China must clearly define property rights

(Important: These 38 countries -- Africa/General, Algeria, Botswana, Burkina Faso, Chile, China, Cuba, Egypt, El Salvador, Ethiopia, Germany, Ghana, Hungary, India, Indonesia, Iran, Japan, Jordan, Kenya, Korea, Malaysia, Mali, Mauritania, Mexico, Mongolia, Mozambique, Nicaragua, Niger, Pakistan, Peru, Philippines, Russia, Sri Lanka, Syria, Taiwan, Thailand, Vietnam, Zimbabwe -- are intricately involved in such issues, though the article only mentions China. On the world stage, where the major players/"stakeholders" consider ninety percent or more of the world's population to be "human resources," it is imperative to understand what is being said in its true context. Language Deception is working overtime. It is up to the savvy and astute, thoughtful reader to ferret out the real message from the one being bandied about under different guises.)
April 16, 2006
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Beijing, China - A senior central bank official said that property rights should be better defined to help in ownership restructuring, mergers and acquisitions.

People's Bank of China vice-governor Wu Xiaoling told a conference in Beijing that 'very strong administrative interference and government interference' is impeding the restructuring and consolidation of state-owned firms.

She called for better legal distinction between public and private property rights to help overcome the problem.

'Property rights should be clearly defined,' Wu said.

Private property was largely unrecognized and unprotected under the planned economy that dominated China initially after 1949, with Beijing moving slowly to address the controversial issue.

The country's parliament was expected to vet a draft property law tackling ownership titles and rights at its annual meeting last month, but a reported backlash against its 'anti-socialist' content saw it postponed.

Wu acknowledged concerns that a recognition of private property rights could diminish public interests, but said the latter would remain intact.

'The infringement of public property rights is really something we do not need to worry about,' she said.

Wu said that the confused equity structures of some firms highlighted the need to distinguish between private and public ownership.

'(China) hasn't created a very good environment for mergers and acquisitions,' she added.

China has seen a growing number of mergers and acquisitions as fragmented industries such as the iron and steel sector try to consolidate ownership, technology and capital to achieve economies of scale and compete internationally.

But state ownership of most mainland-listed companies has complicated the pricing of firms, seen by some as sold too cheaply in management buy outs, and contributed to administrative resistance to equity sales.

Wu noted that the high failure rate for mergers and acquisitions could have a 'very bad impact' on the country's banks, which provide the bulk of financing for such transactions.

She proposed an 'over-the-counter mechanism' to allow the legal sale of shares unlisted on the stock exchange, without elaborating.
Apart from the Shanghai and Shenzhen bourses, China has only a few equity trading exchanges approved to sell state-owned assets.

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Copyright 2006, Forbes.


Additional related reading and definitions:


This is a video, under six minutes in length, and takes quite awhile to 'buffer' with a dial-up connection, but it is a Must-See for anyone that cherishes property rights. It is absolutely horrifying rare footage from China that shows how the newest member of United Nations "Human Rights" Council views the property rights of its own people.,,31200-china_p10436,00.html


Private Property Rights Law Needed
CRI - China needs laws that guarantee private property rights, to attract enough international investment to control unemployment and to help Chinese companies withstand foreign competition, the central bank said. ...


China must clearly define property rights - central bank official
Forbes - Apr 16, 2006
Beijing (AFX) - A senior central bank official said that property rights should be better defined to help in ownership restructuring, mergers and acquisitions. People's Bank of China vice-governor Wu Xiaoling ...
China needs private property laws Xinhua
China Needs Private Property Laws, Central Bank Says (Update1) Bloomberg
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Definitions of interest


