsidies on average should amount to 4 to 
6 times the average annual output value of the land for the three years 
preceding the expropriation. However, such resettlement subsidies may 
exceed that average, and are capped at a maximum of 15 times the 
average annual output value of the land for the previous three years.
    If land compensation and resettlement subsidies set according to 
these standards are still insufficient to help the displaced farmers 
maintain their original living standard, the resettlement subsidy can 
be increased upon approval by the people's governments of the 
provinces, autonomous regions and municipalities. The total amount of 
land and resettlement compensation is capped at 30 times the average 
annual output value for the three prior years. However, use rights for 
the land that is taken may be auctioned or sold by the State for a 
value that is many times higher than this figure. In fact, by most 
estimates, the compensation paid to farmers represents only 5-10 
percent of the ultimate sale price of the land; 25-30 percent of the 
land value is kept by the village level collective, with the remaining 
60-70 percent of the sale price captured by the county and township 
governments.\22\
---------------------------------------------------------------------------
    \22\ Xiaolin Guo, Land Expropriation and Rural Conflicts in China, 
The China Quarterly (2001) at 422. See also RDI memorandum to Files, 
supra note 2, 11-12.
---------------------------------------------------------------------------
    While the compensation formula is already extremely unfair and well 
below the market price of the land to be taken, especially where the 
land is to be used for industrial, commercial, or residential 
developments, farmers who lose land to state takings cannot even get a 
large part of the compensation calculated based on these standards. The 
existing takings regulations explicitly require that the portion of 
compensation which is for loss of land be retained with the collective 
entity.\23\ Farmers are entitled only to compensation for standing 
crops and fixtures, and resettlement subsidies if neither the 
collective entity nor the state take responsibility for 
resettlement.\24\
---------------------------------------------------------------------------
    \23\ Implementing Regulations of the Land Management Law (1998), 
art. 26.
    \24\ Id.Central government efforts to curtail rampant land 
development and speculation through bureaucratic and administrative 
changes had, at least as of early 2004, proven ineffective. In late 
2003, the central government announced that officials at the county and 
township levels of the Ministry of State Land and Natural Resources 
would be brought under the direct supervision of province-level 
ministerial offices. There have been repeated calls for strengthening 
land use planning efforts in order to make China's system for 
protecting arable land the world's strictest. Anecdotal evidence--such 
as driving around any peri-urban area in China--inevitably leads to the 
conclusion that land continues to be developed at a brisk pace.
---------------------------------------------------------------------------
    Policy makers and legislators in Beijing recognize that action must 
be taken, and initial steps are underway. Constitutional amendments 
adopted by the NPC in March, 2004, added new language regarding 
compensation when property is taken.\25\ Although this change is 
unlikely to have an immediate or direct impact on land takings cases, 
it sets the broad direction for future reforms.
---------------------------------------------------------------------------
    \25\ Article 10 of the Constitution reads in part, ``the State may, 
for the necessity of public interest, requisition [zhengshou] or 
expropriate [zhengyong] land in accordance with law and pay 
compensation.''
---------------------------------------------------------------------------
    Importantly, amendment of the 1998 Land Management Law, which has 
enabled local governments to acquire agricultural land at very low 
prices relative to its ultimate price, and retain the lion's share of 
resulting profits, has been added to the legislative agenda. Prior to 
amending the LML, however, the central government plans to issue a 
policy document related to land takings. Initial drafts of this policy 
have contemplated several fundamental changes to the current system of 
land development, including:

