How screwed up is the demolition system in China? So bad that it’s possible every tear down in the last three years was actually technically illegal. That’s one of many eye-opening findings in a recent 30,000 character report forwarded to ChinaGeeks.
Says C. Custer, the report was passed on to them from a reporter at a domestic state-owned media outlet who was told not to report on it. Custer’s only translated half of the words so far (if anyone else wants to take a stab at it, he’s put up the full summary, unedited and in Chinese), but the revelations from this half are shocking enough.
For instance, if the Property Rights Law implemented three years ago really did bring China into a “post-demolition era,” then there’s a strong possibility that events like the Expo and construction on things like Shanghai Disneyland are actually in iffy legal territory… even though they were sanctioned by the government! Of course, that just means that the ability of individuals to redress these problems in court is near impossible – especially in the larger cities: the report points out that “the problem of it being difficult to even file a case is becoming more and more serious in places like Beijing and Shanghai.”
The reason why governments have “unscrupulously become players [in the demolition game],” which has in turn “led to some cases of “stability preservation” [workers] acting like organized criminals, and people defending their own rights acting in scary ways,” is because property sales is increasingly becoming the way the government finances itself:
The problem that lies behind land finance is that increasingly, local governments cannot keep up with rising expenditures using only taxation, so more and more rely on profits from land [sales]. This has become a major conflict in modern society and a huge impediment to the process of implementing a harmonious society.
The total income from all land sales nationwide in 2009 was 1,423,970,000,000 RMB, up 43.2% from 2008. This amounts to about 46% of the total national income for local financial administrations during the same period.
But in 2009, the total spent on land acquisition was 1,232,710,000,000 RMB, up 28.9% from 2008. 498,576,000,000 RMB was spent on land takeovers and demolition compensation, or 40.4% of the total expenditures. 10.7% of total expenditures were spent on land development, 27% on city construction, 3.5% on rural infrastructure, 1.6% to subsidize farmers whose land was seized by the government, 0.7% on professional land sales, 1.5% on low income housing. Land arrangement and basic rural construction got 3.9%, development of farming land 0.9%, disaster relief/reconstruction and bankruptcy bailout 9.7%.
In 2010, land sales deals brought in over 2,700,000,000,000 RMB, an increase of 70.4%, and even more worrying, local finance has taken another step further in relying on land sales profits [to function]; the four major cities all relied on land sales for at least 50% of their funding this year, before this, land sales income was only 25% of Beijing’s budget. According to statistics, in China’s ten largest cities, income from land sales hit 875,241,000,000 RMB, an increase of over 54% from 2009.
Late last year, the government promised to “consult” on housing demolitions, after several high profile self-immolations. Just a day after, in Zhejiang, one of the biggest demolition controversies erupted when a village leader known for petitioning against fixed elections and illegal land expropriation was found crushed by a construction truck. Eye witnesses said he was held down by security guards while the truck drove over him. Local officials, of course, deny this.
What’s worrying, besides all the terrifying “incidents” happening around the country, is that the government’s reliance on property also means it’s especially vulnerable to property bubbles popping. Say what you will about the doom-and-gloom utterings of people like Jim Chanos, but even China’s freaking out over the possible collapse of the market.
It’s already been three years with no improvement – in fact, one could easily argue that the situation’s only deteriorated – when exactly will something be done about this? And what will happen if nothing is done, the property market falls and government coffers suddenly empty?
It’s riveting stuff and I can’t wait for Part II.