Taking Revenge for Land Seizures

On May 26, a 52-year-old unemployed man named Qian Mingqi reportedly set off improvised explosive devices outside three government buildings in Fuzhou, Jiangxi province, killing himself and one other person and wounding at least 10 others. According to Chinese media reports, the man had posted statements to his microblog accusing a local government official of failing to compensate him fairly for the seizure of his property. Though not all the details of the case are available, the man claimed the government had appropriated 10 million yuan ($1.5 million) for land belonging to him and seven other people, but the local official had cheated him out of about 2 million yuan he believed he was owed. In the microblog post, he claimed to have appealed the case for 10 years without any progress due to opposition from the local government and judicial bureau, which he said presented false evidence in court. Grievances against local governments over land seizures and compulsory demolitions are a long-running and widespread issue in China — an issue that has been exacerbated by the rapid economic growth and urbanization since the 1990s. Local governments are given a great deal of autonomy over land sales and collaborate with developers, investors or other interest groups in pursuing financial interests, shaping a process that is easily manipulated by local officials and developers. This has caused resentment among residents, especially given that they have little legal recourse, with local judiciaries often acting in collusion with officials and developers. According to estimates by the China Academy of Social Science, more than two-thirds of petitions and unrest in rural areas are associated with land seizure. Because these evictions are a main revenue source for local governments, they are certain to resist efforts at reform from Beijing, even as social unrest and acts of violence like the May 26 bombings increase the central government's concerns about the potential for instability.

Roots of the Problem

The dispute on land seizures goes to the root of the differing conception of private property in China from in the West. In China, urban land belongs to the state, and land in rural areas, despite being officially designated as belonging to each respective collective farm, is ultimately controlled by the state as well. In most cases, the problem emerges when the government allows developers to proceed with real estate projects by seizing land belonging to a rural household or properties in urban areas without reaching an agreement on compensation and displacement. The developers then illegally demolish the property, sometimes violently forcing the residents out. For local governments, land sales are a large proportion of revenue. Since the 1994 tax reform, when tax revenues from certain items like a sales tax and part of a value-added tax were transferred from local governments to Beijing, local governments' tax revenue has declined. In response, localities have increasingly turned to land sales to fill some of this gap. While this has provided stable revenue sources to local governments — estimated at 40-60 percent of their total — it has also generated massive corruption through the permission and bidding process, in which local officials have the direct authority and are often the major beneficiaries. Moreover, the transformation of a piece of land into real estate or a development zone can significantly drive up its value (sometimes by as much as 100 times what it was worth before being developed), creating huge profits for both developers and investors. This obviously promotes a shared interest among developers, investors and local officials to acquire land and maximize their profits by setting the terms for compensation with residents very low. When residents refuse the terms, local governments often decide to seize the land by force and demolish the homes. This problem is particularly acute in rural areas, where corruption is endemic, government officials operate with little supervision from both central and local governments, and the lack of an independent judicial system gives landholders no options for legally seeking protection. While residents in cities may be offered alternate dwellings, farmers are particularly harmed by the loss of land without decent compensation and proper arrangements. Due to hukou restrictions, farmers are not eligible for the same benefits as urban residents, making their land their most important resource. This has fueled massive grievances among rural populations against the local governments and has led some individuals, such as the Fuzhou bomber, to take more drastic measures.

Local vs. Central Government

At present, the complaints are directed largely at local governments instead of Beijing, and unrest triggered by land seizure is quite localized. However, the central government is still concerned that rising resentment could lead to more widespread social instability. In January, Beijing issued a new rule on land seizure, regulating compensations to residents based on fair market value. It also required a judge to issue a ruling on evictions, instead of the local government. The move aimed to reduce the role of the local government, which is the major authority and beneficiary in the land seizure process, and involve the judicial system more. But the effectiveness of this solution would require an independent judicial system, which, as stated before, is not present in most localities. Land seizures in recent years have been critical to the rapid urbanization and modernization process in Chinese cities and have been one of the main drivers of the country's economic growth. While the central government's gradual tightening of real estate regulations has gained much attention, the tightening policy has succeeded only in slowing the rapid growth of property in some areas and has by no means disrupted the process of local government land seizures and collusion with real estate developers. And because land revenue represents such a large share of local governments' funding, it is at the center of their resistance to Beijing's policy changes. A resolution to the issue requires breaking up the incentive structure that leads local officials, judiciaries and developers to force residents from their homes with no compensation or recourse. To this point, Beijing has proved unwilling or unable to make the necessary changes, as they could jeopardize economic growth and leave local governments without the revenue they have come to depend upon.