  Limitation of the state expropriation of land solely to 
    public purpose takings, which will be defined in legislation 
    (roads, public schools, etc.);
  For other, profit-making commercial, industrial, or 
    residential development projects, allowing the collective landowner 
    and farmer-users to directly negotiate land use right leasing 
    transactions with prospective developers, without (in contrast to 
    present practice) invoking the state's expropriatory power or 
    involving the state in the development process;
  Increasing the compensation standard that is paid to farmers 
    to more closely reflect the value of the land that is lost as a 
    result of conversion to non-agricultural use;\26\
---------------------------------------------------------------------------
    \26\ Depending on the discount factor used for future streams of 
income, secure 30-year land use rights should, at the beginning of the 
period, have an economic value equivalent to about 75-95 percent of the 
value of full private ownership, underscoring the argument that the 
farmer-user should get the lion's share of all compensation paid. 
Moreover, strong arguments can be made that compensation should be 
based on the full 30-year term, not treating the term as a depreciating 
asset. This can be supported both on the likelihood that the rights 
will be extended for a further 30years upon expiration of the present 
term, as has been indicated by former President Jiang Zemin, and by the 
practice in Hong Kong when farmers' 50-year rights are acquired for 
non-agricultural purposes.
---------------------------------------------------------------------------
  Providing key procedural protections to farmers whose land 
    will be developed, including prior notice, an opportunity to be 
    heard, and a right to appeal.

    In dealing with seemingly uncontrollable conversion nationwide of 
agricultural land for non-agricultural use, the central government 
recently took several drastic measures to administratively halt such 
conversion. On April 29, the State Council issued an urgent notice 
putting a moratorium on land conversions for the rest of the year.\27\ 
It requires government at all levels with authority of approving land 
conversions suspend their review of applications for land conversions 
during the moratorium period except for the conversions for projects 
with ``urgent needs.'' In clarifying such ``urgent needs,'' the 
Ministry of Land and Resources and the State Commission on Development 
and Reforms issued an Implementing Measures of the State Council's 
Urgent Notice on Carrying Out Land Market Correction and Tightening 
Land Management on June 8, 2004. The Implementing Measures explicitly 
list seven categories of uses that fall within the definition of 
``urgent needs'' and may be approved within the moratorium: (1) energy 
projects; (2) transportation projects; (3) water conservancy and 
agricultural projects; (4) major urban utilities; (5) healthcare 
facilities; (6) education facilities; and (7) national defense 
facilities.\28\ These new developments clearly indicate the central 
government's grave concerns over rampant land takings, and appear to 
show its inclination in defining the scope of future land takings by 
listing public purposes in unambiguous terms.
---------------------------------------------------------------------------
    \27\ The General Office of the State Council Issues an Urgent 
Notice: Carry Out Land Market Correction and Tighten Land management,'' 
People's Daily, April, 30, 2004.
    \28\ The Ministry of Land and Resources and the State Commission on 
Development and Reforms' Implementing Measures of the State Council's 
Urgent Notice on Carrying Out Land Market Correction and Tightening 
Land Management, Sec. 2, available at www.mlr.gov.cn/project/querysta/
multidocview.
---------------------------------------------------------------------------
    Issuance of a longer term policy document, however, has been 
delayed, primarily because of objections raised by local governments, 
who consider the ability to offer low cost land to developers to be an 
important component of attracting investment and maintaining economic 
growth. Beijing still appears to be reconciling the potential negative 
impact of making land development transactions more expensive and time-
consuming on a permanent basis, against the increasing social and 
political costs of the current system, which severely disadvantages 
farmers, badly distorts land markets and, quite likely, contributes to 
unhealthy overheating in various sectors of the economy. The central 
government also seems determined to increase farmers' compensation for 
land as an early step in the reform process -- but when and by how much 
remains to be seen.\29\
---------------------------------------------------------------------------
    \29\ See ``China Will Increase Land Takings Compensation Standard 
(Woguo Jiang Tigao Zhengdi Buchang Biaozhun),'' Law-Star.com, citing 
the Ministry of State Land and Natural Resources, January 18, 2004.
---------------------------------------------------------------------------
                      WHAT MORE NEEDS TO BE DONE?

