A dramatic reform of China's land management system is in the works, which experts say may significantly increase the cost of taking over land from farmers or urban residents.

The reform will involve the passage of a special law to protect farmers' rights, amendment of the current China Land Management Law, revision of the State Council's Regulation of Land Requisition and the State Council's Regulation of Urban Relocation, as well as the possible enactment of a real estate registration law and a land development planning law.

The focus of the land system reshuffling is an amendment to the China Land Management Law, says Yan Jinmin, a professor of land management at Renmin University of China.

Yan is participating in the amendment process.

In addition, the Ministry of Land and Resources (MLR) declared late last month that personnel in local land management departments will be directly controlled by provincial governments instead of by local governments. China's provincial governments commonly do not participate in land transactions, and the direct control of personnel will help avoid local leaders interfering with the ratification of land transactions.

According to Yan, drafters of the land law under revision have reached a consensus on increasing land requisition prices and reducing the amount of land subject to government requisition in the name of public interest.

"But much dispute remains concerning the concrete conditions of compensation to those who relinquish land, as well as over the definition of public interest,?Yan told China Business Weekly.

Yang Kui, an official with the State Council's Legislative Affairs Office, confirmed that the land laws will experience a major reshuffling in the coming five years and MLR is working on drafting an amendment to the Land Management Law.

"We have not received the report yet, as the revision is quite significant, and different interests are concerned. All parties involved in the legislative process are quite cautious,?Yang added.

An official with MLR told China Business Weekly that the ministry has been occupied with the drafting of the law amendment for several months, and that the new draft is unlikely to be finished soon.

In China, the initial draft of a law is usually written by law scholars and officials organized by the government department in charge of the enforcement of the law in question. The draft will then be submitted to the State Council's Legislative Affairs Office, which, after reviewing and revising the draft, submits the drafted law to the Standing Committee of the National People's Congress (NPC).

Before the law is finally passed, there are at least three readings by the standing committee, and for important laws like the Land Management Law, the approval of a plenary meeting of NPC is needed.

Although the procedure is quite lengthy, the revision is still highly urgent.

With the rapid economic development in China, various economic development zones and real estate projects are blossoming nationwide. Under the current land management system, local governments expropriate land from farmers or urban residents at very low cost that is justified by saying it is in the public interest. But many local governments then sell the acquired land to real estate developers at much higher prices.

A nationwide inspection launched by MLR, which lasted nearly one year and ended in October last year, discovered a total of 168,000 cases of illegal land requisitions. Former MLR Minister Tian Fengshan was even dismissed and detained in October because of his involvement in illegal land requisitions. Tian has not been sentenced so far.

The MLR has quashed more than 2,600 illegal economic development zones this year.

But even the land for the legal ones is acquired unfairly, said Yan.

Under the current Land Management Law, land expropriated by the government for public interest is not compensated for according to the market price. For rural land, whose legal ownership belongs to rural collective organizations, for example, the villagers?committees, the compensation fee will vary from six to 10 times the value of the average annual crop yield of the expropriated land. The compensation fee cannot exceed 20 times the value of the land's average annual crop yield.

In urban areas, where all land legally belongs to the State, the government does not pay any compensation when expropriating land for public interest. It only pays a low compensation price for private housing built on the expropriated land.

"It is a stipulation characteristic of the planned economy, although the current Land Management Law was drafted in 1998,?Yan said.

In addition to the low compensation, the use of the term public interest is also questioned by legal scholars.

"When the government can obtain profits from the allegedly public interest projects, these projects should not claim they are being done in the public interest,?said Wang Weiguo, a legal scholar with Beijing-based China University of Politics and Law.

The proposed amendment of China's Constitution, which was passed by the standing committee of the NPC late last year, adds "the State should give compensation?to the original stipulation that "the State has the right to expropriate urban and rural land.

But some law drafters insist that the increased compensation rate for land requisition should be decided by the government not the market, because using market standards might significantly increase land costs in China and hence increase the cost of economic development.

For example, the land cost to build an expressway may increase by 10 times if the land requisition is done at the market price.

Agricultural economist Han Jun with the State Council's Development Research Centre said market-based high compensation rates for those who relinquish their land is necessary because Chinese farmers have sacrificed their interests to the tune of about 2 trillion yuan (US$241.55 billion) between 1979 and 2002 by accepting low land compensation payments.

Yan said that the increased land cost will not hurt the Chinese economy in the long term, because so far the expenditure for land accounts for a very small portion of the production cost of Chinese goods. Even if land prices increase 10-fold, land costs will still be a relatively small part of overall cost.

Yan also argues that the so-called public interest projects should be strictly limited to non-profit ones, such as military, health and infrastructure projects, and that commercial development in the name of public interest must be strictly banned.

A mere reshuffle of the land management system is not enough, Yan said.

"Grassroots democracy and the protection of farmers?property rights to their land should be enhanced to curb local governments?irresponsible actions,?Yan added.

(Business Weekly 01/06/2004 page1)