Chapter Two Explaining Land Use Conversion Explaining Land Use Conversion Several hypotheses have been advanced in explaining the conversion of agricultural land to non-agricultural use in China. Analyses that pinpoint large-scale processes of urbanization and industrialization, institutional flaws in China’s land use regime, and the political weakness of peasants are insightful in throwing light on land use change from different perspectives.1 However, while existing literature has shown that these diverse factors account for land use conversion in one way or another, there has yet to be a study that employs a coherent framework to systematically analyze the interplay of the various determinants, including general and local-specific variables, in influencing the patterns of land use conversion. An understanding of how problems in China’s land management and peasants’ vulnerability are institutionalized is useful but whether local state agents choose to exploit these institutional weaknesses is dependent on norms and conditions at the collective level. Local-specific factors – the fiscal situation and requirements, path of development or industrialization, and the availability of land and other resources – affect local state agents’ decision and action to supply agricultural land for conversion. This brings us to another problem with most existing studies: the lack of sufficient attention on the central actor in the process, i.e. local officials, and their incentives in effecting land use change. Local state agents play a decisive role in land use conversion. Although national policies are enacted by the central government, local agents exercise considerable power and discretion in implementing them. They not necessarily act in the interest of the principal and may distort or selectively implement central policy.2 Furthermore, in the absence of upper-level guidance, local Refer to the works cited under the next section. For a general discussion of China’s policy implementation, see Kenneth G. Lieberthal and David M. Lampton (eds.), Bureaucracy, Politics, and Decision Making in Post-Mao China (Berkeley: University of Yew Chiew Ping 27 Chapter Two Explaining Land Use Conversion governments may also make and implement their own policy that contravenes central policy. Local state agents’ motivations, therefore, serve as a useful point of departure in understanding land use conversion. From this platform, regional variation in land use patterns may be explained through the further analysis of how officials’ motivations interact with local-specific structural and institutional conditions. The following sections explore existing literature for the variables that promote land use conversion before articulating an approach to the problem that addresses the micro-macro, agency-structure connection. Alternative Explanations The Demands of Urbanization Scholars have analyzed statistics at the national and regional levels to propose that the trends of urbanization and industrialization, drive the conversion of land to nonagricultural use from the 1980s to the 1990s.3 This study, however, proposes that the concept of urbanization, broadly understood as the shift from rural-agricultural activity to urban-industrial activity and measured by different indicators, has a more ambiguous relationship with non-agricultural land use in China than what scholars perceive. First, some common indicators of urbanization, such as the size of the urban built-up area and industrial land, are not appropriate for analyzing the causes of nonagricultural land use. Lin, for one, suggests that “a city-centred urban sprawl at the top and a dispersed rural-based industrialisation at the bottom appear to be the two California Press, 1992); Melanie Manion, “Policy Implementation in the People’s Republic of China: Authoritative Decisions versus Individual Interests,” The Journal of Asian Studies, Vol. 50, No. (1991), pp. 253-79. See Lin and Ho, “China's Land Resources”; Ho and Lin, “Converting Land to Nonagricultural Use,” pp. 81-112; Lin, “Reproducing Spaces,” pp. 1827-55; Tan Minghong, Li Xiubin, Xie Hui, and Lu Changhe, “Urban Land Expansion and Arable Land Loss in China: A Case Study of Beijing-Tianjin-Hebei Region,” Land Use Policy, Vol. 22, No. (2005), pp. 187-96. Yew Chiew Ping 28 Chapter Two Explaining Land Use Conversion concurrent processes of urbanisation that have contributed to the recent expansion of non-agricultural land use” in Guangzhou, Hefei and Wuxi.4 However, it seems tautological to suggest that industrialization, indicated by the area of industrial land and development zones, caused the expansion in non-agricultural land use. Similarly, the use of “urban built-up area” as an explanation for the increase in nonagricultural land use is also flawed.5 In another study, Ho and Lin have used a multivariate regression analysis to suggest that non-agricultural land use in