Chapter Four Land Development and Urbanization Land Development and Urbanization Urbanization in China has been transformed from a centrally-controlled phenomenon to a contentious process among local states.1 In 2005, Wang Guangshou, Minister of China’s Ministry of Construction censured local governments that set unrealistically high targets in city building. Whereas the Chinese capital of Beijing had positioned itself as only a “modern international city” (xiandaihua guoji chengshi) in its citybuilding plan, there were 183 cities all over China that proposed to turn themselves into “modern international metropolis (xiandaihua guoji dadushi),” a target that even the capital had yet to achieve.2 Furthermore, the Ministry of Construction also disclosed that around 20 percent of China’s 662 cities and over 20,000 designated towns were culpable of “image engineering projects” (xingxiang gongcheng) such as huge squares, wide roads and luxurious office buildings.3 The city building fever that the Ministry described has been commonly termed as “chengshi jingying” or “city building as a business” by Chinese media and experts.4 It is characterized by the inordinate expansion of a city through the extensive requisition of land for property development and infrastructure construction, financed For an overview of the process, definition and measurement of urbanization in China, refer to Zhang L. and Simon X. B. Zhao, “Re-examining China’s ‘Urban’ Concept and the Level of Urbanization,” The China Quarterly, No. 154 (1998), pp. 330-81; Zhang Li, “Conceptualizing China’s Urbanization under Reforms,” Habitat International, Vol. 32, No. (2008), pp. 452-70; Shen Jianfa, “Estimating Urbanization Levels,” pp. 89-107; Chan Kam Wing, “Economic Growth Strategy and Urbanization Policies in China,” International Journal of Urban and Regional Research, Vol. 16, No. (1992), pp. 275-305.; Chan Kam Wing and Hu Ying, “Urbanization in China in the 1990s: New Definition, Different Series, and Revised Trends,” The China Review, Vol. 3, No. (2003), pp. 49-71; Zhou Yixing and Laurence J. C. Ma, “China’s Urbanization Levels: Reconstructing a Baseline from the Fifth Population Census,” The China Quarterly, No. 173 (2003), pp. 176-96; Eric J. Heikkila, “Three Questions Regarding Urbanization in China,” Journal of Planning Education and Research, Vol. 27, No. (2007), pp. 65-81. “Jianshebu buzhang henpi jianshe xitong bingzheng, nuche ‘zhengji gongcheng’” (“Minister of Construction reproved the ills of the construction system and denounced ‘political achievement projects’”), Chengshi guihua tongxun (City Planning News), No. (2005), pp. 2. 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. Sun Yongzheng, “Chengshi jingying de fengxian” (“The risks of running a city like a business”), Shidachao (Trends of the Time), No.2 (2003), pp. 36-37; Lin Jiabin, “Dui ‘chengshi jingying’ re,” pp. 10-13. Yew Chiew Ping 74 Chapter Four Land Development and Urbanization through bank loans, land leasing, or the collection of ad hoc fees from enterprises and the society. In explaining what drives land use conversion in China, therefore, part of the story is that urbanization in the sense of a shift from agricultural to industrial activity is accountable for the expansion of Chinese cities at the expense of rural land. This chapter shall focus on telling the other part of the story. It argues that China’s urbanization is also a spatial expansion that may proceed independent of urban population growth or a sectoral shift. The engineers of this land-centred urban sprawl are the local states. As an expert on China’s urbanization suggests, Urbanization, if achieved by urban spatial expansion and infrastructure upgrading, is regarded as a sign of modernization and a means to enhance local competitiveness. In this context, urban transition . . . is effectively facilitated by many untrammelled developments at the local level . . . from extensive land use change to lure investment, redundant construction of infrastructure and duplication of projects with less concern directed towards the development plans of neighboring jurisdictions, and conversion of rural areas into designated cities to widen the development space.5 This urge to stimulate local competitiveness through urbanization is closely related to the way officials are graded by their superiors under the Cadre Target Responsibility System. In the process of spatial expansion, local governments have taken agricultural land for construction with alacrity because it fulfils multiple objectives critical to their career and other interests. Besides fiscal incentives and legitimate or illegitimate monetary gains described in the previous chapters, land development fuels GDP growth and conjures up highly visible political accomplishments – megascale construction projects labelled aptly as “political achievement projects” (zhengji gongcheng). Local officials may sell land use rights at high prices to increase coffers or offer land at low prices to attract investments and promote industrialization; they may also expand the urban built-up area (jianchengqu) under their territorial Zhang L., “Conceptualizing China’s Urbanization,” pp. 466. Yew Chiew Ping 75 Chapter Four Land Development and Urbanization jurisdiction and build infrastructure to expedite “urbanization." In short, land use change effectively allows the government to “kill many birds with one stone.” The following section outlines the way local cadres are appraised before elaborating on the nature of urbanization and the business of city building in China. The Cadre Target Responsibility System The performance of China’s government officials at the county level and below is measured and supervised through a system of quota (zhibiao), which is a legacy of the planned economy era.6 In 1995, the Central Organization Department (zhongyang zuzhibu) issued tentative measures on the appraisal on county level cadres and leaders, which consisted of over 20 quotas falling under three categories: economic construction, social development and civil construction, and party construction (see Table 4.1).7 These include highly specific and measurable targets such as local fiscal capacity, birth control as well as those under party construction that generate less tangible results. Through this political institution of performance appraisal, each level of government signs responsibility contracts “objectives, evaluation procedures, and remuneration” with its immediate subordinates one level down.8 In this way, higher-level objectives cascade to lower levels through the administrative hierarchy and the completion of important tasks translates into direct incentives for individual cadres. For instance, county leaders seek to include their priorities and responsibilities in the contracts of Yang You-Ren Daniel and Wang Hung-Kai, “Dilemmas of Local Governance under the Development Zone Fever in China: A Case Study of the Suzhou Region,” Urban Studies, Vol. 45, No. & (2008), pp. 1048. For a brief history on China’s cadre evaluation system, see Lang Youxing, “Zhongguo ganbu kaohe zhidu zai bianlian” (“The changing face of China’s cadre evaluation system”), Renmin luntan (People’s Forum), No. (2008), pp. 10-11. Wang Jun, “Zhongzubu shixing xian(shi) dangzheng lingdao banzi gongzuo shiji kaohe biaozhun” (“The Central Organization Department tests the evaluation standards for the actual work achievements of county(city) party and government leaders”), Beijing tongji (Beijing Statistics), No. (1996), pp. 7-8, 26. Kevin J. O'Brien and Li Lianjiang, "Selective Policy Implementation in Rural China," Comparative Politics Vol. 31, No. (1999), pp. 172. Yew Chiew Ping 76 Chapter Four Land Development and Urbanization township leaders, who in turn convey these to village cadres.9 The contracts quantify and attach numeric values or weights to targets that subordinates are to attain within a specific period of time.10 While lower level governments have some room in defining their targets, economic quotas still predominated.11 As seen from Table 4.1, economic items have betterdefined quotas, in comparison to those of the other two categories. It is also more difficult to verify the results of environmental protection, and other social developmental goals. This accentuates the over-emphasis on GDP, revenue and other growth indicators.12 Tasks subsumed under economic and social development are more heavily weighted and thus are naturally given more attention by the local governments and cadres to be assessed.13 Under certain circumstances, a cadre’s failure to meet an important target may render all his other accomplishments futile and deny him of the opportunity to be promoted. The types of targets that have veto power (yipiao foujue) over the rest had increased gradually, extending to areas such as clean and honest governance, social stability, birth control, and others.14 The amount of revenue, in particular, is often a Susan H. Whiting, Power and Wealth in Rural China: The Political Economy of Institutional Change (Cambridge, U.K.: Cambridge University Press, 2001), pp. 103; Maria Edin, “Local State Corporatism and Private Business,” Journal of Peasant Studies, Vol. 30, No. (2003), pp. 281. 