    A longer-term central directive on the aggravated issue of land 
takings does seem likely in the near future, and should be followed by 
a package of amendments to the 1998 Land Management Law. These should 
include measures to specifically define and limit, following the 
current moratorium, the ``public purposes'' for which the power of 
compulsory taking can be used; moving towards a regime where any 
proposed taking of agricultural land for a commercial or private use 
should be on a non-compulsory basis, at a price which is voluntarily 
agreed to through negotiation both by the collective owner of the land 
and by the farmers who are the long-term users (that is, a market 
price); with a much higher compensation standard for compulsory takings 
than at present; with the farmers to receive the bulk of the 
compensation paid in both compulsory takings and negotiated 
acquisitions (versus the 5-10 percent of compensation they are 
estimated to receive now); and with highly transparent and public 
procedures being used, instead of the opaque and non-participatory 
process that has been used until now.
    Beyond issuance of a new policy document and amendment of the LML, 
there will be key measures of implementation required to bring any new 
restrictions on rural land takings into full effect. Three in 
particular should stand out:

  Publicize the new rules. This was vital to reaching 85 
    million farm households with 30-year land rights by 2001, and 
    relied heavily on the repeated use of television (the great 
    majority of farm households do have a television).
  Set up a hot-line for complaints. This has successfully been 
    done for the province-wide implementation of tax-end-fee reform in 
    Anhui.\30\
---------------------------------------------------------------------------
    \30\ In parallel to the idea of hotline, the Ministry of Land and 
Resources recently issued a notice calling on all provincial level land 
administrations to establish an internet hotline for accepting 
complaints about and report on illegal land takings. See the Ministry 
of Land and Resources Notice on Effectively Strengthening Transparency 
of Government Information on Land Resources Through Internet, sec. 2, 
available at www.mlr.gov.cn/project/querysta/multidocview.
---------------------------------------------------------------------------
  Include takings-reform in monitoring. A national sample 
    survey of farmers should be done within the next 12-18 months on 
    the state of implementation of farmers' 30 year rights, and this 
    should include specific questions on recent land takings in the 
    village and farmers' knowledge of new rules (by then, hopefully, 
    clearly in place) on takings reform.

    A broader benefit is that, as the central government begins such 
implementation steps on land takings, it will be setting patterns that 
are generally relevant, and necessary, in effectively extending other 
important normative regimes, and the rule of law generally, in the 
Chinese countryside.



                       Submission for the Record

                              ----------                              


 Prepared Statement of Patrick Randolph, Elmer E. Pierson Professor of 
  Real Estate Law, University of Missouri, Kansas City, School of Law