three coastal provinces – Shangdong, Jiangsu and Guangdong – is positively related to population density (population divided by land area), level of development (real GDP per capita) and urbanization (ratio of nonagricultural population to total population). Results of the analysis show that “the relative importance of land allocated to non-agricultural use are 75.1 percent for population density, 17.8 percent for urbanization and 7.1 percent for per capita real GDP” together which explains 74 percent of the variations in non-agricultural land use.6 Likewise, Tan et al. suggest that GDP per capita and rural-urban migration have contributed to urban land expansion in the Beijing, Tianjin and Hebei region.7 Demographic changes cited above create greater demands for housing, roads and other urban infrastructure to accommodate the needs of a larger population, which ultimately encroaches upon rural or agricultural land. While this correlation between demographic changes and non-agricultural land use seems straightforward, the same cannot be said of the relationship between GDP levels and non-agricultural land use. As with their explanation on how demographic changes lead to urban land expansion, Tan et al.’s theory on how GDP growth has stimulated urban land expansion also boils down to the demand for land. They suggest that growing Lin, “Reproducing Spaces,” pp. 1847. Ibid., pp. 1829; pp. 1845-47. Ho and Lin, “Converting Land,” pp. 774. Tan et al., “Urban Land Expansion.” Yew Chiew Ping 29 Chapter Two Explaining Land Use Conversion affluence leads to greater demand for more living space per capita, in the emergence of “high-class suburban residential areas in some large cities.”8 This is a valid argument but there is also another perspective – centring on the supply of, instead of demand for, land – to interpret the relationship between GDP levels and nonagricultural or urban land. Some scholars have suggested that local governments manipulate land and its supply in order to stimulate growth. Liu et al., for instance, observe that “In the process of intensifying regional competition for investment, a ‘race to the bottom’ type of game pushed local governments to offer low-cost land to attract industrial investment in order to boost future GDP and revenue growth.”9 In other words, land is a means through which local governments draw investment, which in turn drives up GDP levels.10 Furthermore, the flourishing of extravagant but underutilized construction projects – such as luxurious village bungalows, oversized shopping malls, massive squares, stadiums and palatial government buildings – also does not arise out of a growing population’s demand for more space.11 Instead, these “white elephants,” which often result in the wastage of land and other resources, are more reflective of the governments’ indiscriminate supply of land to conjure up “projects to boost one’s political achievements” (zhengji gongcheng). To perceive these image-engineering projects as a government’s response to the demands of urbanization would have Tan et al., “Urban Land Expansion,” pp. 191-92. Liu et al., ´“Instrumental Land Use,” pp. 314. 10 This refers to the measurement of GDP by the expenditure method, which includes the components of gross investment, government spending, consumption and net exports. 11 See Sima Long, “Toushi zhengji gongcheng” (“Surveying political achievement displays”), Zhongguo jiancha (China Surveillance), No. 15 (2002), pp. 52; Zhou Wenshui, “‘Zhengji gongcheng’,” pp. 34-35; Qu Jingyao and Qi Haishan, “Bierang ‘xingxiang gongcheng” qinshi xinnongcun” (Prevent ‘image projects’ from corroding the New Village), Liaowang xinwen zhoukan (News Watch Weekly), March (2006), pp. 46-47; Renmin luntan diaoyanzu, “Zhengji gongcheng bie zai nongcun raomin” (Do not let political achievement projects perturb villagers), Renmin luntan (People's Forum), No. 191 (2007), pp. 12-13; Cartier, “‘Zone Fever’,” pp. 454-57. Yew Chiew Ping 30 Chapter Two Explaining Land Use Conversion missed the point. Rather, they represent the externalities of “urbanization” engineered by local governments. The preceding discussion suggests that although there is a correlation between the non-agricultural land use and GDP level, the causal direction is equivocal. Besides, because land converted to non-agricultural purposes has frequently resulted in the misallocation or wastage of resources, it is doubtful if sustainable growth is attainable through an expansionary land policy. As some experts point out, Construction land affects investment, which in turn affects capital stock and economic growth. The expansion of construction land in China from the end of the 1990s led to a decreased quality of investments . . . [because] (i) the excess growth of land supply has resulted in excess investments; (ii) investments have been focused on construction instead of equipment; (iii) investments have focused