10 See Tsui Kai-yuen and Wang Youqiang, “Between Separate Stoves and a Single Menu: Fiscal Decentralization in China,” China Quarterly, No. 177 (2004), pp. 78. 11 Yang and Wang, “Dilemmas of Local Governance,” pp. 1048. 12 See Wang Qiang, “Ruhe pingjia defang guanyuan de zhengji” (“How to evaluate local officials’ political achievements”) Juece zixun (Policy Consultation), No. 12 (2003), pp. 34-35; Gu Jinglei and Yao Rong, “Zhengfu lingdao ganbu kaohe zhidu yanjiu” (“A study on the evaluation system of government leaders and cadres”), Jiaxing xueyuan xuebao (Journal of Jiaxing University), Vol. 17, No. (2005), pp. 93-95; Zhang Zhanbin, “'Difang zhengfu gongsihua' fansi” (“Reflections on the corporatization of local governments”), Juece (Decision Making), No. 11 (2006), pp. 32; Zhu Jiangping, “Xiankai xin zhengjiguan de honggaitou,” (“Unveiling a new concept of political achievement”) Nongcun gongzuo tongxun (Village Work News), No. (2006), pp. 33-34; Xu Wenjun, “Ganbu kaohe ‘shizhen’de beihou” (“Behind the ‘sham’ of cadre evaluation”), Zhejiang renda (Zhejiang Deputies to the People’s Congress), No. 10 (2007), pp. 26-27. 13 Tsui Kai-yuen and Wang Youqiang, “Between Separate Stoves,” pp. 75-79; Zhang Jiliang, “Jiyu quyu lingdao ganbu kaohe tiaojian xia shuju zhiliang de xin zhidu jingjixue fenxi” (Data quality resulting from the appraisal of regional leaders and cadres: an analysis using the new institutional economics approach), Tongji yanjiu (Statistical Research), No. 10 (2004), pp. 25. For a detailed illustration of how a county grades the performance of township subordinates, see Whiting, Power and Wealth, pp. 106. 14 Han Qiang, “Dui jianli de wanshan dangzheng lingdao ganbu kaohe pingjia zhibiao tixi de ruogan sikao” (The appraisal of party political leaders and cadres: reflections on developing and improving the criteria of the evaluation system), Zhengzhixue yanjiu (Studies in Political Science), No. (2003), pp. Yew Chiew Ping 77 Chapter Four Land Development and Urbanization “hard target” for towns and townships and all other achievements may be discounted upon the failure in meeting the quota set by the county government. Some counties may even cut their subsidies to townships as a penalty. In desperation, some towns and townships resort to tax-buying, or appropriating other financial sources to make up for the deficiency.15 The defects of the appraisal system have been widely covered in the Chinese literature. The way it is structured and the focus on economic goals have given rise to a warped perception of what constitute political accomplishments. Beneath the façade of impressive growth and investment figures often lies a reality that is far less rosy. Opportunistic local governments take advantage of information asymmetry and seek the most beneficial outcome for themselves through high, if superficial, economic growth targets. It has also been suggested that the handing down of targets or quotas from upper levels (ya zhibiao) constituted a strong motivation for lower ranks officials to seek investments through extensive land use conversion. The violation of land use regulations is driven by the link between cadres’ promotion or evaluation and the system of economic indicators at below the county level.16 41. 15 Ba Zhipeng, "Woguo fenshuizhi gaige,” pp. 39. “Tax-buying” takes many forms. To attract or draw businesses and tax-payers to pay tax in a locality, some townships may give a 20 to 50 percent rebate on the tax contribution to local coffers. Others may reduce tax rates to attract tax-payers but still pay the stipulated amount to local coffers. The shortfall is then accounted for as tax-collection costs. These desperate measures are often a response to unrealistic quotas set by superiors whose aim is to boost their own “political accomplishments.” Refer to Dawuxian Shenjiju, "Xiangzhen zhengfu 'yinshui' xingwei de fenxi yu tantao" (“The ‘tax-drawing’ behaviour of town and township governments: an analysis and exploration”), Shenji yuekan (Accounting Monthly), No. (2006), pp. 28-9; Li Dezhi, "'Maishui jiaochai' shui lai zhizhi" (“Who to put a stop to ‘tax-buying to fulfil duty’”), Jingji yanjiu cankao (Study and Research of Economics), No. 87 (2006), pp. 27; Qing Shan, "'Maishui' wu zong zhui" (“The five commandments of ‘tax-buying’”), Xin xibu (New West), No. 10 (2006), pp. 53-4. 16 Yang and Wang, “Dilemmas of Local Governance,” pp. 1049. Yew Chiew Ping 78 Chapter Four Land Development and Urbanization Table 4.1 The Cadre Target Responsibility System Evaluation Item 1) Economic construction i. Economic aggregates, growth and per capita levels Indicator Qualitative Requirement GDP and growth; GDP per capita and growth ii. Tax revenues and local governments’ fiscal capacity iii. Urban and rural living standards Central tax revenue and growth; local financial revenue and growth Villagers’ gross income per capita; population lifted from poverty; urban cost of living per capita, income and growth; social retail price index; urban consumer price index Cultivated land area preservation; output of food and main agricultural production and growth; cropland irrigation area Appreciation of state-owned assets In accordance with the State’s overall management and control targets, taking into account the patterns of the socialist market economy as well as objective circumstances, determine local development targets and shift the focus to restructuring, improving the quality of economic growth and results. To improve the tax sharing system, increase central and local financial revenues and achieve a balance in expenditure and revenue. Gradually increase urban and rural income; steadfastly control the price inflation rate and ensure market supply iv. Agricultural production and village economic development v. Management of state-owned assets vi. Enterprise management and development State-owned enterprise profits; state-owned enterprise tax turnover rate; TVE profits; TVE tax turnover Level of investment in basic infrastructure vii. Traffic, energy, telecommunication, urban construction, cropland water conservancy and the level of other basic infrastructures 2) Social development and civilization construction i. Population and birth control Planned birth rate ii Social stability and security Crime rate reduction; rate of solving major cases Evaluation Item iii. Education, scientific technology, culture, public health, and sports Yew Chiew Ping Indicator Spread of the nine-year compulsory education; reduction in youth illiteracy; technological innovation and contribution; spread of village thirdlevel medical treatment and prevention safety net Increase agricultural investment; improve the conditions of agricultural production; promote advanced technology; increase unit production and total output; improve agricultural structure; increase supply of agricultural produce Build a sound responsibility system and a value-preservation/appreciation evaluation system for the management of state-owned assets to prevent loss. Transform the management mechanism of state-owned enterprises and enhance economic results; actively promote TVEs; reasonably introduce and utilize foreign capital Improve production and living standards, enhance security for industrial and agricultural production Control high birth rate and improve population quality Strengthen the integrated management of social security, forbid pornography, gambling drugs and backward, superstitious activity, ensure social stability and a stable life for the people Qualitative Requirement Implement the development strategy of prioritizing education, increase investment in education, promote the transformation of technological results, improve the health of the people 79 Chapter Four Land Development and Urbanization iv. Environmental and ecological protection Reducing and regulating the “three wastes” (waste water, gas and residue); Forests and vegetation coverage 3) Party construction i. Ideological and political construction ii. Building of leadership and cadre teams iii. Building of democratic centralism iv. Building of party grassroots organization v. Cultivation of party spirit and non-corruption Source: Wang Jun, “Zhongzubu shixing,” pp. 8. Yew Chiew Ping The simultaneous planning, implementation and development of environmental and economic construction, control and reduce environmental pollution Cadres of the organization and party members learning and understanding of the Party’s fundamental theories, direction and knowledge, enhance ideological and political calibre Attach importance to evaluating leaders’ improvement and structural improvements Attach importance to evaluating if major decisions and policies