                             JUNE 21, 2004

         Property Seizures in China: Politics, Law, and Protest

                        THE URBAN RENEWAL ISSUE

    News reports from China for more than a year have been full of 
stories of conflict over what is popularly referred to as 
``demolition,'' but what we call ``urban renewal'' here. To understand 
the issue, one must first know what ``urbanism'' is being ``renewed.''
    During the 1980s, the Chinese filled their cities with apartment 
blocks to provide basic housing as part of the ``iron rice bowl'' 
promise. Everyone gets an apartment, be it ever so humble. These were 
generally six story walk-ups made of concrete, with terrible plumbing, 
service porches on the window side (for drying clothes) and enough 
space to house one person comfortably, although generally families of 
five to eight lived in them. Having constructed these monstrosities in 
great dirty rows, the Chinese proceeded to ignore them for two decades, 
letting them deteriorate with rust, dirt, and the detritus of many poor 
people trying to live together in not enough space. Painted in fading 
green, dusty rose, and beige, these buildings were the dominant visual 
element of Beijing, Guangzhou, Shanghai, Xian and other Chinese cities 
I visited in the early 1990s.
    Ugly and cramped as they were, the little concrete cubicles 
provided a warm (often too warm) and dry home for millions of workers 
in state-owned industries and lower-level government bureaucrats. The 
Chinese had become accustomed to living in close quarters, and often 
the apartments housed extended families that adjusted to the conditions 
and lived out their lives on top of one another. Buried somewhere in 
the rows of apartment blocks were schools, clinics, and community 
facilities all developed by the factory or bureau that owned them. In 
the interstices, very primitive concrete block or brick buildings 
housed the shops that provided food and basic necessities, again, all 
very convenient to the clientele. Sometimes these complexes actually 
were located within the walls of the big factories. Workers could 
easily walk or bike to their place of employment, and commonly went 
home on the long noon break to take a nap. The Chinese shopped for 
fresh meat and produce in open markets along the street. Few had 
refrigerators. Virtually none had air conditioning. But everyone that 
one knew (except a few high party bosses) lived pretty much the same 
way. At Peking University, the University President might have had a 
few extra square meters in his place, but it was otherwise 
indistinguishable from the nearby concrete cubes where his employees 
resided. This was the culture of communism.
    Although, in theory, this housing was provided as part of one's 
arrangement with the work unit to which one was assigned, in fact the 
system provided virtually perpetual occupancy. There was rent--but it 
was very small, and evictions for non-payment were virtually 
nonexistent. Laid off workers continued to be entitled to this housing 
(and also education and health care) from their former employer. When 
the family member who worked for the work unit died, other family 
members who still lived in the apartment were permitted to remain. When 
the state-owned industries failed, the State took over the housing and 
other social service responsibilities, and the housing remained.
    Around 1997, Premier Zhu Rongji announced that the game was over. 
Everyone in China's cities would stop living in State provided housing 
and buy their own homes. He set a 2-year deadline, but in fact the 
transformation, such as it was, took a number of years longer. The 
basic transaction was a sale of the living units by the State or the 
work units to the occupants, usually for small prices, which could be 
paid in installments that were not a lot more than the original tiny 
rent. Of course, now the occupants were responsible for their own 
maintenance, but they were used to very little of that. Today it is 
estimated that 80 percent of China's legal urban residents live in 
their own homes. I suspect the percentage is quite a bit smaller, since 
many Chinese own three or four of these little cubicles and rent them 
out to younger people who did not have the chance to buy an apartment 
when conversion occurred. But many of the lower echelon workers just 
stayed put in the concrete boxes they'd always known.
    Then came prosperity and with it the development of newer, nicer 
housing that workers could buy. Tens of thousands of new apartments 
structures rose up virtually overnight, often on surplus land within 
the urban area or suburbs, but on the fringe. Chinese had more money to 
spend, and they sopped up these larger (60-120 square meter) boxes, in 
elevator buildings with far more amenities, at least when new. The 
maintenance is still appalling by Western standards, but compared to 
what people had before--this is ``uptown.''
    The new buildings often were developed on land that the developers 
bought from the State through the newly created program of ``land use 
rights.'' The same system was used to build the new office complexes, 
shopping centers, business centers, and other structures that marked 
China's economic renaissance. Local governments profited from the sale 
of these land use rights, and used the money to fuel massive 
infrastructure development (the flocks and flocks of building cranes).