on external and expansionary construction; and (iv) local governments have supplied land at low cost, reducing the resource allocation efficiency of the land market.12 Land Management: Institutional Flaws Another often cited reason for the rise in non-agricultural land use is China’s flawed land management system. In her study on development zones or kaifaqu, for instance, Cartier suggests that “contradictory domestic political and economic policies of land development, land management, and land conservation” have promoted the proliferation of such zones.13 This line of argument centring on inherent flaws in land policies is echoed by Lichtenberg and Ding, who suggest that “the existing institutional and policy structure create incentives for both insufficient farmland retention and excessive farmland conversion, resulting in significant inefficiencies in land use.”14 12 Li Huizhong, Yin Feng and Li Jialun, “China’s Construction Land Expansion and Economic Growth: A Capital-Output Ration Based Analysis,” China & World Economy, Vol. 16, No. (2008), pp. 15. 13 Cartier, “‘Zone Fever’,” pp. 445. 14 Erik Lichtenberg and Ding Chengri, “Assessing Farmland Protection Policy in China,” Land Use Policy, Vol. 25, No. (2008), pp. 59. Yew Chiew Ping 31 Chapter Two Explaining Land Use Conversion On top of these works, there is a legion of others that may not address land use change directly but nonetheless provide insights on various land institutions that contributed to land use conversion, namely land ownership, land acquisition and its approval, and the land market.15 These investigations, which point out inherent problems and contradictions in China’s land system such as ambiguous landownership rights, low rates of compensation for expropriated land, incomplete land markets, incompetent enforcement of law against violations and so on, enhance the understanding of how such flaws inadvertently provide openings for the relative ease of converting land to non-agricultural use.16 Yet in reality, perfectly-designed institutions are elusive: “Since people have limited capacities to acquire and process information, uncertainty and asymmetric information must exist, and these conditions represent unavoidable obstacles to ‘perfect’ institutional design.”17 Attributing excessive land use conversion to inherent deficiencies in land institutions does not explain why repeated reforms to land institutions and the correction of flaws only manage to halt or slow down land use change temporarily. On 20 May 1997, for instance, a moratorium on non-agricultural construction taking up cultivated land was imposed and its one year duration was subsequently extended in 1998 till the revision of the Land Administration Law was complete.18 However, not long after the tightening of control over the approval of land use conversion, land requisition and others in the revised law, the area of arable land used for construction began to rise again, soaring to 3.4 million mu in 2003 from 2.4 15 See, for instance, C. W. Kenneth Keng, “China's Land Disposition System,” Journal of Contemporary China, Vol. 5, No. 13 (1996), pp. 325-45; Yeh and Wu, “The New Land Development Process,” pp. 330-53; Peter Ho, “Who Owns China's Land? Policies, Property Rights and Deliberate Institutional Ambiguity,” China Quarterly, No. 166 (2001), pp. 394-421; Ding Chengri, “Policy and Praxis of Land Acquisition in China,” Land Use Policy, Vol. 24, No. (2007), pp. 1-13. For a review of other relevant journal articles, see Zhang Sumei and Kenneth Pearlman, “China's Land Use Reforms: A Review of Journal Literature,” Journal of Planning Literature, Vol. 19, No. (2004), pp. 16-61. 16 Refer to Ding Chengri, “Land Policy Reform,” pp. 109-20; Ding Chengri, “Policy and Praxis,” pp. 1-13; Cartier, “‘Zone Fever’”; Lin and Ho, “The State, Land System,” pp. 411-36; Peter Ho, “Who Owns China's Land?,”pp. 394-421. 17 Erik G. Furubotn and Rudolf Richter, Institutions and Economic Theory: The Contribution of New Institutional Economics (Ann Arbor: The University of Michigan Press, 1997), pp. 15. 18 Guojia tudi guanli ju and Guojia jihua weiyuanhui, document no. (1997); “Guojia jiang jixu dongjie feinong jianshe zhanyong gengdi” pp. 2; “1998: tudi guanli dashiji,” pp. 9. Yew Chiew Ping 32 Chapter Two Explaining Land Use Conversion million mu in 2000.19 On 18 July 2003, the State Council issued a notice to suspend the approval of all development zones, together with complementary measures to remove illegal development zones.20 Yet again, the arable land used for construction increased unrelentingly after the moratorium was lifted, rising over 70 percent from 2.2 million mu in 2004 to 3.9 million mu in 2006.21 Hence it appears that problems in China’s land management system are not sufficient in accounting for land use change. Instead of institutional flaws, therefore, this study proposes that selective implementation or agency