produced positive results or led to serious lapses Attach importance to evaluating the construction of grassroots party organizations, and the construction and enforcement of the responsibility system Attach importance to evaluating leaders’ and cadres’ enforcement of relevant regulations on non-corruption and self-discipline 80 Chapter Four Land Development and Urbanization Urbanization: the Business of City Building In countries where all urban land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet . . . Urban land values are created in part by public investment. They reflect the capitalized value of access to road networks, water supply, schools and other services made possible by municipal investment. It is economically appropriate therefore for municipalities to capture part of the land-value increment they create through their investment. There are various ways that increases in urban land value can be captured, but the sale of land or land rights has the advantage of producing revenue quickly and being easier to administer . . .17 The above passage aptly sums up the attractiveness of urban land as an asset for governments, as well as how public improvements boost land prices. Revenue from land sales is used to finance urban infrastructure, which contributes to a further hike in land prices. According to a World Bank report, many China cities have financed half or more of their urban infrastructure investment through land sales while using land as a collateral to finance the remainder.18 Local governments capitalize on land value increment through the construction and development of basic infrastructure. First, they may lease land use rights to buyers after improving public infrastructure. Land use rights are mortgaged to banks to obtain loans for financing capital construction.19 After investing in and improving public infrastructure, bringing about an appreciation in land price, land use rights are then conveyed or transferred through auction, tender and so on. Part of the economic gains are again invested on enhancing urban facilities to further drive up land prices and so on. Alternatively, local governments may lease land use rights before improving public infrastructure. The projected appreciation in land price draws private sources of funds from investors to participate in the development of public infrastructure.20 Peterson, “Land Leasing and Land Sale,” pp. 3. Ibid. More than 60 percent of China’s cities had borrowed form banks or had outstanding loan applications to finance infrastructure construction by 2001. The total debt incurred by the government for urban infrastructure amounted to 74.2 billion yuan in 2001. Refer to Su Ming and Zhao Quanhou, “The Fiscal Framework.” 19 Capital construction refers to “new construction projects or extension projects and the related activities of the enterprises, institutions or administrative units mainly for the purpose of expanding production capacity (or improving project efficiency), covering only projects each with a total investment of 500,000 RMB yuan and over.” For the full definition, refer to the “Explanatory notes on Main Statistical Indicators,” http://www.stats.gov.cn, accessed 24 January 2008. 20 Wang Jun, “Zengzhang quxiang de shiyingxing tiaozheng: dui defang zhengfu xingwei yanbian de yizhong lilun jieshi” (“Adjusting growth inclinations to external changes: a theoretical explanation of the change in local governments' behaviour”), Guanli shijie (Management World), No. (2004), pp. 54; 17 18 Yew Chiew Ping 81 Chapter Four Land Development and Urbanization This practice of infrastructure-financing to spur urban development is also observed by other researchers. Lin, for one, suggests that land sales, or the leasing of land use rights, which constitute 30 to 70 percent of local revenue in many cities, have become a vital source of capital for urban development. “This new ‘land-centred urban politics’,” he argues, “has been correctly identified by many urban researchers as one of the most important driving-forces operating behind the spectacular expansion of cities, particularly large cities, and the upsurge in city-forming urbanization since the mid 1990s.”21 China’s “spectacular” urban expansion is evident in the rapid growth of its fixed assets investment. Investment in capital construction went up by 1433.8 billion yuan or 167 percent from 1996 to 2003 whereas investment in real estate more than trebled over same period, growing from 321.6 billion yuan to 1015.4 billion yuan (see Table 4.2). The following statistics illustrate what the burgeoning investments had materialized into: total floor space of buildings more than doubled from 1996 to 2003, expanding from 6.1 billion square metres to 14 billion square metres; the length of paved roads almost doubled from 1996 to 2005 while area of paved roads increased from 1.4 billion square metres to 3.9 billion square metres (see Table 4.3). Another indicator of China’s urban development is the urban built-up area, which reflects the size of the urbanized area in China’s cities. Specifically, the urban builtup area refers to the non-agricultural area in an urban district which is developed through land requisition and construction, and is well-equipped with public infrastructure and facilities. It is a more accurate indicator than city area since a city in China is an administrative concept and may encompass large areas of villages and agriculture, meaning that the area of a Chinese city is often larger than its urbanized Zheng Meng and Miao Jie, “Chengshi tudi jingying,” pp. 32. 21 Lin, “Reproducing Spaces,” pp. 1832-33; See also Lin Jiabin, “Dui ‘chengshi jingying’ re,” pp.10-13; Liu Shouying, “Jingti tudi jingying,” pp. 46-47; Zhang Meng and Miao Jie, “Chengshi tudi jingying,” pp. 32-33. Yew Chiew Ping 82 Chapter Four Land Development and Urbanization area.22 Through improvements to public infrastructure in the manner described above, a city’s urban built-up area is expanded, thus driving up land prices. From 1996 to 2006, China’s urban built-up area increased from 20,214 square kilometres to 25,972 square kilometres. Land and real estate prices had increased more rapidly after 2001. On average, prices of residential and non-residential properties had risen by 3.7 to 9.7 percent annually from 2002 to 2005 while land prices grew by nearly to 10 percent annually over the same period (see Table 4.4). At the same time, significant areas of rural land were requisitioned in the process of city building. In a decade from 1996 to 2005, the total expansion in urban built-up area amounted to 12,306 square kilometres, of which 12,014 square kilometres were land requisitioned for state construction projects (see Table 4.3). An estimation claims that the encroachment of urban space onto rural China has given rise to 1.5 million landless farmers each year in the last decade.23 Zhejiang urban development exemplifies the experience of China’s coastal provinces. From 1996 to 2002, the urban built-up area in 33 percent of Zhejiang’s 61 county level units (cities and districts) had doubled in size. From 2002 to 2005, among 59 county level units, 15 percent underwent a 100 percent expansion in their urban built-up area while of them saw a threefold enlargement. Comparing 1996 and 2005 statistics, the urban built-up area in 20 percent of 54 county level units had expanded by more than threefold; that of 15 percent grew by twofold while that of 37 percent doubled.24 Moreover, the expansion of a city maximizes the local government’s tax revenue. For instance, one of Zhejiang’s counties had redrawn its boundaries three times since Li Jianying, "Guangdong chengshihua de xianzhuang, wenti yu zhidu yuanyin fenxi (The urbanization of Guangdong, its problems and systemic causes: an analysis"), Dongya lunwen (East Asia Dissertation), No. 50 (2005), pp. 3. 23 Tan Minghong et al., “Urban Land Expansion,” pp. 188. 24 Dai Wenzhuo and Ding Han, “Zhejiangsheng xianji yishang chengzhen jianchengqu guimo kuozhan yanjiu”, Guotu ziyuan (Land and Resources), No. (2007), pp. 12. 