Dawangjing follow-up 7: the Dawangjing model

Commentary: demolishing and relocating leading to sudden wealth –can the Dawangjing model be sustained indefinitely?

Source: Xinhua Daily 2010-05-20

http://finance.people.com.cn/GB/11648606.html

Compared to those cases of demolition that occur by brute force and uncivilized means, the Dawangjing example is held up as a model of a better way. Although the myth of “sudden wealth through demolition” is a phenomenon that cannot continue, the Dawangjing model, which allows villages to share in future profits of the redevelopment and also in any future rise in the value of the land they relinquished, offers a bright alternative. This may be the secret to making the demolish and relocating process a harmonious one.

In this interim period between the old methods of demolition and the proposed new regulations, still in various localities demolition has involved clashes and extreme forms of protest. Compared to this, the Dawangjing villagers can be rated as very fortunate. As a village within the city that relied for income on “eating tiles” [building housing for migrant workers], the Dawangjing villagers became wealthy overnight. Many bought cars, apartments, and invested in funds. Within the space of one year, the villagers bought 600 cars, Some people joked that there were some households in which every family member now had an Audi. (5-19 New Beijing Times)

Even though we feel bitter and envious when we hear of these cases of sudden wealth, we need to acknowledge that through this process the villagers  became satisfied. Actually there is no secret to it, the government is simply allowing   the villagers to share in the profits accrued when the land they relinquished to development increases in value. In Dawangjing, the government, besides giving the villagers replacement housing and a impressive compensation payment, also offers to some of the villagers  employment opportunities, and a one-step transfer from agricultural to urban resident status, including social security payments. Besides this, the government has promised to return to the village collective 50,000 square meters of ground floor commercial property, according to the principle “capital given to shareholders, shareholders are the villagers.” The village collective members become shareholders in a business enterprise, drawing profits from their shares. If this works out, the villagers will have a guaranteed long term source of income. Previously, demolition and relocation led those involved to experience fear and uncertainty about the future, but to a large extent this problem will be resolved.

As opposed to those cases of demolition that occur by brute force and uncivilized means, the Dawangjing example is one that “benefits both sides.” This arrangement came about because Beijing is, as the capital of the country, a place where people are very conscious of their rights and quite able at negotiating. As for the government, it is all the more reluctant to undertake actions which will lead to mass demonstrations and extreme forms of protest such as suicide, which has a negative effect on social order. With these checks and balances in place, both sides were able to sit down and proceed in a rational fashion, to discuss how the demolition and relocation would proceed, and the compensation plan.

As to why the Dawangjing villagers received such generous compensation plans, the key factor lies in the huge profits the government stands to make in opening up the land for development. Dawangjing lies in a “golden sector” of development beyond the 4th Ring, facing the flourishing Wangjing district. When the village land was slated for development, the villagers, albeit briefly,became “land kings.” But if the villagers received a generous compensation, it is because the government made a not insignificant sum in selling off the land.

The problem is this:  not all villages slated for demolition are blessed with such ideal conditions for development, nor is it certain that real estate values in general will continue to appreciate indefinitely. In the near future, real estate prices may be controlled and regulated. Therefore the Dawangjing village cadres smell a risk [because they are supposed to get a share when the land they relinquished for development rises in value in the future –what if this doesn’t happen?].

Therefore, the myth of “demolition creates wealth” in Dawangjing would be difficult to duplicate, especially for areas in second and third tier cities, where the empty land does not have such a high real estate value.  However, the Dawangjing model represents a new positive approach, and deserves to be spread as much as possible.

There are many local governments that make large profits selling off land, but this does not reach the pockets of the villagers. There are certain local government officials who heave a sigh, and say, requisitioning land for demolition is so much more complicated these days. Getting them to move to better circumstances is “like demanding their lives.” As a matter of fact, villagers are not at all stupid, they can weigh the pros and cons. They have to leave their housing compound and move to a multi-story building which they are not accustomed to. Also, demolition and relocation has often been a one-shot deal, in which they are supposed to make do with one low payment.They become urban residents, but are not allowed to share in the profits from the land they relinquished, while at the same time they still must think of how to make a living, and worry about what support they will receive in their old age.

Demolish if you must, proceed with the urbanization process however you will, but at least respect the villagers aspirations and rights. Resolve the problems of relocated villagers –help them find employment, provide for their old age, make sure they have social security. It is necessary to let the villagers enjoy a share of the profits that come about through urbanization.  This is the way to make demolition and relocation a harmonious process. Ding Yongxun

Editor Nie Congxiao