    The process of providing better and better housing to Chinese 
consumers proceeds today unabated. Most are built on granted land use 
rights--so the residents in theory really have rights in the land 
itself, and not just occupancy claims in the buildings. The newest 
facilities can actually be pretty nice, and arguably the Chinese soon 
will be waking up to the fact that they're entitled to expect some real 
building maintenance from the state- owned maintenance companies paid 
out of owner's association assessments to care for these new places. 
Air conditioning is common, elevators work, and there is even 
underground parking. And, always keep in mind, we're talking lots and 
lots and lots of these buildings. There are a whole lot of urban 
Chinese seeking new housing.
    But now many of the cities that were most proactive in bringing 
about this economic rebirth have discovered that there is precious 
little land now available for the creation of new land use rights. And 
they've spent the money they already earned as fast as they got it. How 
to meet their future growth plans? The answer lies right there in the 
heart of the city--in those locations that were once dirty factory 
areas but now are prime residential sites as the city, surrounded by 
all the high rise office buildings, gleaming roads and other mass 
transit facilities. And convenience to work, once taken for granted and 
undervalued, has become a highly desired commodity. As the Chinese buy 
more and more private cars, they have discovered that wonderful western 
invention--traffic gridlock. People who have acquired apartments in the 
suburbs have found that it takes an hour or more to get to work, and 
there's a huge demand for more convenient middle and high-end housing.
    And there--right in the urban core--is all that land ripe for 
development. Even better, the land has never been the subject of 
granted land use rights, so the local land administrations can sell it 
to developers for a pretty penny.
    Just one little problem--there are people living in these squalid 
little places. In fact there are lots and lots of people, still 
trusting in government to take care of them consistent with the 
promises made to them during their youth. These people present special 
problems to the Chinese. In America, we've seen redevelopment of our 
urban cores time and time again. But, because theoretically we have an 
open market that will provide alternative housing for people living in 
these kinds of situations, we just startup the bulldozers and start 
ripping away. We pay the owners of the old apartments and flophouses 
and slum brownstones that we demolish, but the residents--usually 
rental tenants--get little by way of relocation allowance except when 
Federal money is used. But China had a political issue with that 
approach--these were people who trusted in Communism, and Liberation 
was all about guaranteeing basic standards to poor citizens. So when 
urban renewal happens in China, the local laws usually required that 
some effort be made to provide alternative housing to those living in 
these places, regardless of how it was to come to be there, and pretty 
much regardless of what ``ownership'' they might have. The compensation 
responsibility is placed upon the developer, and it is in addition to 
whatever the developer paid for the land itself.
    As the urban renewal push began in China we started to see people 
waking up one morning and discovering huge Chinese characters painted 
on their buildings indicating that demolition was imminent. This was 
the first thing that happened in the process, since it prevented anyone 
claiming relocation rights who moved into a building so decorated with 
warnings. Then the developers started to negotiate with the residents. 
But the residents, although their little apartments were hovels 
compared to many Chinese facilities, liked their little communities and 
especially valued their location. The developers offered replacement 
housing facilities instead of cash payments (permitted and even 
encouraged by the laws) but the tenants often concluded that the 
substitute housing, even when new, was too remote from their jobs, and 
in fact from the community that they'd always known, to be suitable. 
They knew that their location was valuable, and they wanted appropriate 
compensation, not some remote concrete box that required a complete 
change of life.
    Note that there are parallels here to the relocation that occurred 
when the great dam was built in the Three Gorges on the Yangtze River. 
But those were peasants, with different rights and different 
expectations. Now we're talking relatively sophisticated urbanites, who 
have friends and relatives still more sophisticated. It was one thing 
to say that one had to be removed because of highways or other public 
works. But when the demolition characters appeared solely because some 
fat cat developer intended to make a huge profit building new private 
housing where old private housing stood, people expected to be paid 
well. The situation from the government perspective was not aided by 
the exposure of massive corruption in the granting of land use rights 
for these purposes. Even though the requisite handful of developers and 
land administration officials were cashiered and imprisoned for the 
most egregious corrupt practices, the Chinese populace in fact felt 