22 Yew Chiew Ping 83 Chapter Four Land Development and Urbanization convert villagers into urban residents and VCs into Residents’ Committees on a large scale, thereby taking over agricultural land that formerly belonged to the villagers.49 As all streets are classified as urban areas, counties and cities can expand their urban districts instantly by converting towns into streets.50 2. County Level and Above As there has been a freeze on county seeking city status since 1997, administrative reclassification in the past decade had taken the form of county-level cities being upgraded to prefecture-level cities, and the latter annexing county-level units within its territory. County-level cities that meet a few criteria may seek the State Council’s approval to upgrade to prefecture-level city, which endows the government with expanded power and authorities.51 From 1996 to 2004, number of county level cities fell from 445 to 374 while the number of prefecture level cities increased by 66 (see Table 4.6). Under China’s system of city-leading-county (shi guan xian), prefecture-level cities are endowed with greater power as all urban districts, counties and county-level cities fall under their jurisdiction.52 Not only is the city’s size expanded, it also has access to more resources, such as land. In the words of Chung, “The expansion of urban scale allows prefecture-level cities to directly intervene in their counties’ spheres of planning, production, circulation, and cooperation. Counties have become the city’s backyard of raw materials, suppliers of cheap labor, and markets for their Dai Junliang, “Zhongguo xiandaihua,” pp. 28. Shen Jianfa, “Estimating Urbanization Levels,” pp. 92; Yi Fei, “‘Zhengaijie’ yu xinnongcun jianzhe lüchun budui mazui” (“Converting towns into subdistricts and the building of new villages: incongruities”), Zhonghua jianshe (Nation Building), No. (2006), pp. 61. 51 Non-agricultural population of 250,000 in urban district, of which 80 percent are in the city-government seat; GDP of at least 2.5 billion yuan, of which 35 percent or more from tertiary industry etc. See Chung Him, “The Change in China’s State Governance and its Effects upon Urban Scale,” Environment and Planning A, Vol. 39 (2007), pp. 796. 52 Wang Yingjing, “Shiguanxian tizhi de libi fenxi ji gaige silu” (“An analysis of the strengths and weaknesses of the city-leading-county system and its reform”), Lilun xuekan (Theory Journal), No. (2005), pp. 84-87. 49 50 Yew Chiew Ping 94 Chapter Four Land Development and Urbanization old equipment . . . Under this new relationship, subordinate counties have lost their autonomy over certain administrative and budgetary issues.”53 Table 4.6 Number of Cities at Various Administrative Levels in China TOTAL Municipalities Sub ProvincialPrefecture-Level County-Level Level Cities Cities Cities 1996 666 16 202 445 1998 668 15 212 437 2000 663 15 244 400 2002 660 15 260 381 2004 661 15 268 374 Sources: Zhongguo chengshi tongji nianjian 1997, pp. 13; Zhongguo chengshi tongji nianjian 1999, pp. 3; Zhongguo chengshi tongji nianjian 2001, pp. 3; Zhongguo chengshi tongji nianjian 2003, pp. 3; Zhongguo chengshi tongji nianjian 2005, pp. 3. Furthermore, prefectures may annex county level units as “districts.”54 From 1989 to 2002, there were 91 prefecture-level cities that underwent administrative adjustments, among which 40 annexed cities to set up districts, 17 set up new districts, four expanded the area of districts.55 When prefecture-level cities annex county-level cities or counties, the authorities formerly enjoyed by the county-level government are rescinded and passed on to the prefecture-level government.56 The benefits of “administrative annexation” for the latter include enlarged space for development, greater economic strength, rise in property prices, rise in the price of urban land, leading to higher revenues for the government.57 For instance, after county-level Wujin city was annexed by the higher level Changzhou city in 2002, the price of commercial housing in Wujin district grew by Chung, “The Change in China’s State Governance,” pp. 802. For details on the extent of annexation in recent years, refer to Zhongguo chengshi tongji nianjian 2003, (Zhongguo tongji chubanshe, 2004), pp. 4-7; Zhongguo chengshi tongji nianjian 2005, Wang Youjuan and Chen Xiaojie et al. (eds.), (Zhongguo tongji chubanshe, 2006), pp. 4-6. 55 Zhang Hao, “Chengshi xingzheng quhua biangeng yu tudi de guanxi yanjiu” (“A study on the adjustment of urban administrative divisions and its relation to land”), Shangye jingji (Business Economics), No. (2007), pp. 7-8. 56 Li Kaining, Wei Qingquan, Zhang Xiaoming, “Cong qu de shijiao dui ‘cheshi shequ’ de jixiao yanjiu – yi Guangzhou shi Panyu qu wei li” (“A study of the results of converting city into district in Guangzhou Panyu from the district’s perspective”), Renwen dili (Human Geography), No. (2007), pp. 113. 57 See Fang Shengjing and Chen Duozhang, “Xingzheng quhua tiaozheng dui fangdichan shichang yingxiang” (“The effects of adjusting administrative divisions on the rela estate market”), Zhejiang wanli xueyuan xuebao (Journal of Zhejiang Wanli University), Vol. 20, No. (2007), pp. 117-120; Zhang Jingxiang and Wu Fulong, “China’s Changing Economic Governance: Administrative Annexation and the Reorganization of Local Governments in the Yangtze River Delta,” Regional Studies, Vol. 40, No.1 (2006), pp. 14-15. 53 54 Yew Chiew Ping 95 Chapter Four Land Development and Urbanization 500 yuan per square metre.58 In 2003, Foshan became the third largest city in Guangdong after it annexed a few county-level units, including Nanhai, Shunde, Sanshui, Gaoming. County-level Panyu city and Huadou city were annexed by Guangzhou city in 2000, after which large areas of farmland in Panyu were expropriated by Guangzhou.59 The Guangzhou government also demarcated and froze the use of large areas of land in Panyu for its development, such as 43 square kilometres for a university town, 200 square kilometres for a new town and so on.60 In Nanjing, with the annexation of Jiangning, Liuhe, Jiangpu counties in recent years, the city area grew from 1,026 square kilometres to 4,728 square kilometres from 2000 to 2002. At the same time, large areas of farmland on the city fringe were expropriated – cultivate land decreased by 3.3 square kilometres in 2002 alone.61 Industrialization: The Proliferation of Development Zones Kaifaqu or development zones are often championed by local cadres as the answer to industrialization.62 Yet the proliferation of development zones has resulted in large areas of idle land, which are expropriated from rural peasants and left in a desolate state due to a lack of investors, funds or other reasons.63 The indiscriminate conversion of land to industrial use has persisted despite the central government’s repeated attempts to douse three rounds of “zone fever” in 1992, 1997 and 2003.64 Zhang and Wu, “China’s Changing Economic Governance,” pp. 13-14. “Foshan chexian shequ dazao zhongxin chengshi da geju” (“Foshan converts county into district to create the structure of a core city”), Lingdao juece xinxi (Information on Leaders’ Policy), No. (2003), pp. 13; Zhang Wen and Xing Shuzhi, “Guangdong dazao di san cheng” (“Guangdong builds the third largest city”), Xinwen zhoukan (News Weekly), (2003), pp. 28-30. 60 Li Kaining et al., “Cong qu de shijiao,” pp. 111-14. 61 Lü Xianjun and Wang Mei, “Xingzheng quhua tiaozheng yu chengshi kuozhang yanjiu – yi Nanjing shi wei li” (“A study of the adjustment of administrative divisions and city expansion using the example of Nanjing city”), Xiandai chengshi yanjiu (Study of Modern Cities), No. (2006), pp. 67-72. 62 Compared to other countries, the percentage of land for industrial use in China is much higher at over 20 percent. See Cao Jianhai, “Lun woguo tudi guanli zhidu yu chongfu jianshe zhi guanlian” (“On the relationship between China’s land management system and duplicate construction”), Zhongguo tudi (China Land), No. 11 (2004), pp. 12-13. 63 He Shujin and Su Guangquan, “Kaifaqu xianzhi tudi chengyin jizhi jileixing huafen” (“The casual mechanism and types of idle land in development zones”), Ziyuan kexue (Resources Science), Vol. 23, No. (2001), pp. 17-19; Wang Jun, “Zengzhang quxiang,” pp. 57. 64 Hua Chen and Duan Li, “‘Kaifaqu qingli zhengdun’ beihou de tudi ziyuan shikong wenti” (“The loss of control over land resources behind the ‘cleaning up of development zones’”), Tequ jingji (Special Economic Zones’ Economy), No. (2004), pp. 94. 58 59 Yew Chiew Ping 96 Chapter Four Land Development and Urbanization According to the MLR’s legal enforcement and supervisory body, there were 1,951 development zones all over China at the end of 1992, with a total planned area of 15,300 square kilometres. The actual area under construction was only 307 square kilometres, a far cry from the total planned area. Moreover, most of the zones were set up illegally.65 A nationwide survey of over 70 county level units in 1992 finds that the average planned area of development zones was more than 10,000 mu, with the average area generally higher in the east than in the central and western parts of China. However, the actual land area under construction fell short of the initial planned area by an average of 80 percent, signalling that local planning was likely to be over ambitious and unrealistic. Furthermore, on average, a development zone in the east occupied 9,956 mu of arable land whereas those in the central and the west took up 5,129 mu and 5,797 mu respectively. More than 50 percent of the counties occupied 50 to 100 percent of arable land for their development zones.66 To curb the proliferation of development zones, the State Council issued a notice to cut down on the number of zones.67 It also established a system of dual-level approval by the provincial governments and the State Council for the setting up of development zones.68 Yet China saw a revival of the zone fever in 1997. By then, there were 4,210 development zones in China with a planned area of 12,400 square kilometres, while occupying only 2,322 square kilometres of land. As with the previous round of zone fever, most zones were illegally set up by governments below the provincial level. A moratorium on the approval of non-agricultural use of land, together with a freeze on the approval for counties seeking city status, were imposed in 1997.69 Zhang Pu and Li Xiaowen, “Fangzhi kaifaqu,” pp. 15. Quanguo nongye quhua weiyuanhui, “Kaifaqu zhandi baixian qingkuang diaocha” (“Development zones’occupation of land: a survey of 100 counties”), Zhongguo nongcun jingji (China Village Economy), No. (1993), pp. 62-63. 