Land development right and collective ownership in China

Abstract

Urban–rural link (URL), a popular land use policy among Chinese local governments, allows urban development of the same or a smaller area than peasants' house sites that are converted back into farmland. It is often regarded as a form of transfer of development rights (TDR). Based on detailed analysis of local governments, villages and peasants, this article finds that local government is the de facto owner of development rights and the only winner in URL. URL strengthens collective ownership by weakening peasants' private land use rights. Overall, URL is an efficient approach to the externality problem caused by farmland protection policy, but it is problematic from a broader perspective, especially from the property rights perspective.

Acknowledgements

An early version this article was included in SSRN Working Papers. Financial support from Chongqing Technology and Business University Research Startup Fund (2010-56-04) and the Ministry of Education, Humanities and Social Science Research Planning Foundation (11YJAZH018) is gratefully acknowledged.

Notes

1. Within China's land administration system, rural construction land includes peasants' house sites. Although URL also applies to other types of rural construction land, it is mainly applied to peasants' house sites in many places.

2. See Johnston and Madison (1997) and McConnell and Walls (2009) for reviews on the practice of TDR in the US.

3. For a comprehensive analysis of China's land use regime see Lin and Ho (2005).

4. ‘Basic farmland’ is designated by the government. It is supposed to be strictly protected from urban development.

5. In recent years the transfer of land use right on farmland among peasants has been permitted but it is not allowed to be developed into urban land. The so-called ‘small property rights housing’ is built on rural construction land and sold to people who live in the cities. It is still regarded as illegal by the government.

6. Cai (2003) found that 60–70% of the profits from land conversion went to the government or its agencies and about 25–30% was collected by the village, whereas peasants received about 10%.

7. This number is probably at the high end when compared with how the revenue from URL is divided between peasants and villages in other cities.

8. Of course, for urban land outside the main districts of Chongqing city the land price will be lower, but still much higher than the compensation to the peasants.