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Trading property rights for shareholder’s rights

December 12, 2012

konjaku: this article provides an overview of the process of urbanization, advocating a more generous level of compensation to displaced villagers, and emphasizing the importance of giving the villagers a role in the whole process of urban transformation. (Of course, villagers are given no chance to opt out of the urbanization project). I have left out most of the descriptions of Beiwu and Dawangjing, as this repeats what I posted in earlier articles. I have also not translated “five steps for improvement” at the end of the article.

 

A transformation is occurring in the process of requisitioning village land in those villages undergoing urbanization

 

2012-09-12

Source: Economic Reference Report

http://www.ciudsrc.com/new_chengshihualv/guandian/2012-09-12/36418.html

 

 

“Requisitioning land and demolishing houses is the hardest thing under heaven!” –that has been the common view of many cadres this reporter has met. To find out about the systems of “exchanging property rights,” “collective shares” “rights identical to land” [different methods for having the villagers of demolished villages give up property rights in land in exchange for shareholder income], this reporter travelled to many villages in Jiangsu, Hainan, and Beijing. In exploring these new methods of “ filial repaying the of villagers” as part of the urbanization and industrialization process, this reporter has seen villagers go from being afraid of having their land requisitioned, to willing and positive participants in the new system. Step by step, what is emerging is a new setup, a managed socialist market economy, in which government authority and people’s rights do not invade each other, and in which clear boundaries exist between administrative control and the activities of the market.

 

The three contradictions

 

Yan Zhiyao, the department head of the National Agricultural Land Resources Protection Bureau, said that since the period of reform and opening to the outside world, the plans for requisitioning land and demolishing have been large, the pace rapid, as an important support for industrialization and urbanization.  In this accelerated drive, three clear problems (contradictions) have emerged, having a negative effect on the development of the economy and society.

 

First, in a number of areas the plan for redevelopment makes the standard for compensation amounts too low, the procedure for replacement housing overly simplified, and communication channels with those to be displaced not smooth. Therefore the persons displaced in the plan, in the end fail to materialize a productive lifestyle corresponding to the high paced development. They may even become poor.

 

Second, in recent years, in the wake of rising land prices, the appeals of displaced villagers for higher compensation amounts and better replacement housing have become more intense. In some places, the amount paid out in compensation has been “heavenly.” In one case, a villager received as much as 100 million yuan. This has thrown the real estate market into disorder. Not only does it make requisitioning land more difficult, but the net costs to the government rise, leading to a deformation in the economy as a whole.

 

Third, the incidents of requisitioning land  attract more attention, becoming hotspots on internet sites, intensifying the possibility of conflict.

 

The latent danger to society from this process of requisitioning land becomes more and more evident.

 

The Suqiong model: property rights transferred

 

This reporter went to Shihong county, Shangtang, Shiji and Kunshan city Huaqiao town in Jiangsu province to investigate. These three all have a “city center” where they built concentrated residential districts for displaced peasants to live, possessing both commercial and residential property rights, replacing the old structures. When the “property rights exchange” was completed, the value of the housing created for the peasants was 2 or 3 times greater than before. “The peasants were willing to move, since they were offered the possibility of living in a two story house in the town center, worth 400,000 or 500,000 yuan ($80,244), for which they could get a mortgage loan.” Shiji villager Ping Xiliang said, from his village the majority of households moved into the concentrated residential district. Those who did not want to move, were not forced.

 

In this system of “property rights transfer” what is subject to the transfer is the peasants’ homestead with garden. In Shangtang, and Shiji, the government did not completely take over the land on which these homesteads had stood. After the buildings were raised and the ground flattened, the government lent it back to the displaced villagers to be used for agriculture. The villagers held it in a cooperative, and their rights became shareholder rights. In Huaqiao, they are exploring the idea of changing the requisitioned land to commercial property, to broaden the villagers sources of income.

 

Hainan, Lingshui county is nationally recognized as a poor county. Lian township Dadun village is a poor village, 1/3 of the villagers rely on fishing for an income, 2/3 on agriculture. In 1993 the county government, with the consent of the villagers, took over 32,000 acres to develop an international tourism site. The compensation was 3200 yuan per acre. When divided among the villagers, it was only 650 yuan per person. But in the end, the development never happened. Dadun villagers had lost their land and had no possibility of employment.

 

In 2010, Lingshui county introduced a new plan, for a new tourist area and a high tech industrial park. This plan called for using the land already requisitioned, and adding an additional 18,648 acres. This time the plan included proposals for demolition compensation, resettlement, manufacture, employment assistance, etc., satisfying the villagers. A number of villagers told this reporter that after the land was demolished, the county government helped them set up a village joint stock company. Every villager possessed shares, and through these will get a share of profits from the development of the property.

 

By 2011, the profit generated from the shares was 20,000 yuan. The village joint stock company started a concrete mixing facility, and a brickyard that produced energy-saving “environmental” bricks.  Now the yearly profit was 35,000,000 yuan. The village also plans to have the government give it some “left-over land” on which to build a five star restaurant. At the same time, they plan to build themselves retail property to rent, and apartment houses, from which they expect altogether in rentals another 30,000,000 yuan.

 

The Yuechuan model.

 

Explaining the difficult problem of transforming the “urban village” –a problem facing any number of cities

Yuechuan is the largest urban village in Sanya city (also in Hainan). In 2001 Sanya city requisitioned village land to build a sports center, but because the compensation amounts were fixed too low,  the process of requisitioning the land was stopped several times. It took until 2008 before all the land was turned over. This requisitioning process can be compared to “the eight year war of resistance.”