67 Guofa document no. 33 (1993),“Guanyu yange shenpi he renzhen qingli gelei kaifaqu de tongzhi” (“A notice on the tightening of approval and conscientious reduction of all types of development zones”). 68 Zhang Pu and Li Xiaowen, “Fangzhi kaifaqu,” pp. 15. 69 Ibid. 65 66 Yew Chiew Ping 97 Chapter Four Land Development and Urbanization In 2003, the zone fever recurred a third time and on a larger scale than before. There were nearly 7,000 zones nationwide, with a total planned area that more than doubled that of 1992 and 1997 (see Table 4.7). In July 2003, the State Council issued a notice to suspend the approval of all development zones and began to earnestly manage, eradicate and restructure development zones. The State Council ascertained the land use master plans and master urban plans submitted to it. Table 4.7 China’s Development Zones (square kilometres) 1992 1997 2003 2004 2005 2006 No. of Development Zones 1951 4210 6866 2053 2037 1568 Planned Area 15300 12400 38600 13700 11700 9949 Average Area Per Zone 7.84 2.95 5.62 6.67 5.74 6.51 Land Used for Settlement, 253542 257284 260151 263545 Industrial and Mining Sites Sources: Zhang Pu and Li Xiaowen, “Fangzhi kaifaqu,” pp. 15; “Guojia fazhan gaigewei,” pp. 20; “Zhongguo guotu ziyuan gongbao,” 2003-2006. At the end of 2004, the MLR with other departments implemented verification standards for development zones. To prevent the inordinate spatial expansion of zones, all zones were to report their boundaries in four directions – north, south, east and west (sizhi fanwei).70 The verification and approval principles and standards in the restructuring of development zones were promulgated in 2005. These countermeasures appeared to be effective, if momentarily, as the number of zones plummeted by 77.2 percent and area cut down by 74 percent from 2003 to 2006.71 Table 4.8 lists the numbers and areas of development zones at the national and provincial levels that were already verified and approved by the authorities. Beyond these approved zones, however, there were numerous variedly named industrial zones at sub-provincial level cities and towns. In Lishui city of Zhejiang, for instance, there were 13 other industrial zones with a total area of 28.8 square Ibid; “Guojia fazhan gaigewei,” pp. 19-20. Fagaiwaizi document no. 1521 (2005), “Qingli zhengdun kaifaqu de shenhe yuanze he biaozhun” (“Verification principles and standards in the reduction and restructuring of development zones”). At the same time, however, the arable land used for construction soared over 70 percent from 2.2 million mu in 2004 to 3.9 million mu in 2006. Refer to Figure 1.2 in Chapter One. 70 71 Yew Chiew Ping 98 Chapter Four Land Development and Urbanization kilometres in addition to the ten development zones of area 24.4 square kilometres; in Hangzhou’s Xiaoshan city, there were three development zones of 25.9 square kilometres and 25 other zones of 50.2 square kilometres and so on. According to MLR, these sub-provincial zones in developed regions were generally larger than the zones at provincial level and above whereas the areas of both were almost the same in less developed regions.72 Thus it may be surmised that the actual land area taken up by development zones in various forms at all levels exceeds the tabulation in Table 4.8. New complications also arose soon after the completion of the nationwide zone restructuring. The deputy chief superintendent of land of the MLR and a spokesperson from China’s Development and Reform Committee (fagaiwei) suggest that the nation is seeing a resurgence of zones as local governments start creating new zones or expand existing ones under the guise of “ecological zones” (shengtaiyuan), “tourist resorts” (lüyou dujiaqu), “industrial corridor” (gongye zoulang), or “industrial cluster zone” (chanye jijuqu). Some local governments revive disapproved or abolished development zones by authorizing approved zones to manage and attract investors on their behalf.73 Zhang Pu and Li Xiaowen, “Fangzhi kaifaqu,” pp. 18. “Guojia fazhan gaigewei,” pp. 21; “Kaifaqu weifa zhandi xin tedian: you hefa de kaifaqu weituo zhaoshang” (“New characteristics of development zones’ illegal occupation of land: authorizing a legal development zone to attract investments”), 23 Sep 2007, MLR website, http://www.mlr.gov.cn, accessed 13 June 2008. 72 73 Yew Chiew Ping 99 Chapter Four Land Development and Urbanization Table 4.8 China’s Development Zones by Province No. of development zones Total planned area (hectares) Gross industrial output value National Provincial (100 million level level yuan) TOTAL 1568 222 1346 994927 222315.93 Beijing 19 16 34583.62 5974.70 Tianjin 30 25 25492.17 6119.08 Hebei 50 45 25686.54 10194.40 Shanxi 24 22 15765.53 4173.93 Inner Mongolia 45 39 28200.90 2327.48 Liaoning 55 13 42 30857.94 9140.61 Jilin 40 35 23271.97 3551.72 Heilongjiang 35 29 20482.53 3955.70 Shanghai 41 15 26 65416.79 14594.15 Jiangsu 136 27 109 83586.24 29476.66 Zhejiang 116 13 103 80841.81 21227.20 Anhui 89 85 39789.58 4236.39 Fujian 84 19 65 54440.21 7516.05 Jiangxi 91 88 41436.43 2736.69 Shandong 171 16 155 87093.02 24678.50 Henan 27 23 18221.39 9236.80 Hubei 93 89 52698.14 5329.23 Hunan 77 73 38739.95 4341.88 Guangdong 92 23 69 68928.02 31519.61 Guangxi 30 23 18946.38 2242.26 Hainan 14398.00 429.42 Chongqing 37 34 15189.75 2598.84 Sichuan 43 38 27509.37 5303.64 Guizhou 15 13 11084.16 1546.17 Yunnan 22 15 12038.93 2344.07 Tibet 1 546.00 24.85 Shaanxi 22 17 19205.36 3150.79 Gansu 36 34 14800.05 1695.79 Qinghai 3398.00 388.12 Ningxia 16 15 9303.96 605.19 Xinjiang 18 11 12974.28 1656.02 Source: “Zhongguo kaifaqu fenbu tubiao” (“The distribution of development zones in China”), MLR website, http://www.mlr.gov.cn, accessed 14 June 2008. The over-development of industrial zones is evident in widespread duplicate construction and underutilization or wastage of land resources in the form of idle land.74 As a MLR report suggests, the so-called high technology development zones or scientific industrial zone have the same industrial structures and lack technological innovations. By combining trade and commerce, real estate, entertainment and medical facilities within a compound, these hi-tech zones are no different from other zones that are subject to strict regulations.75 By 1999, duplicate construction was so rampant that the State issued a list of 201 items under 17 industries that were Ho and Lin, “Converting Land to Nonagricultural Use,” pp. 105; Gar and Wu, “The New Land Development Process,” pp. 345. 75 Bu gengdi baohu yu jingji fazhan guanxi diaoyan zu, “Tudi liyong zongti guihua,” pp. 33. 74 Yew Chiew Ping 100 Chapter Four Land Development and Urbanization banned. These items fell under three categories: those with a low entry level duplication resulting in overproduction; those utilizing obsolete technology which is outmoded by more advanced technology; those that cause severe pollution and wastage of resources. Governments and relevant departments at all levels are prohibited from approving investments related to the banned items; financial institutions are not to grant loans for these ventures and so on.76 Idle land includes land that is levelled but yet to be developed and land that is developed but underutilized.77 Large areas of land lay idle often because the developed area exceeds demand and due to inadequate investment. Some fail to draw investors due to poor location while others who obtain land at low cost not have sufficient financial power to develop the industrial zone. Others merely use land to reap huge profits through speculation. After several rounds of speculation, a parcel of land ends up in an idle state when it is no longer profitable to transfer its land use rights. Corruption in the exchange of power for money between government and developers has also promoted land speculation. Lapse in the supervision and management of development zones after land is conveyed is also a contributing factor, as some governments are more interested in selling than developing land.78 Unfortunately, there are no comprehensive statistics on the total area of idle land in China. Nonetheless, a 1995 investigation carried out by the then State Bureau of Guojia jingji maoyu weiyuanhui ling document no. 14 (1999), “Gongshang touzi lingyu zhizhi chongfu jianshe mulu” (“List of industrial and commercial investment items that are checked for duplicate construction”). The document is defunct from December 2005. 