that the occupants of these places deserved better treatment. We 
started to see demonstrations, sit-ins, even newspaper and television 
reports, and the Beijing taxi drivers were outraged--passing on their 
views to all who would listen.
    As I've been saying all along, with prosperity in China comes the 
expectation of protection from government for vested rights. And this 
in turn leads to participation in government. Since, in fact, there was 
little formal right to participate, the affected Chinese citizens and 
their friends resorted to the time-honored method of seeking redress 
from the power structure--harangue. Party officials and land 
administration leaders were contacted regularly and called to account 
for what were perceived to be abusive practices. The plot thickened 
when stories emerged about the emotional impact that destruction of 
these traditional urban communities had on the beloved older folks who 
had trusted in Communism their whole lives. There were some suicides 
that occurred while the bulldozers chugged toward the buildings, and 
other dramatic examples of how Chinese, like the rest of us, place an 
extraordinarily high value on the concept of ``home.''
    I've seen U.S. newspaper pieces, fueled often by dissidents and 
``China knockers,'' who have suggested that this is one more example of 
how much more abusive China is to its citizens as compared to the West. 
In fact, anyone involved in urban renewal here knows that we regularly 
have beat up on our poorest citizens in the same circumstances through 
the last 50 years. Tenants in slum buildings slated for demolition get 
virtually no compensation and little if any relocation assistance. Even 
commercial tenants routinely sign leases that say that any lease rights 
end on condemnation, thus eliminating any compensation for claimed 
property takings, and leaving the whole condemnation award for the 
landlord.
    In fact, if anything, China's greatest oversight as compared to the 
U.S. was the failure to recognize the claims of the landowners and non-
resident owners of the apartments who had been renting to others. Oh 
yes, there were stories of inadequate payments and abusive evictions. 
But these were not, so far as I can tell, the dominant complaint. Most 
of the complaints have been about nothing more than money. And neither 
these abuses nor the underpayments were condoned by law. For several 
years, there have been a national statute and local regulations that 
clearly provided for adequate compensation for residents and an appeal 
process to resolve disputes. But neither the regulations nor the system 
provided for proper attention to the actual owners of the land use 
rights or the housing units (if they were not residents).
    Recently, things have commenced to change dramatically. There has 
been a dizzying release of new statutes and regulations. The national 
administration has promoted an amendment to the Chinese Constitution 
containing a guaranteed protection of property rights lawfully obtained 
and a specific requirement for compensation when such rights are taken. 
I saw a New York Times report citing Chinese scholars who said that the 
Constitution in China is not binding in the same way that the U.S. 
Constitution controls government behavior. True, but beside the point. 
The really significant fact is that the Hu administration is the 
interest group that initiated these reforms, and therefore the 
government appears prepared to take them seriously.
    There is one glaring omission in this whole structure, at least as 
compared to Western process. The Chinese system, so far as I can tell, 
provides no opportunity for notice or review by interested landowners 
of the question of whether a public purpose exists to justify taking 
away the private interests of some citizens and giving them to others. 
My Chinese scholar friends tell me that a ``public purpose'' 
requirement undoubtedly exists--apparently in some Supreme People's 
Court interpretation of the Constitution--and the demolition must be 
consistent with zoning decisions, where relevant. But most of the 
decisions to grant land use rights to developers occur outside of the 
public eye and immune from judicial review. Once the characters go up 
on the buildings, there is process and judicial review concerning 
payment (although usually by the time the fight is settled, the 
residents are out--condemnation in China is ``quick take'').
    Clearly there should be greater process to make sure that there is 
public justification to strike down the old buildings, and the 
justification probably should be something more than just making a 
housing developer rich. But because there is no real process, there are 
no standards here. Likely, in light of China's tradition of powerful 
government, any system that will be developed will favor the 
government. But the point is that legal due process rights often lead 
to the development of political process. The harangue tactics could 
start sooner, and citizens could openly negotiate with the government 
toward some standard as to when demolition is appropriate, and when 
not.
    It is important to note that, from the standpoint of substantive 
legal standards, American law also is grossly tilted toward the 
government. In 1954, in Berman v. Parker (the famous ``Poletown'' 
case), the U.S. Supreme Court pretty much rubber-stamped the notion 