costs, incurred as the agent fails to act in the full interest of the principal, is a more potent explanation. Some scholars have touched on the principal-agent problem in their analysis of land institutions. For instance, Keng, in his overview of China’s land disposition system, alludes to the discretionary power of local state agents in implementing central policies. He observes that since local economic development takes precedence among the concerns of local governments, they may not conform to the orders and regulations imposed by their superiors.22 Xu also highlights the “contradictory roles” of governments that contribute to the loss of agricultural land: “Whereas the governments have made a series of policy initiatives to protect agricultural land, they have, however, been the most important players in destabilizing the land base for agricultural production.”23 Specifically, local officials’ discretion in supplying agricultural land for construction within the limits imposed by central regulations is pivotal to explaining local variations in the patterns of land use conversion. Through an investigation of the incentives and disincentives that structure agents’ behaviour and how these interact with other “Zhongguo guotu ziyuan gongbao,” 2001-2006 Guoban faming dian document no. 30 (2003). 21 “Zhongguo guotu ziyuan gongbao”; Guotuzifa document no. 45 (2003). 22 Keng, “China's Land Disposition System.” 23 Xu Wei, “The Changing Dynamics of Land-Use Change in Rural China: A Case Study of Yuhang, Zhejiang Province,” Environment and Planning A, Vol. 36, No. (2004), pp. 1595-615. 19 20 Yew Chiew Ping 33 Chapter Two Explaining Land Use Conversion macro-level factors beyond their control, this study shall analyze in greater depth the problem of selective implementation with a focus on the supply of land by local governments. Political Weakness of Peasants Yet other researchers begin their investigation at the village level where land is taken away from its rightful owners. These studies illustrate the political weakness of peasants vis-à-vis local officials, which accounts for the relative ease of the latter in depriving the former of either land use rights through illegal transfers or ownership rights through state requisition. By delving into the root of the problem, case studies by Guo and Cai illustrate how land expropriation is carried out by village cadres, township and county officials often at the expense of villagers, leading to peasant resistance.24 They observe that income disparities among villagers, their degree of economic or social dependence on village cadres, and the difficulty in organizing preventive ex ante action often render peasant resistance futile.25 Hsing, on the other hand, focuses on how the township government acts as a broker between higher level governments and the village.26 Together, these studies reveal the ways in which institutional and hierarchical structures, such as the one-level-down cadre management system, bind together the interests of these lower level state actors, who often jointly exploit villagers to maximize their self-interests. The political weakness of peasants does not serve as a direct motivation for the conversion of agricultural land to non-agricultural use. As with imperfect land 24 Guo Xiaolin, “Land Expropriation and Rural Conflicts in China,” China Quarterly, No. 166 (2001), pp. 422-39; Cai Yongshun, “Collective Ownership or Cadres’ Ownership? The Non-agricultural Use of Farmland in China,” China Quarterly, No. 175 (2003), pp. 662-80. 25 Ibid. 26 Hsing You-tien, “Brokering Power and Property in China's Townships,” The Pacific Review, Vol. 19, No. (2006), pp. 103-24. Yew Chiew Ping 34 Chapter Two Explaining Land Use Conversion institutions such as ambiguous land ownership rights and low compensation for dispossessed peasants, the vulnerability of peasants ensures that land use change can be carried out with relatively few obstructions. Yet the bargaining power of peasants against local cadres also varies with local conditions, some of which are mentioned in the preceding paragraph. Other local factors that may affect villagers’ capacity for contention and the outcome of contention are lineage or kinship ties, the type of resistance such as lodging petitions, ousting village cadres or civil disobedience.27 Arguments and Framework The core of this study revolves around institutional arrangements that underpin land use conversion in China. Institutions, defined as “the formal or informal procedures, routines, norms and conventions embedded in the organizational structure of the polity or the political economy,” are integral to this analysis.28 However, it is also recognized that institutions are not the sole cause of outcome. Instead, they “act as filters that selectively favour particular interpretations either of the goals toward which political actors strive or of the best means to achieve these