77 He Shujin and Su Guangquan, “Kaifaqu xianzhi tudi,” pp. 344. More specifically, according to the “Measures to Manage Idle Land,” land for construction qualifies as idle land in the event that the land user fails to start construction work on the lawfully obtained land within a stipulated time frame, or when the actual area under construction is less than one third of the entire area to be constructed, or when the sum of investment is less than 25 percent of the total sum and has halted construction continuously for one year without approval. See Guotu ziyuanbu ling document no. (1999), “Xianzhi tudi chuzhi banfa” (“Measures to manage idle land”), Article 2. 78 He Shujin and Su Guangquan, “Kaifaqu xianzhi tudi chengyin,” pp. 18-19; Zhu Linxing, “Tudi xianzhi wenti de yanzhongxing, chengyin ji qi chuzhi” (“The severity and causes of the idle land problem and countermeasures”), Tansuo yu zhengming (Exploration and Argument), No. 11 (2006), pp. 9-10. 76 Yew Chiew Ping 101 Chapter Four Land Development and Urbanization Land Administration found over one million mu of idle land.79 It was also estimated that by 2004, the area of idle land was 3.96 million mu.80 As mentioned earlier, the GDP level and the extent to which local officials attract foreign enterprises and investments during their tenure have become vital benchmarks for career advancement.81 Intense competition among localities in the same region triggers “price wars,” exacerbating the problem.82 To attract capital and investors to set up businesses and industries on their territory, local governments in the same region undercut each other to offer the lowest possible land prices and preferential administrative arrangements.83 Some local governments even offer land at zero cost to land users.84 For instance, Jiangmen, Zhongshan in Guangdong had used zero land price to attract Foshan enterprises to relocate.85 To limit local authorities’ discretion in determining land conveyance prices, the central government had divided land into 15 grades based on location and set basic land prices for county-level units in all provinces based on their grade.86 This was followed up with similar measures from provinces and “official” basic land prices in subprovincial units.87 Despite these measures, local governments continued to underprice land covertly by granting rebates or “cash rewards” to investors. According to a 2005 audit report carried out by central authorities, of the 87 Baohu gengdi wenti zhuanti diaoyanzu, “Woguo gengdi baohu,” pp. 4. “Gedi xianzhi tudi ziyuan ji liyong zhuangkuang bijiao” (“A comparison of idle land resources and their usage in various regions”), Lingdao juece xinxi (Information on Leaders’ Policy), No. 31 (2005), pp. 27. 81 Wu Xun, “Tudi jiage, difang zhengfu jingzheng yu zhengfu shiling” (“Land prices, regional competition and governance failures”), Zhongguo tudi kexue (China Land Science), Vol. 18, No. (2004), pp. 12-13. 82 Zhang Fei et al., “Difang zhengfu jingzheng,” pp. 90. 83 Baohu gengdi wenti zhuanti diaoyanzu, “Woguo gengdi baohu,” pp. 5; Bu gengdi baohu yu jingji fazhan guanxi diaoyan zu, “Dangqian jingji jianshe zhong de ruogan xinqingkuang yu tudi liyong guanli ji gengdi baohu zhengce diaoyan baogao” (“New circumstances in today’s economic construction, land use planning and management, and cultivated land protection policy: a research report), Guotu ziyuan tongxun (Land and Resources News), No. 12 (2002), pp. 37-43. 84 Cartier, “‘Zone Fever’”, pp. 452; Wu Xun, “Tudi jiage,” pp. 12-13; Zhang Fei et al., “Difang zhengfu jingzheng,” pp. 90. 85 Wu Xun, “Tudi jiage,” pp. 12-13. 86 Caizong document no. 49 (2004). 87 Yuecaizong document no. 186 (2004), “Guangdongsheng yongyu nongye tudi kaifa de tudi churangjin shouru he shiyong guanli banfa” (“Guangdong province’s measures to manage the land conveyance fee for agricultural land reclamation and its use”); Sifu document no. 51 (2005). 79 80 Yew Chiew Ping 102 Chapter Four Land Development and Urbanization development zones audited, 65 had implemented policies on tax rebates; 79 returned 12.02 billion yuan to businesses in development zones, intensifying the competition to attract investments in a region. From 2003 to 2005, 60 out of the 87 zones conveyed land use rights for 78.73 square kilometres of land at unlawfully low prices, amounting to a loss of land conveyance fee of 5.57 billion yuan. Some openly violated the State Council’s regulations which forbid the underpricing of land by signing the land conveyance agreement and subsequently returning the land conveyance fee or subsidizing the businesses.88 Some governments even absorbed one to two percent interest of the loans borrowed by enterprises located in their development zones or subsidized the ventures according to the amount of investment. These government expenditures not yield any returns and enterprises are not required to pay back even if the venture failed. In less well-off regions, such measures had increased local government’s financial burden and caused some to hold back or delay the compensation to peasant.89 Since the land conveyance fee is generally lower for industrial land, governments have financed development zones through land-secured bank loans.90 The higher prices of commercial and residential land are also used to compensate for the shortfall.91 Moreover, industrialization also triggers urbanization and the development “Guanyu 2005 niandu zhongyang yusuan zhixing de shenji gongzuo baogao” (“An audit report on the execution of central budget in 2005”), http://news.xinhuanet.com/fortune/2006-06/28/content_4762987.htm. accessed 14 June 2008. 89 Wang Jun, “Zengzhang quxiang,” pp. 57-58. 90 In the initial stage, government organizations, usually termed development zone management committee (kaifaqu guanweihui) will make use of bank loans to expropriate land at low cost, or obtain land free of charge through state allocation. These management committees were authorized by local governments and were responsible for the requisition, conveyance, planning and approval of land use. The selected piece of land is then contracted to developers that are usually companies usually funded and set up by local governments. These companies are mainly responsible for the initial development and infrastructure construction on the land. After building basic infrastructure, the land will then be conveyed to investors. Refer to Lu Xinhai, “Kaifaqu tudi ziyuan de liyong yu guanli” (“Land management and land use in development zones”), Zhongguo tudi kexue (China Land Science), Vol. 18 No. (2004), pp. 42; Han Runxian, “Kaifaqu yongdi tezheng ji zhengce jianyi yanjiu” (“A study of the characteristics of development zone land usage and policy suggestions”), Huabei guotu ziyuan (Huabei land resources), No.4 (2007), pp. 15-17; “Kaifaqu kaifa gongsi yunzuo xianzhuang ji fazhan yanjiu” (“A study on the operation and evolution of developers of development zones”), Chengshi (Cities), No. 12 (2007), pp. 50-52; Chen Xiao, “Kaifaqu shoudi,” pp. 39. 91 Yang and Wang, “Dilemmas of Local Governance,” pp. 1047. 88 Yew Chiew Ping 103 Chapter Four Land Development and Urbanization of other industries such as the construction and real estate industries, yielding more revenue for the government. A Chinese researcher argues, Industrialization is still the primary driving force of urbanization. Without rapidly increasing investments from enterprises, the government will not be able to carry out large-scale land requisition and urban construction. Thus attracting businesses and investments has always been the core of local government’s work. However . . . local governments promote enterprises not to reap direct benefits from enterprise taxes and profits but to gain from urbanization accompanying industrialization.92 In other instances, the short-term loss in land conveyance fee is made up by the gains in tax revenue brought about by industrialization. In Guangzhou Development District, for example, land was leased at 500 yuan per square metre, which was 500 yuan lower than the land preparation cost per square metre. To recover the land cost, the government had to rely on tax revenue generated by the investor in the years to come. Using the economic output of land as to project future tax income, the government estimated that they would recover the loss after six years.93 Constraints? Since the reform era, China’s political legitimacy has rested largely on its ability to deliver the economic goods. Fiscal and administrative decentralization has fostered local states that are highly motivated to pursue economic growth. Such developmentalism has continued into the 1990s and the 21st century and the topdown emphasis on economic goals is manifested in the way cadres’ performance is evaluated by their immediate superiors under the Cadre Target Responsibility System. However, it is evident that the price of economic progress has become increasingly high for China. The widening rich-poor gap, unemployment and corruption are some Zhou Feizhou, “Fenshuizhi shinian,” pp. 113. Wong Siu-Wai and Tang Bo-Sin, “Challenges to the Sustainability of ‘Development Zones’: A Case Study of Guangzhou Development District, China,” Cities, Vol. 22, No. (2005), pp. 313. 