Everybody from famous Irish "economist" Eddie Hobbs to this blogger’s mother, seems convinced that China is the place to buy property these days. Disregarding, for the moment, the bubble market fears, on the surface this idea does seem to make sense. The economy is thriving and house prices across the country rose by double digits every year for the last several years. In some cities, prices are growing by as much as 20% p/a. But what very few prospective buyers are aware of, though, is that the vagaries of China’s pseudo-socialist legal system dictate that if you do choose to buy a new pad in the Orient, you won’t actually own it at all. Incredibly, despite all the economic advances of the past two decades, private property is still not recognised under Chinese law. So rather than owning your house, you’ll merely be renting it from the state. Hu Jintao and the bigwigs in Zhongnanhai will, in essence, be your landords.
This paradox dates back, of course, to when Mao and the communists came to power in 1949. One of the most sweeping, and initially most popular, of their early moves was to nationalise all property. Grasping landlords were turfed off their estates, and the land apportioned out to the peasants. Owners of large houses had their title deeds seized by government authorities and soon found themselves sharing their residences with several other poorer families.
But the concept of nationalized property ran aground in a quick and devastating fashion, its inherent failures cruelly exposed by the famines of the 1950s. It was gradually phased out as a working concept as the centrally-planned economic system was abandoned during the Deng Xiaoping era. From that time on, quasi-property ownership began to be recognised, with owners given long-term leases on their property.
But until now, private property as a legal concept still does not exist in the country. This is obviously an untenable situation and one the authorities have long been keen to rectify. The law on private property has been in the pipeline for almost a decade, with work on the draft beginning 9 years ago. It was finally published, with great fanfare, in the summer of 2005. In a rare step, members of the public were invited to participate in a process of public consultation. The leadership evidently wanted to gauge the public’s mood on the proposal and get some basic feedback.
What they did not expect was a vicious and sustained backlash against the proposal from within their own ranks. For months on end, the draft was savaged by the unreconstituted Marxist wing of the party, laying bare, albeit briefly, ideological rifts that have gradually developed within the party over the past two decades. One disgusted leftwing scholar accused the party’s leaders of apeing wholesale the ‘capitalist’ laws of the USA. Another dismissed the law as offering protection only for "the rich man’s limousine and the poor man’s stick", assuring the safety of the fortunes of the wealthy while the poor continued to suffer.
The Communist old schoolers, long silent partners in the party’s drive towards modernisation, seized on the draft as a symbol of all that they believed was rotten with the party in the modern era, and they rose up to voice their disapproval. Many were unhappy that the law would reduce the government’s direct role in economic development, and increase the already very large gap between the rich and poor. Their howls resulted in the draft being withdrawn from the last session of the NPC in March, shortly before the governing body was due to vote on it, an embarrassing climbdown for the party leadership after they had spent so long developing the proposal.
Last week, however, the bill was suddenly resurrected and now seems set to be passed at the next meeting of the NPC in the spring. There have been, we are told, significant revisions that have appeased the leftwing factions, but as yet nobody has revealed exactly what has been changed. Xinhua stated only that the changes would "clarify the scope and ownership of state assets" and that under the new law "private property will be afforded the same protection as public property". It would seem that the principle amendments affect the ownership of state-owned companies, as many party members had been concerned that the previous version afforded too much protection to corrupt officials who were getting rich by selling off state assets in crooked deals. Whether this new law will put an end to the regular reports of of farmers being turfed off their lands by corrupt local officials remains to be seen.
There is still some debate worthy of note about other aspects of this law. One interesting point being raised by some legislators is whether the law should allow urbanites to buy houses in the countryside. Private holiday homes are almost unheard of here, as is the phenomenon - common in Ireland and other western countries - of middle class urbanites moving to the countryside in search of fresh air and a cheaper, more peaceful life. A change in the law, however, could change all that, with fairly major social consequences. This would also be a potential moneyspinner for rural-dwellers, who could sell their land for housing. Legislators are also debating whether people in rural areas should be allowed to mortgage their houses and land.