ends.”29 The operation of institutions, moreover, is not immune to social relationships. Power relations – between the central state and local governments, between domineering local officials versus politically weak peasants – underlie this investigation on why and how much land is supplied for conversion to non-agricultural uses. In its analysis 27 Refer to the literature on peasant resistance such as Cai Yongshun, “Managed Participation in China.” Political Science Quarterly, Vol. 119, No. (2004), pp. 425-51; Kevin J. O'Brien and Li Lianjiang, Rightful Resistance in Rural China (New York: Cambridge University Press, 2006); Zhou Xuegang, "Unorganized Interests and Collective Action in Communist China." American Sociological Review, Vol. 58, No. (1993), pp. 54-73; Li Lianjiang and Kevin J. O'Brien, "Villagers and Popular Resistance in Contemporary China." Modern China, Vo. 22, No. (1996), pp. 28-61; Lucien Bianco, “Peasant Resistance in the PRC” in Peasants without the Party: Grass-roots Movement in Twentieth-Century China (Armonk, NY: M. E. Sharpe, 2001). 28 Peter A. Hall and Rosemary C. R. Taylor, “Political Science and the Three New Institutionalisms,” Political Studies, Vol. 44, No. (1996), pp. 938. 29 Ellen M. Immergut, “The Theoretical Core of the New Institutionalism,” Politics & Society, Vol. 26, No. (1998), pp. 20. Yew Chiew Ping 35 Chapter Two Explaining Land Use Conversion of institutions, the study also foregrounds the dynamism of power struggles between the central and local governments as the former continually seeks to assert its dominance over the latter in land processes while the latter devise strategies to evade central control, often under the guise of compliance. Institutions are, therefore, “ligatures fastening sites, relationships, and large-scale processes to each other.”30 They serve as mediations between the microfoundations of agency and the macro-environment. At the same time, intermediate-level institutions themselves are also embedded in a larger milieu with political, economic and social conditions that are beyond individual control. This study thus incorporates macro-level contextual factors into the rational choice model in its analysis of factors that contribute to disparities in regional trends of land use conversion. A Model of the Determinants of Land Use Conversion Drawing from the hypotheses outlined in the foregoing literature and other relevant studies, a model of the determinants of land use change may be derived. The extent to which agricultural land is converted for non-agricultural purposes is determined by an array of structural, institutional and agential factors described below: 1) Fiscal resources: The government’s overall fiscal situation affects its capacity in effecting land use change as well as the extent to which it needs to turn to land use change for revenue. Before leasing land for industrial or commercial purposes, the government has to finance the developing of raw land, incurring expenses in the levelling of land and the provision of basic infrastructure like electricity, water, roads and others. According to Chiu et al., the ability to provide infrastructure is one reason why land may not be readily supplied by governments. Infrastructure provision relies 30 Ira Katznelson, “Structure and Configuration in Comparative Politics” in Mark Irving Lichbach and Alan S. Zuckerman (eds.), Comparative Politics: Rationality, Culture, and Structure (Cambridge, UK: Cambridge University Press, 1997), pp. 103. Yew Chiew Ping 36 Chapter Two Explaining Land Use Conversion on the government’s capacity to finance its investment with very long term payouts, and this difficulty is compounded by the limited capacity of raising revenue directly from the services provided.31 In China, the vast majority of spending on urban capital construction is the responsibility of sub-provincial governments. Local infrastructure investment is financed from general resources in the local budget as well as from extrabudgetary or off-budget funds.32 On one hand, it may be surmised that the lesser the revenue at the government’s disposal, the less able it is in supplying land for construction. On the other, however, lesser revenue also implies a greater need for the government to tap on undeveloped land resources for income. Improvements in public infrastructure bring about an appreciation in land price. Part of the profits from the conveyance of land use rights through auction, tender and other channels are reinvested on enhancing urban facilities to further drive up land prices.33 The remaining revenue may also be used to defray other government expenditures. On the whole, therefore, it may be proposed that a shortage of funds will not deter the government from supplying land for conversion as long as it is able to recoup initial land development expenses and generate additional revenue from rising land prices. The local government’s overall fiscal situation is, in turn, dependent on the revenuesharing arrangements with upper level governments, which determine the expenditure responsibilities of the former and the revenue sources accessible to local governments. 