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The private property debate in China

Pallavi Aiyar

While the opponents of the property bill see it as a final sell-out by the state to capitalist interests, its supporters say it is a long overdue step.

EMOTIONS ARE running high at the National People's Congress (NPC), the Chinese Parliament's ongoing annual meeting this year, transforming what is usually a sedate set piece of political theatre into the site of some unusually feisty debate. At issue is a controversial bill that would provide the legal basis for the protection of private property for the first time since the Communist Party came to power in 1949.

The bill has been harshly criticised by opponents who see it as a final sell-out by the state to capitalist interests, but supporters say it is a long overdue step in giving equal legal protection to all lawful forms of property in China's "socialist market economy." The bill's advocates also argue that it will help curb arbitrary land grabs by corrupt officials and prevent asset stripping of state-owned property, practices that have in recent years caused much disaffection among substantial swathes of Chinese society.

The significance of the bill, which is almost certain to pass when legislators vote on it at the end of this week, evidently transcends the actual legal minutiae it entails. Fourteen years in the drafting and subject to a record seven readings by legislators since 2002 (most bills in China are passed after three readings), the draft property law has in fact become the centrepiece of a behind-the-scenes face-off between the Left-leaning and the reformist-oriented camps in the Chinese Communist Party.

The law was widely expected to be passed a year ago, at the 2006 Parliament meet. But widespread criticism from new-Left thinkers amplified by heated Internet-circulated commentaries forced its last minute withdrawal from the NPC's agenda. One of the bill's most vocal critics — a law professor at Peking University, Gong Xiantian — condemned it as "copying capitalist law like slaves" and offering equal protection to "a rich man's car and a beggar man's stick."

China has already embraced several other free market mechanisms such as stock markets and in 2002 the Communist Party opened its doors to private entrepreneurs. But the idea that socialist property is inviolable has long been an almost sacred legal principle in China. "Socialism is based on public ownership. This won't be a glorious page in the history of Chinese legislation," Professor Gong said of the property bill at the start of this year's parliamentary session.

The final shape the draft law has taken reflects the attempts at compromise between the bill's detractors and supporters aiming to strike a balance between state and private interests.

It clearly lays out definitions of both and also defines private wealth including income, houses, investments, and other personal assets.

However, the bill stops short of moving toward privatising collectively owned rural land. Instead it maintains the concept that property is owned by the state and individuals are merely given a right to use it. It is this right of use that the law protects, not private ownership of land.

Accommodating criticisms

In a further accommodation to new-Left criticisms, the bill affirms the state-owned sector as the "leading force." "The nation is in the first stage of socialism and should stick to the basic economic system in which public ownership predominates, coexisting with other kinds of ownership," it reads.

But this watered down version, the result of an attempted compromise by China's leadership to bridge the differences between reformists and conservatives, is in danger of displeasing both sides.

"Private property is the foundation of civilisation. It must be protected," says Dean Peng, a Beijing-based free market advocate and commentator. "Public ownership results in poverty as China has already experienced," he adds.

He is sceptical, however, whether the new law will substantially help push forward the economic reform process. The actual impact of the law is likely to be minimal, he says, because it merely restates what was already the status quo. In rural areas, farmers have the right to lease collectively owned land for 30 years but cannot buy or sell it. In urban areas, residents have been able to buy and sell 70-year leases on property for more than a decade.

The bill under discussion does not alter any of this. Mr. Peng points out that several laws governing the leasing of land in both rural and urban areas were already in place. The current draft property law merely brings several of these earlier laws together under an overarching umbrella. "We already have enough laws on paper to protect property rights. What we need is rule of law, so that these laws can really be implemented," he says.

Fan Gang, the director of China's National Economics Research Institute, is more positive in his assessment of the bill. He says the law's significance lies in its formalisation of the status quo and in making explicit the fact that private property will be offered legal protection on a par with public property.

"It's a basic first step that will create more confidence [among private investors] and help set the stage for more significant future developments," he concludes.

Last week an NPC vice-chairman, Wang Zhaoguo, formally expounded the reasoning behind the government's support of the bill to gathered parliamentarians. Given China's current economic circumstances, the people "urgently require effective protection of their own lawful property accumulated through hard work," he said.

The private sector in China has in recent years come to play an increasingly salient role in the economy, a fact that is reflected in the leadership's support for the bill despite its controversial reception. Up until 1998, state-owned firms were the mainstay of the economy but today private businesses account for more than 65 per cent of GDP.

However, rather than dwelling on the benefits of the bill for the private sector, most of Mr. Wang's explanation before the NPC focussed on those parts of the draft law that address concerns regarding asset stripping of state-owned factories, illegal transfers of farmland to real estate developers by local governments, and adequate compensation for those whose lands are expropriated legally.

Rising numbers of mass protests against such practices have caused alarm in Beijing where the central government worries that unless checked, property rights violations may destabilise the legitimacy of their own leadership.

China's new-Left thinkers have used this background to give resonance to their critique of the direction of governmental policy. It is their belief that the current direction of economic liberalisation in China has led to a nexus between party bigwigs and business interests who have plundered the nation's assets under the cover of privatisation.

Wen Tiejun, Dean of the School of Agriculture and Rural Development at Renmin University and a leading new-Left scholar, is sceptical of the claims made by the government for the new property bill.

"The bill is dressed up to show that it will protect rural people and public-owned property but in fact its main aim is to give more rights to China's new millionaires and urban middle-class," he says.

Putting private property on an equal legal footing with state-owned and collective property, Mr. Wen argues, is a dangerous first step towards the eventual privatisation of all property in China. Such an outcome, he says, would be a disaster for the 700 million Chinese who continue to live in rural areas.

Rural residents have no state-provided social security, Mr. Wen explains, so their communally owned plot of land is often virtually all that remains between them and destitution. Were they allowed to sell this land it would expose them to exploitation and impoverishment on an altogether more alarming scale than at present, he concludes.

The final draft of the property bill that is now under discussion is an attempt to strike a delicate balance between the needs of China's economy, which depends on private investment for future growth, and the concerns of those for whom China's economic reform is straying unacceptably far from the communist ideals on which the Party came to power in 1949.

And while there is little doubt that the bill itself will pass when it is voted on later this week, the majority by which it passes is less certain. The rocky passage of the property bill has demonstrated that China's future course remains contested and there are no certainties about the outcome.

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