92 93 Yew Chiew Ping 104 Chapter Four Land Development and Urbanization of the most severe problems that threaten China’s social, political and economic development.94 Before the Tiananmen protests, corruption had reached recordbreaking levels. In 1988, China’s courts had dealt with an unprecedented 55,710 cases of economic crime. In the first quarter of 1989, there were 1,338 corruption cases involving more than 10,000 yuan committed by government officials at the county level and above, an increase of more than 100 percent from the previous year.95 By the mid-1990s, corruption had become ingrained in the Chinese state. The scale of corruption has reached new proportions in recent years with officials receiving bribery as the main form of corruption concentrating in the land-related construction industries.96 “Corruption in public procurement and contracts is closely-related to China’s large-scale infrastructure investment in its economic reform, such as highway construction. Just as with corruption in capital and administrative monopoly industries, this has caused very significant economic losses.”97 In addition, it is estimated that bribes to local officials in the leasing of land use rights amount to 10 to 20 percent of the revenue generated. In 2005, bribery in land leasing would amount to 58 to 116 billion yuan, or 0.5 to percent of GDP.98 Besides the losses due to corruption, there are other economic and social costs resulting from opportunistic policy decisions pertaining to the use of land described in this chapter. The underpricing of land to draw investments, for one, leads to higher than socially-optimal investment, especially in the manufacturing industry. As some Yong Guo, “National Integrity System Country Study Report: China 2006,” Transparency International, available at http://www.transparency.org, accessed 20 March 2009. 95 Andrew J. Nathan and Perry Link (eds.), The Tiananmen Papers (London: Little, Brown and Company, 2001), pp. 6. 96 Lieberthal, Governing China, pp. 202-203; Yong Guo, “National Integrity System,” pp. 12. 97 Yong Guo, “National Integrity System,” pp. 12. 98 Pei Minxin, “Corruption Threatens China’s Future,” Carnegie Endowment for International Peace, Policy Brief 55, October 2007, pp. 2. 94 Yew Chiew Ping 105 Chapter Four Land Development and Urbanization experts observe, “This would lead to an over-industrialized economy, as well as relatively low returns in industrial development.”99 Local officials’ obsession with image-engineering projects as a display of political achievements also has detrimental consequences on the economy. As many of these projects are non-productive or underutilized, losses are compensated through the leasing of commercial land for real estate development and land speculation. The rising housing costs are eventually borne by local residents, indirectly footing the bill for officials’ political achievement projects. Moreover, during the period of the Tenth Five-Year Plan, losses over ill-judged policy decisions amounted to around 100 billion yuan; one quarter of 516 construction projects funded on national debts failed to be completed.100 That is not counting incalculable social costs and externalities in the process of indiscriminate land development, such as social resentment and unrests, and environmental degradation. For instance, collective incidents over environmental pollution has grown at an average of 29 percent every year; in 2005, the number of appeal (shangfang) cases relating to environmental degradation is 68,972, 11 times that in 1995.101 In the early reform era, the State had granted more discretionary power to local cadres despite their transgressions in order to quicken the pace of economic growth. Reforms to rein in cadre misconduct were compromised because the State had to avoid jeopardizing of the interests and incentives of its agents. Corruption was also Liu et al., “Instrumental Land Use Investment,” pp. 329. Yan Liangcheng, “Chenzhong de yiwanyi yuan ‘xuefei’,” (“The heavy price of one thousand billion yuan of ‘school fees’”), Zhengfu fazhi banyuekan (Law and Order Bi-monthly), No. 15 (2008), pp. 52. 101 See Yu Jianrong, “Dangqian nongcun huanjing wuran chongtu de zhuyao te zheng ji duice” (“Characteristics of and solutions to environmental pollution conflicts in villages”), Shijie huanjing (World Environment), No. (2008), pp. 58-59; Yu Jianrong, “Tudi wenti yi chengwei nongmin weiquan kangzheng de jiaodian” (“Land issues have become the focus of peasants’ struggles for rights”), Diaoyan shijie (World of Survey and Research), No. (2005), pp. 22-23; Qiu Le’an and Zhu Xuezheng, “You chaiqian yinfa de quntixing shijian de yuanyin ji fangfan jizhi” (“Mass incidents triggered by resettlement: causes and prevention”), Beijing renmin jingcha uxeyuan xuebao (Journal of Beijing People’s Police College), No. (2006), pp. 10-14; Li Tinghao, Li Binghua and Li Xian, “Yueji, chongfu shangfang yuanyin ji duice qianxi” (“Appeals that bypass immediate leaders and repeated appeals: an analysis of causes and counter-measures”), Juece tansuo (Policy Research & Exploration), No. (2005), pp. 59-60. 99 100 Yew Chiew Ping 106 Chapter Four Land Development and Urbanization not severe in the early years of the 1980s.102 Circumstances have changed with mounting severity of cadre transgressions and socio-economic costs. If the State fails to rein in bureaucratic inefficiencies and wastage, curb corruption and develop an effective legal system, government predation may eventually undermine growth and social stability. Yet agency costs that resulted in distortion and selective implementation continue to stand in the way of further reforms. The gradual and piecemeal nature of reforms has resulted in slow and painful transformation. “In such a stone-groping approach,” Ngo writes, “every reform measure is a compromise. Because of their lack of thoroughness, these reform measures soon become the stumbling blocks for further progress. In consequence, the results of earlier reforms quickly become the targets of the next reform.”103 The case of the enforcement of land laws described below illustrates this predicament. In 2003, the MLR exposed 168,000 cases of illegal land use, among which more than 99 percent of the culprits escaped unscathed.104 In contrast to the tremendous incentives for unlawful land deals, constraints in the form of punishment thus appear to be negligible. Besides, those punished were mainly officials below the countylevel. Enforcement proves to be tricky. In one of the central provinces, local bureaus and offices of the Ministry proposed to relevant authorities to subject 96 offenders to party disciplinary action and to prosecute 32 under criminal offence. Yet actual enforcement fell way below 50 percent. Sometimes offenders were even promoted, further stimulating illegal land use among emboldened government officials and departments.105 Yong Guo, “National Integrity System,” pp. 12. Ngo Tak-Wing, “Rent-Seeking and Economic Governance in the Structural Nexus of Corruption in China,” Crime, Law & Social Change, Vol. 49 (2008), pp. 41. 104 Liu Zhengshan, “‘Lunxian yu zhenjiu’,” pp. 5. 105 Yu Zeyuan, “Zhongguo jianchabu.” See also “Tudi weifa dafu shangsheng zhengjie hezai?,” pp. 63; “Xinhuashe: tudi weifa xingze zhuijiu fengxian zhiyou 0.1%,” pp. 13. 