31 Chiu R., B. Turner and C. Whitehead, “Land Use Regulation: Transferring Lessons from Developed Countries,” World Bank Fourth Urban Research Symposium: Urban Land Use and Land Markets, May 14-16 2007, The World Bank, http://www.worldbank.org/urban/symposium2007/papers/whitehead.pdf, accessed March 2009. 32 Su Ming and Zhao Quanhou, “The Fiscal Framework and Urban Infrastructure Finance in China,” World Bank Policy Research Working Paper 4051 (2006), The World Bank, http://www.worldbank.org, date accessed 12 February 2008, pp. 36-38. 33 Peterson, “Land Leasing and Land Sale,” pp. Yew Chiew Ping 37 Chapter Two Explaining Land Use Conversion 2) Land resources: Although construction land is not a static asset and can be created by taking over agricultural land, the government is nonetheless constrained by the physical characteristics of the land resources that it may exploit. As mentioned in Chapter One, for instance, the east coast of China has large areas of arable land as well as construction land, which means that there is a limited supply of remaining land that can be used for construction. Sihui, as we shall see later, is constrained by the vast expanses of mountainous and hilly terrain in its territory since it is costly and hence not very feasible to develop land in the mountains to make it accessible to potential users. Both fiscal and land resources affect the government’s relative bargaining power visà-vis land users and collective landowners, which “increases when it does not depend on resources – economic, political, and otherwise – that are controlled by individuals and groups in society.”34 3) Local officials’ goals and preferences: The conversion of agricultural land is, first and foremost, a means for local officials to fulfil developmental targets and meet fiscal demands important for their career advancement. Local officials strive to maximize their self-interests subject to the constraints of the institutional environment, which supplies the necessary contextual information to determine what exactly these political actors aim to maximize and why certain goals preside over others.35 Within the parameters of the cadre target responsibility system, the central-local revenue-sharing system and land institutions, the maximization of 34 José Antonio Cheibub, “Political Regimes and the Extractive Capacity of Governments: Taxation in Democracies and Dictatorships,” World Politics, Vol. 50, No. (1998), pp. 361. 35 Margaret Levi, “A Model, a Method, and a Map: Rational Choice in Comparative and Historical Analysis” in Mark Irving Lichbach and Alan S. Zuckerman (eds.), Comparative Politics: Rationality, Culture, and Structure (Cambridge, UK: Cambridge University Press, 1997), pp. 25. See Kathleen Thelen, “Historical Institutionalism in Comparative Politics,” Annual Review of Political Science, Vol. (1999), pp. 375-76, on how rational choice analysts and historical institutionalists not differ too much on how they contextualize preferences. Yew Chiew Ping 38 Chapter Two Explaining Land Use Conversion “self-interests” is operationalized as the maximization of careers. It is further assumed that in the pursuit of utility maximization, the individual is not omniscient and thus exercises “bounded rationality” under the condition of incomplete information. At the local level, the political and fiscal motives for converting land to urban uses vary in their causal impact. Local state variations, including the government’s fiscal situation, path of industrialization, history of governance, land resources, interact with officials’ cost-benefit calculations to determine local patterns of land use change.36 While officials seek to maximize their careers in the institutional arena, the strategy they adopt, their means of doing so, and the resources accessible to them fluctuate with other macro-level considerations. Instrumental land use may or may not payoff for officials seeking career advancement, especially if they resort to illegal land use conversion or if land expropriation sparks off peasants’ resistance. Hence career maximization through the manipulation of land resources varies with the official’s discount rate, defined here as the risk of being removed from office.37 The higher the discount rate, the higher the risk of being removed from office, and the less likely one shall resort to illegal land use conversion to maximize one’s career. Having said this, violating land regulations rarely jeopardizes one’s career in China. Most offenders escaped punishment and some were even promoted. Besides, those punished were mainly officials below the county-level.38 36 Structure and agents are mutually constitutive. In the words of March and Olsen, “Human actions, social contexts, and institutions work upon each other in complicated ways, and these complex, interactive processes of action and the formation of meaning are important to political life.” James G. March and Johan P. Olsen, “Organization Factors in Political Life,” The American Political Science Review, Vol. 78, No. (1984), pp. 742. 