that condemnation, redevelopment and resale to private developers is a 
legitimate government response to the problem of decaying central 
cities. The progeny of that decision have been some pretty egregious 
tactics in many local areas as governments vie with their neighboring 
cities to develop business opportunities, shopping centers, and, on 
rare occasion, even housing. In a few recent cases, State courts, 
interpreting the U.S. Constitution, have started to put the brakes on 
the most extreme practices. The Illinois Supreme Court struck down a 
local eminent domain action designed to eliminate the property rights 
of a factory owner who had the bad luck to be located just where a 
booming NASCAR track sought to put up an additional parking lot. The 
factory was by all accounts neat, clean and making a nice little 
profit. It was not a decaying urban core. But it was in the way, and 
NASCAR had neither the time nor the inclination to negotiate an 
acquisition price with the owner. The local government was more than 
accommodating, and authorized a ``quick take'' of the factory site at a 
price determined by eminent domain proceedings. But the owner had the 
resources to fight back, and his lawyers ultimately prevailed, 
convincing the state's high court that the procedure violated both 
State and U.S. Constitutions. The case does not stand alone, but is 
part of a series of lashback decisions responding to abuses of the 
eminent domain process around the country. But the U.S. Supreme Court 
has yet to address the issue, and there are lots of states where the 
process continues unabated.
    Even the Illinois court acknowledged that if the local government 
had gone through an administrative process by which it determined, by 
application of objective and reviewable standards, that there was a 
demonstrated public need for public intervention to resolve creeping 
urban blight, the public decision would have been entitled to great 
deference. But the local politicos here had dispensed with that 
process--perhaps because, on the facts--any such decision would have 
been a pure sham that would have received embarrassing treatment in the 
press and ultimately might not have survived even the gentle judicial 
review that the courts might have applied.
    In talks in China, I have emphasized this developing authority in 
America, noting that the political upset over the ``demolition'' 
practices might be alleviated, if not eliminated, by greater process 
before the actual taking commences. If people are given warning and 
opportunity to object, the most egregious corrupt decisions simply 
don't happen. Corruption dries up in the light of day, and in the 
threat of public scrutiny.
    Further, the Chinese need to educate their people better about what 
it is they are receiving compensation for. The Chinese practice of 
using replacement properties instead of money for relocation 
compensation strikes me as sound, so long as the new properties do not 
unduly destroy community or employment access. Further, the government 
needs to explain to its citizens that the right of occupancy for which 
they are being compensated is just that and no more. Most of these 
occupants of old residential blocks never paid for the land use rights 
(in many cases no one did), and the ``location value'' that goes with 
land value was never traded out by the state. Consequently, the State 
should not be required to pay for that value. Even the newest laws in 
China do not draw an adequate distinction between granted land use 
rights (where people pay for the right in the dirt itself) and 
allocated land use rights (where there is only a sort of revocable 
license for the dirt, but people own the buildings--an independent 
object of ownership in China.) Clarity of legal provisions and greater 
information to the people about these distinctions would help a lot.
    Of course, it's fun to criticize and cluck our tongues at the 
struggle of traditionally all-powerful government officials to deal 
with the new political awareness of their citizens. And it's useful to 
provide constructive criticism. But all of this should not obscure the 
real point here--the very publicizing of these disputes, and the 
agonizing of public officials over how to resolve them, and the 
consequent exposure of corruption--all of this is new stuff in China. 
It's clearly the result of a new commitment to openness, at least with 
regard to private ownership rights. Further, we should not lose sight 
of the fact that we here in America have swept these very issues under 
our own public policy carpets for many years. When we needed 
revitalized cities and gentrification of the slums, we didn't stand too 
hard on Constitutional principle, and this in a society that has 
limited government as a basic principle. The Chinese deserve credit and 
support for moving their traditional all-powerful government structure 
toward a new property rights regime. The battle over demolition in 
China shows that a highly developed, multi-layered and overbearing 
bureaucracy does not disappear overnight. But, given the opportunity to 
progress, I think we'll see some real political process emerging here, 
at least in the larger cities. Further, the U.S. is hardly in the best 
position to cast stones.

                                 
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