102 103 Yew Chiew Ping 107 Chapter Four Land Development and Urbanization The tiao/kuai guanxi of China’s multilevel bureaucratic system, in which vertical coordination from centre to locality is integrated with horizontal coordination within a locality, is a crucial reason behind weak legal enforcement.106 Formerly, all upper level land management bureaus were linked to lower level bureaus by non-binding professional or business relations (yewu guanxi) while local governments enjoyed leadership relations (lingdao guanxi) over the bureaus. Under such circumstances, land management departments could only execute the orders of the government officials at the same level and were unlikely to serve as deterrence to their trespasses. Not only did local land bureaus lack autonomy in human and financial resources, investigations on land illegality often met with the local officials’ interference. Even land-related statistics have to be manipulated to pander to the wishes of local governments. In many instances, leaders of local land management bureaus were replaced because they had been conscientious in carrying out their duties. Some provincial land bureaus saw a replacement rate of as high as 20 to 30 percent each year.107 In 2004, the personnel system was reformed to improve the autonomy of local bureaus by implementing vertical management to a certain extent, concentrating power upwards to provincial bureaus and attenuating the authority of governments at the prefecture, county and township levels.108 In actual execution, however, there are Enforcement of the law is also hampered by the legal system and procedures. See Xu Xiaolin, “Dangqian tudi weifa anjian chachu nan de chengyin yu duice” (“The current difficulties of investigating and punishing illegal land offences: causes and countermeasures”), Zhejiang guotu ziyuan (Zhejiang Land and Resources), No. 12 (2005), pp. 26-27; Zhang Fujun, “Tudi weifa zhixing nan, nanyu shangqingtian” (“Insurmountable difficulties in enforcing the law in illegal land deals”), Guotu ziyuan (Land and Resources), No. 68 (2007), pp. 20-21. 107 Hu Weiliang, “Dangqian tudi weifa xianxiang pouxi” (“An analysis of current land crimes”), Henan guotu ziyuan (Henan Land Resources), No. (2004), pp. 10-11; Liu Ling, “Tudi xinzheng xia zailun zhongguo tudi guani tizhi gaige” (“On the reform of China’s land management system under new land policies”), Guotu ziyuan daokan (Land and Resources Herald), Vol. 2, No. (2005), pp. 12; Zhang Baohui and Ding Feng, “Difang guotu ziyuan guanli tizhi gaige de sikao” (“Reflections on the reform of the local management system of land resources”), Zhongguo dizhi kuangchan jingji (China Geology and Mining Economics), No. (2002), pp. 19; Baohu gengdi wenti zhuanti diaoyanzu, “Woguo gengdi baohu,” pp. 108 Guofa document no. 12 (2004), “Guowuyuan guanyu zuohao shengji yixia guotu ziyuan guanli tizhi gaige youguan wenti de tongzhi” (“The State Council’s notice regarding relevant issues on proper implementation of the reform of the land resources management system below the provincial level”); Liang Meina, “Guojia dui guotu ziyuan guanli tizhi shishi zhongda gaige” (“The State implements a significant reform to the land resources management system”), Juece guanli (Policy Management), No. 106 Yew Chiew Ping 108 Chapter Four Land Development and Urbanization still problems since reforms were incomplete. For instance, the appointment and dismissal of leaders at prefecture level bureaus were controlled by provincial governments but their salaries are still dictated by local governments; lower level personnel continue to come under the management of local governments; operating funds and remuneration of county bureaus are also controlled by local governments. Such contradicting arrangements put local bureaus in a dilemma since they are subject to dual-leadership under local governments and provincial land management offices.109 Conclusion Urbanization – urban population growth fuelled by rural-urban migration and a sectoral shift into urban, industrial activity – has propelled the conversion of agricultural land to meet the demands of an expanding population and industrialization. On the other hand, urbanization is also a government-engineered, land-centred spatial expansion that serves the needs of local officials in maximizing revenues, rent and career prospects. As the quest for bigger, grander cities and fatter pockets spins out of control, the central government is confronted with widespread illegal land use and devious practices in land deals, which are further abetted by its weakness in enforcing the compliance of local state agents. In the next chapter, the general incentives and constraints on land use conversion discussed so far will be placed in the context of Sihui to study their interaction with local conditions. The case study shall delve into location-specific costs and benefits local cadres face in their manipulation of land to meet fiscal demands and fulfil parochial interests. (2004), pp. 14; Liu Ling, “Tudi xinzheng,” pp. 12. 109 Hu Nengcan, “Shixianji guotu ziyuan guanli tizhi de tiaocha yu sikao” (“Investigation and reflection on the land resources management system at the prefecture and county levels”), Guotu ziyuan (Land and Resources), No. (2007), pp. 24. Yew Chiew Ping 109 [...]... their towns and townships .48 In tandem with this were the upgrading of towns into streets (jiedao) and the turning of villages into urban neighbourhoods (shequ) These adjustments benefited the local governments in expanding the land area available for development and turning rural land into stateowned land According to Dai Junliang, Director of the MCA’s Administrative Division and Naming Department,... 21 .4 28.6 49 .1 21.6 29.3 46 .9 22.5 30.6 44 .8 23.8 31 .4 87 Chapter Four Land Development and Urbanization The Nature of “Urbanization” Using Beijing, Tianjin and Hebei region as case studies, Tan et al conclude that “high economic growth rate (the GDP growth rate touched 11.2%) was one of the main forces that led to urban land expansion and the increase of urban land per capita in the 1990s, especially... In 2003, Foshan became the third largest city in Guangdong after it annexed a few county- level units, including Nanhai, Shunde, Sanshui, Gaoming County- level Panyu city and Huadou city were annexed by Guangzhou city in 2000, after which large areas of farmland in Panyu were expropriated by Guangzhou.59 The Guangzhou government also demarcated and froze the use of large areas of land in Panyu for its... since they are subject to dual-leadership under local governments and provincial land management offices.109 Conclusion Urbanization – urban population growth fuelled by rural-urban migration and a sectoral shift into urban, industrial activity – has propelled the conversion of agricultural land to meet the demands of an expanding population and industrialization On the other hand, urbanization is also... taxes and profits but to gain from urbanization accompanying industrialization.92 In other instances, the short-term loss in land conveyance fee is made up by the gains in tax revenue brought about by industrialization In Guangzhou Development District, for example, land was leased at 500 yuan per square metre, which was 500 yuan lower than the land preparation cost per square metre To recover the land. .. wishes of local governments In many instances, leaders of local land management bureaus were replaced because they had been conscientious in carrying out their duties Some provincial land bureaus saw a replacement rate of as high as 20 to 30 percent each year.107 In 20 04, the personnel system was reformed to improve the autonomy of local bureaus by implementing vertical management to a certain extent,... urbanization and relieving peasants’ financial Wang Yang, "Shiwu" chengzhenhua fazhan guihua yanjiu (The Tenth Five-Year Plan: a study of urbanization and planning) (Beijing: Zhongguo jihua chubanshe 2001), pp 29; Hu Shunyan, Zhou Mingzu and Shui Yankai, Zhongguo chengzhenhua fazhan zhanlüe (Developmental strategies in the urbanization of towns in China) (Beijing: Zhonggong zhongyang dangxiao chubanshe,... compliance of local state agents In the next chapter, the general incentives and constraints on land use conversion discussed so far will be placed in the context of Sihui to study their interaction with local conditions The case study shall delve into location-specific costs and benefits local cadres face in their manipulation of land to meet fiscal demands and fulfil parochial interests 3 (20 04) , pp 14; ... area under construction was only 307 square kilometres, a far cry from the total planned area Moreover, most of the zones were set up illegally.65 A nationwide survey of over 70 county level units in 1992 finds that the average planned area of development zones was more than 10,000 mu, with the average area generally higher in the east than in the central and western parts of China However, the actual... concentrating power upwards to provincial bureaus and attenuating the authority of governments at the prefecture, county and township levels.108 In actual execution, however, there are Enforcement of the law is also hampered by the legal system and procedures See Xu Xiaolin, “Dangqian tudi weifa anjian chachu nan de chengyin yu duice” ( The current difficulties of investigating and punishing illegal land offences: . duplicate construction of basic infrastructure and industries, taking up vast areas of cultivated land. Under the nationwide land use plan, the land use quotas of railways, airports, industrial and. area since a city in China is an administrative concept and may encompass large areas of villages and agriculture, meaning that the area of a Chinese city is often larger than its urbanized Zheng. hike in land prices. According to a World Bank report, many China cities have financed half or more of their urban infrastructure investment through land sales while using land as a collateral