37 Cheibub, “Political Regimes,” pp. 360. 38 Liu Zhengshan, “‘Lunxian yu zhenjiu’” (“Land ‘occupation’ and redemption”), Zhongguo tudi (China Land), No. (2004), pp. 5; Yu Zeyuan, “Zhongguo jianchabu.” See also “Tudi weifa dafu shangsheng zhengjie hezai?” (“Where lies the crux of the large increase in illegal land deals?”), Guotu ziyuan (Land and Resources), No. (2007), pp. 63; “Xinhuashe: tudi weifa xingze zhuijiu fengxian zhiyou 0.1%” (“Xinhua news: the pursuit of criminal responsibility for iilegal land deals is just 0.1%), Nongcun nongye Yew Chiew Ping 39 Chapter Two Explaining Land Use Conversion 4) Institutional context: As socially-embedded individuals, officials’ objectives are influenced by their institutional context as well as broader environmental conditions. As suggested earlier, the driving forces of land use conversion emanate from the cadre target responsibility system and the central-local fiscal system. The way the cadre target responsibility system is structured is a manifestation of the importance of economic achievements to the ruling regime as a justification for its political legitimacy. This top-down emphasis on economic growth is built into the cadre appraisal system to foster cadres’ development-oriented behaviour. Post-1994 central-local revenue-sharing arrangements, designed to increase the central share of revenue, place increasing strain on local coffers.39 The pressure to produce economic results on a tightening budget compels local governments to exploit land resources under their jurisdiction. Leasing land for industrial and commercial purposes generates extra-budgetary revenue from the conveyance and transfer of land use rights, miscellaneous fees plus tax revenue such as the business tax and value-added tax.40 The revenue raised may also be diverted to fund largescale urban infrastructure development, salient symbols of modernization.41 The institutional context within which officials operate also consists of institutions other than the aforementioned. Flaws in China’s land management system provide openings for opportunistic officials to exploit and even participate in illegal land deals. The inefficacy of grassroots self-governance in empowering villagers also nongmin (Village, Agriculture and Farmers), No. (2007), pp. 13. 39 Ping Xinqiao, “The Evolution of Chinese Fiscal Decentralization and the Impacts of Tax Reform in 1994,” Hitotsubashi Journal of Economics, Vol. 41, No. (2000), pp. 187-90. 40 Wong and Zhao, for instance, point out that fiscal decentralization means local state agents have to be self-reliant in managing their coffers and the huge profits accompanying land apportionment allow them to be so. Wong K. K. and Zhao X. B., “The Influence of Bureaucratic Behavior on Land Apportionment in China: The Informal Process,” Environment and Planning C: Government and Policy, No. 17 (1999), pp. 122-23. Also refer to Liu et al., “Instrumental Land Use,” pp. 321-28. 41 Liu et al., “Instrumental Land Use,” pp. 321; Xie Jianchao and Gong Chengyu, “Weifa kaifashang he guanyuan weihe wusuo guji” (“Why unlawful developers and officials are fearless”), Zhongguo jingji shibao (China Economic Daily), 11 April 2007, pp. 016; Su Ming and Zhao Quanhou, “The Fiscal Framework.” Yew Chiew Ping 40 Chapter Two Explaining Land Use Conversion emboldened local officials who may dispossess peasants of their land with relative ease. 5) Macro-processes: While local governments manipulate land resources under their jurisdiction to spur urbanization that may not be predicated on demographic changes, they also have to supply land to accommodate the demands arising from such changes. Large-scale processes such as urbanization and industrialization are often triggered by government policies. Political and economic reforms since the late 1970s, for instance, unleashed pent-up demand for roads, housing, and other infrastructure that led to the widespread conversion of agricultural land for construction purposes. At the provincial level, industrial restructuring planned by the Guangdong provincial government since the late 1990s has created a greater demand for non-agricultural land in the less developed regions within the province. In competing to attract relocating industries, governments in Sihui and other counties on the fringe of the Pearl River Delta leased construction land to industries at low prices, waived administrative fees and offered tax returns for enterprises.42 Having established the factors that determine land use conversion, the next chapter shall begin by examining central-local fiscal arrangements in the post-1994 context and the ways in which land revenues contribute to local finances. 