[Continued from yesterday’s Part 4 and the preceding Part 1, Part 2, and Part 3.]
By: David A. Smith
By now in this post it should be apparent, even working with the limited information presented by the useful survey article in the Economist (March 26, 2016), that the urban reforms launched by Bo Xilai, and whose popularity may have contributed to Mr. Bo’s disgrace, were intended to be a sweeping change from – I would write repudiation of – the Maoist philosophy of promoting agrarian peaceability by giving farmers an indentured tenure on land, and a home on that land, that they could know they would occupy all their lives, but could never sell.
Decades have come and gone, yet I still farm this small plot
Mr. Bo, by contrast, introduced the principle that farms and their urban development rights could be sold, via upzoning certificates known as dipiao, and the results were immediate:
In Wulong county, about three hour’s drive from the main city, the office in charge of dipiao trading is literally knee-deep in applications from farmers who want to sell.
Development rights for sale? Village in Wulong
Markets enhance value; they ‘make money’. But in making money, market governance should also encourage the equitable distribution of that money – including most particularly that those who own the land which has now become valuable should participate in the increase in value to be created by its development.
The reform was intended to be of particular benefit to farmers in remote areas, who would otherwise have no opportunity to benefit from land appropriations, which usually occur on city margins. Sometimes the compulsory acquisition of rural land for construction is carried out violently, with farmers receiving little or no compensation.
As I wrote back in 2007’s Shot heard ‘round the world? compulsory purchase – or eminent domain as we call it in America – is both an essential tool for effective urban development and among the most dangerous ones to bestow upon any government, much less an autocratic one. Nine times out of ten, compulsory purchase is used to take from the poor and give to the soon-to-be-rich, and unless there are powerful legal protections, that are powerfully defended, the poor will be bulldozed aside even without any overt evil intent.
So keep your rural house: holdout in naming, China
According to the Economist, in fact Mr. Bo’s land reform plan does benefit the rural poor:
Chongqing’s system aims to make this fairer.
Farmers who want to sell their rights to their village land are given what is called a land ticket, or dipiao.
As noted above, this is akin to a transferable development right.
Developers who want to build, say, a 10-hectare (25-acre) project on farmland, can buy 10-hectares’ worth of dipiao. They do not have to be tickets owned by farmers on that very plot. The farmers get to keep 85% of the sale price of the dipiao. Their village administrations get the rest.
How to create an egalitarian land boom
This new market allowed the trading of land-use rights to rise from nothing in 2008 to over 3,500 hectares’ worth in 2011 (see chart above).
Some officials had hoped it would eventually develop into a genuine free market for rural property: if the dipiao system was seen to work on a small scale, they figured, scruples about selling collective land might be overcome.
[Nevertheless], the dipiao system has not taken off as initially expected.
It takes a while to unkink people’s brains, and never underestimate the chilling effect of Mr. Bo’s expulsion, and his life imprisonment.
Qincheng prison, where Mr. Bo is serving life
Even with that, the volume seems to me impressive:
Since then the amount traded annually has levelled out at around 1,300 hectares, worth roughly 4 billion yuan.
That is $600 million a year, just in Chongqing municipality – in short, a boom in a brand-new market.
The market has enthused villagers.
And isn’t that success? Evidently it depends who in China you ask.
F. Overall, it’s working
Offering sober center-left commentary for almost 175 years
As befits a publication that believes editorial sobriety a virtue, the Economist starts by downplaying the statistics it is about to report:
Doubtless the lure of good wages in these factories would have drawn many farmers into urban areas anyway. But Chongqing’s economy has performed better than many other inland cities; for the past five years its GDP growth has been about three points above the national average.
Give me three hundred beeps of GDP growth above the norm and I will own the world.
Yes, I LBO’ed the planet
The reforms may also have helped reduce outbreaks of social unrest. China Labour Bulletin, an NGO based in Hong Kong, says there were 42 known labour-related protests in Chongqing last year, compared with 121 in Shenzhen, a coastal city with half of Chongqing’s urban population.
In clinical trials, a six-fold reduction in disease outbreak would be regarded as a huge win.
In September 2015 it went further still, giving holders of rural hukou access to most urban social services. This sharply narrowed the formal difference between urban and rural dwellers.
Migrant workers proudly displaying enlargements of their new urban social security cards
An inclusive society is a safer society. Even though like likes living with like, living with the apparently unlike broadens one’s conception of who actually is like us, and who likes us.
Dis is how I un
So far, Chongqing has been able to avoid a backlash among holders of urban hukou, many of whom, as elsewhere in China, fear that already strained public services may be overwhelmed if migrants gain more rights.
NIMBYism is universal, because it’s what Rakesh Mohan called the ‘third-class carriage mentality’: I’ve got my seat, don’t you dare come in.
AHI posts on China’s urbanization and capital
.
April 27, 2007: Chinese property rights: the shot heard ‘round the world?
July 28, 2010: Little Chinese nested shoeboxes, the ‘ant tribes’ of urban men
August 23, 2010: Gleefully running up the debts, 2 parts, SOEs and development
October 28, 2011: A little learning is a dangerous thing, 2 parts, hukou and schools
May 2, 2012: Old before rich? 2 parts, China’s gray wave
July 29, 2012: I’m shocked, shocked, kickbacks in property development
August 23, 2012: China’s cities and housing: “Nothing outside China matters”
August 25, 2012: China’s cities and housing: “Imperial economy is successful society”
August 26, 2012: Suburb stuffing, 2 parts, new ghost high-rise towns
September 17, 2012: China’s cities and housing: “Between observation and doctrine, report doctrine”
November 14, 2012: Not nice places to live, 2 parts, the shortage of girls
July 22, 2013: China’s runaway money train, 4 parts, out-of-control monetary policy
December 16, 2013: Formula for an instant slum, 5 parts, supply-side urbanization
September 19, 2014: Where the money goes, people will follow, 3 parts, expatriating
February 1, 2016: Yuan to buy American housing?, 4 parts, Chinese buying US assets
March 8, 2016: The fall of China Mae, 3 parts, the likelihood of major overleverage
To have overcome this, despite Mr. Bo’s spectacular fall from the political firmament, and then not to have it undone or even stopped?
To these aged eyes, that’s what winning looks like!
You do realize I’ve won, don’t you?
And what does it portend for China’s urban future, or for that matter, China’s political future?
[Continued tomorrow in Part 6.]