 

2007, according to “the government leads, the people participate, share in the same land, the same value, the same rights, all share and gain together,” the government put forward a new model for requisitioning the land, and in one stroke transformed the process and overcame the difficulties. Now 2201 villagers are all shareholders in the village joint stock company, they all bought old age insurance, and at the end of the year received dividend payments. Every shareholders fixed assets are estimated at 70,0000 yuan. Their 2012 dividend payment per person was 20,000 yuan, each household thus got around 80,000 yuan ($12,795).

 

An important element in the “Yuechuan model” is allowing the villagers to be in control of the whole demolition and removal process. The government only gives  guidance, supervision, and publicity to coordinate the operation. The village shareholding company signs a contract with the township government regarding the demolition and replacement housing. The government puts the compensation money and the funds for the demolition in a “package” and provides it to the village stock company. Any surplus left over goes directly to the joint stock company. The village company got 190,000,000 yuan ($30,507,166) in order to move away 140 households, and turn over 32.6 acres to the government. Starting in 1994, the government made a number of attempts to clear this same patch of land through forcible demolition, but never got what they wanted. This time, in acquiring the responsibility to complete the task, the villagers themselves accomplished in  54 days what the government could not do in 11 years: they completed demolished the “urban village” without conflict, and happily moved into new quarters.

 

Next, according to publicly released documents, of the profit the government received upon selling the land, they set aside 20% to use in building the public infrastructure necessary for the project. The remaining 80% they returned directly to the villagers, above and beyond the set compensation amounts they had already paid. This total was 11,200,000 yuan ($1,790,511), 350 times the compensation amount.

 

Third, the government gave the villagers back left-over land not used in the development, 21 acres, and encouraged them to develop commercial enterprises on it, in order to have a stable income. On this patch of land the villagers put up buildings which they rented out as a restaurant and a market, collecting rentals from these businesses.

 

The Beiwu model

At the beginning of 2009 the Beiwu rural urban unification pilot project began. “From beginning to end the villagers had control of the process,” the village committee head Guo Chunli told this reporter. He can’t remember how many meetings they had, but everyone got to state their opinions on the project. The plan went through 19 draft revisions. Every item of the moving and compensation payment amounts and schedule were clearly stipulated. The Beiwu village collective economic organization retains rights over the former village collective land, and are in charge of its development. According to their calculated property rights large or small,  the villages became shareholders in the economic organization.

 

The Beiwu village Party League Secretary Zhang Quan said that the Beiwu village replacement housing is equal in quality to commercial market priced housing, That means if any surplus units are put on the market, the Beiwu villagers will get a good price for them. Aside from the Beiwu housing development, over 666 acres has been set aside for a green zone, and 54 acres are earmarked for development by the village collective. There are four parcels of land being developed. The first is becoming a Lexus dealership. The second is a 20,000 square meter apartment building to rent to foreigners, because the foreigner population is comparatively large in this area. On the third they are building an eco-garden dining hall [a restaurant set in a large building with glass walls or ceiling, with displays of living plants, trees, waterfalls, etc]. On the fourth, a 70,000 square meter top class restaurant.

 

These plans take into consideration the problem of employment opportunities for the villagers.  Zhang Quan estimates that if these projects are all completed as planned, 800 to 1000 new jobs will be created.  Beijing University law professor Wang Xixin said, the government gave the Beiwu project special treatment. They did not auction off the land, but instead gave it special status as “national land for commercial use,” to be directly developed by the villagers.

 

The Dawangjing village plan improved on the Beiwu model, by giving the villagers access to all the forms of social security and financial safeguards available to urban residents. In addition, the villagers were given 50,000 square meters of commercial ground floor space to develop.

 

After Beiwu and Dawangjing,  Beijing pushed forward with a plan to transform 50 “focal point” villages located on the city outskirts. Part of this experiment is that the village collectives will themselves be in charge of building market priced housing for rental income.

 

As for capital, the items listed in the redevelopment plan and the fund requirements must match. The city will give priority to those planned developments that have collateral, a risk reserve fund in place, an improved credit policy, or a guarantee of necessary funds.

 

The policy concerning social security to be offered to displaced villagers is in the process of being reformed. Previously, for the villagers, having their plot of land was a substitute not having the social security granted to urban residents. Now, the villagers with a rural household registry are transforming into urban residents, and they still have, as the village collective, rights of use over the portion of former village land slated to them. Thus, they are still owners of some part of the land, and can enjoy profits from it. This goes further than simply “exchanging land for social security.”

 

When property rights are quantified as shares of stocks, or capital, the former villagers enter into city life with their own reserve of funds. For the village collective to have its own space to develop, to find a role to fill in the high end industries that are going up in the city periphery, maintaining green zone areas and renting commercial property, is a big shift from relying on the “tile economy” [renting rooms to migrant workers].  As for the floating population, when there are surplus units in the residences built for displaced villagers, there is a systemized plan to offer these as rentals to migrant workers through the respective village collectives.

 

 

konjaku: in Jiangsu, the policy seems to be to move villagers or peasants out of their villages and into “town centers,” more concentrated urban districts, even when there is not an immediate need for the land on which the villages once stood. In the Hainan sites, there are ambitious plans to build high end industrial parks, tourist attractions, or a “sports center” to replace impoverished villages.

 

We also get details about development in Beiwu: a Lexus dealership, probably because this is an area with many car dealers. A high end restaurant, and an eco-garden dining hall. Below are some photos of what eco-garden halls look like.

2009513083968777801 绿色生态餐厅专用板——拜耳智能调温板 绿色生态餐厅专用板——拜耳智能调温板1 绿色生态餐厅专用板——拜耳智能调温板2

 

 

 

 

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