China Passes Law Bolstering Private Property Rights

Investors in the China exchange-traded fund or ETF (FXI) are investing in 25 large state-owned companies but in a larger sense are betting on the overall growth and potential of the Chinese economy. Privatization is critical to this continued growth and the private ownership and transfer of property is a critical issue.

According to Asia specialist Matthews, after the Communists took over China in 1949, the government collectivized privately-held land on a large scale. In the late 1970’s, China underwent economic reforms whereby the notion of individual property rights resurfaced. One of the most important breakthroughs since then was the privatization of housing in the mid-1990's. At that time, Chinese citizens were granted the right of ownership over their domicile, but not the land underneath it. This right was a boon to the urban population, but was of limited value to rural farmers. In past years, many disputes arose between farmers and property developers over land seizures in which the farmers were given little or no compensation.

Last week, at the Tenth National People’s Congress [NPC], China passed new laws effective October 1st, 2007 aimed at bolstering private property rights, particularly focused on land use rights. It should be noted that the new laws do not grant outright freehold ownership of land; nor does anyone know how well these laws will be enforced. However, the new laws do grant longer term control over land and potentially pave the way for the transfer of properties across generations, thereby unlocking a critical component of the private economy.

Comments

[All Roads L...:]

The test of this new law is currently being held in Chongqing as I type this.

the "Nailhouse" story has really gained some steam in Blogosphere as the gov't has ended coverage on what will be a landmark decision (i.e. either they uphold the law or the law becomes worthless in a week).

For background, visit www.globalvoicesonline.../

2007 Mar 27 11:41 PM