42 Refer to Chapter Five and Six for details. Yew Chiew Ping 41 [...]... constrained by the physical characteristics of the land resources that it may exploit As mentioned in Chapter One, for instance, the east coast of China has large areas of arable land as well as construction land, which means that there is a limited supply of remaining land that can be used for construction Sihui, as we shall see later, is constrained by the vast expanses of mountainous and hilly terrain... local patterns of land use change.36 While officials seek to maximize their careers in the institutional arena, the strategy they adopt, their means of doing so, and the resources accessible to them fluctuate with other macro-level considerations Instrumental land use may or may not payoff for officials seeking career advancement, especially if they resort to illegal land use conversion or if land. .. profits accompanying land apportionment allow them to be so Wong K K and Zhao X B., The Influence of Bureaucratic Behavior on Land Apportionment in China: The Informal Process,” Environment and Planning C: Government and Policy, No 17 (1999), pp 122 -23 Also refer to Liu et al., “Instrumental Land Use, ” pp 321 -28 41 Liu et al., “Instrumental Land Use, ” pp 321 ; Xie Jianchao and Gong Chengyu, “Weifa kaifashang... in China, ” World Bank Policy Research Working Paper 4051 (20 06), The World Bank, http://www.worldbank.org, date accessed 12 February 20 08, pp 36-38 33 Peterson, Land Leasing and Land Sale,” pp 3 Yew Chiew Ping 37 Chapter Two Explaining Land Use Conversion 2) Land resources: Although construction land is not a static asset and can be created by taking over agricultural land, the government is nonetheless... pent-up demand for roads, housing, and other infrastructure that led to the widespread conversion of agricultural land for construction purposes At the provincial level, industrial restructuring planned by the Guangdong provincial government since the late 1990s has created a greater demand for non-agricultural land in the less developed regions within the province In competing to attract relocating industries,... governments in Sihui and other counties on the fringe of the Pearl River Delta leased construction land to industries at low prices, waived administrative fees and offered tax returns for enterprises. 42 Having established the factors that determine land use conversion, the next chapter shall begin by examining central-local fiscal arrangements in the post-1994 context and the ways in which land revenues... largescale urban infrastructure development, salient symbols of modernization.41 The institutional context within which officials operate also consists of institutions other than the aforementioned Flaws in China s land management system provide openings for opportunistic officials to exploit and even participate in illegal land deals The inefficacy of grassroots self-governance in empowering villagers... omniscient and thus exercises “bounded rationality” under the condition of incomplete information At the local level, the political and fiscal motives for converting land to urban uses vary in their causal impact Local state variations, including the government’s fiscal situation, path of industrialization, history of governance, land resources, interact with officials’ cost-benefit calculations to determine... villagers also nongmin (Village, Agriculture and Farmers), No 7 (20 07), pp 13 39 Ping Xinqiao, The Evolution of Chinese Fiscal Decentralization and the Impacts of Tax Reform in 1994,” Hitotsubashi Journal of Economics, Vol 41, No 2 (20 00), pp 187-90 40 Wong and Zhao, for instance, point out that fiscal decentralization means local state agents have to be self-reliant in managing their coffers and the huge... contextual information to determine what exactly these political actors aim to maximize and why certain goals preside over others.35 Within the parameters of the cadre target responsibility system, the central-local revenue-sharing system and land institutions, the maximization of 34 José Antonio Cheibub, “Political Regimes and the Extractive Capacity of Governments: Taxation in Democracies and Dictatorships,” . Chapter Two Explaining Land Use Conversion 2 Explaining Land Use Conversion Several hypotheses have been advanced in explaining the conversion of agricultural land to non-agricultural use in China. . in China. Analyses that pinpoint large-scale processes of urbanization and industrialization, institutional flaws in China s land use regime, and the political weakness of peasants are insightful. exploit. As mentioned in Chapter One, for instance, the east coast of China has large areas of arable land as well as construction land, which means that there is a limited supply of remaining land