Property Rights – The legal limits governing the use and control of economic resources by individuals and corporations. Source: The New Dictionary of Cultural Literacy, Third Edition, 2002. 2. Evaluating the relationships between property rights, risk, technology and productivity in Sub-Saharan Africa, Socio-Economies and Policy Research Working Document No. 18. Proceedings of the ILCA/IFPRI Research Planning Workshop held at ILCA, Addis Ababa, Ethiopia, August 31-September 1, 1994. Edited by Brent M. Shallow, International Livestock Centre for Africa, P.O. Box 5689, Addis Ababa, Ethiopia. Socio-Economics and Policy Research Working Documents: Staff members and consultants of the Socio-Economics and Policy Research programme write working papers at several stages during their research on a topic. Publication of the final results of research may not occur until several years after the research started. The Socio-Economics Division, therefore, makes its working documents available to anyone requesting them in order to provide access to data and ideas on African livestock policy issues as early as possible to those with a need for them. This is a Socio-economic and policy research working document. It has not been prepared in accordance with procedures appropriate to formal printed texts and ILCA accepts no responsibility for errors. Both data and ideas are subject to revision. The views and interpretations in this document are those of the author and should not be attributed to ILCA. ILCA however retains copyright and reserves all other rights. A list of all Socio-economic and policy research working documents is given on the inside of the back cover of this document, together with the address from which they may be ordered. Brent M. Swallow is an Agricultural Economist working at the International Livestock Centre for Africa, P.O. Box 46847, Nairobi, Kenya. Property rights - Preface: This document reports the results of a small meeting of social scientists from the International Livestock Centre for Africa (ILCA) and the International Food Policy Research Institute (IFPRI) held at ILCA headquarters in Addis Ababa, Ethiopia, on August 31 and September 1, 1994. The meeting was held to plan collaborative research on property rights?. Both ILCA and IFPRI have conducted research on property rights in the past and have identified property rights as an important subject for research in their respective medium-term plans. At ILCA property rights research is conducted under the theme of Livestock and Resource Management Policy at IFPRI it is conducted under the Environment and Production Technology Division (EPTD). A concept note for a collaborative project on property rights and risk was first drafted in September 1993 when economists from ILCA visited IFPRI. A concept note for a study of the effects of policy on the management of fragile lands was developed at the same time. ? The terms "property rights," "property institutions" and "land tenure" are Used by different people to refer to the same phenomena. In these proceedings all three terms refer to the institutional arrangements (i.e. rights, rules, norms, conventions, contracts) that govern the way that people access, Use and manage the benefits that derive from natural resources. In March 1994, ILCA and IFPRI submitted a pre-proposal to a European donor agency for a restricted core project on "Policy research for sustainable intensification of Land-Use systems in fragile areas of sub-Saharan Africa." The pre-proposal combines elements of the proposed collaborative studies on property rights and fragile lands. In May 1994, Keijiro Otsuka (IFPRI visiting scientist from the Tokyo Metropolitan University) visited ILCA and Ethiopia as part of a project planning mission. Several ILCA scientists were able to meet with Dr. Otsuka to discuss common interests. Dr. Otsuka introduced his proposed research on the effects of property rights on the use and management of forestlands. Sarah Gavian (Rockefeller Fellow with ILCA in Ethiopia) arranged for Dr. Otsuka to visit a field site in rural Ethiopia. Brent Swallow (ILCA-Nairobi) and Peter Hazell (Director of IFPRI's EPTD) subsequent!) met in Nairobi. They agreed that the pre-proposal needed to be developed in greater detail and that the research on property rights should be separated from the research on fragile lands (led by Sarah Scherr of IFPRI and Simeon Ehui of ILCA). They proposed that a planning meeting could be held in conjunction with the meeting of the International Association of Agricultural Economics in Harare, Zimbabwe that several of the relevant scientists from IFPRI and ILCA would be attending. The workshop was planned during subsequent correspondence and discussions between Hazell, Ehui, Gavian, Swallow and Dr. Fitzhugh (Director General of ILCA). Sarah Gavian managed the logistical arrangements for the workshop. The output from the workshop is summarized in these proceedings and a more detailed proposal is being developed. Session IX: Conclusions and Priorities for future research %20and%20priorities%20for%20future%20research

Private Property Rights – Relating to private property rights: “Most MENA (The Middle East and North Africa) countries do not perform much worse in the quality of their administration than other countries at similar income levels, and several countries do better. In terms of the rule of law, the United Arab Emirates (UAE), Kuwait, and Bahrain have very satisfactory protection and enforcement of private property rights, contracts are efficiently enforced by the court system, and expropriations are highly unlikely. But other countries do not always enforce private property rights because the outcome of judicial systems is not consistent and reliable.” – The World Bank Development Report: "Enhancing Inclusiveness and Accountability: Better Governance for Development in the Middle East and North Africa" Copyright 2003. 41_20031106135835/Rendered/PDF/271460PAPER0Be1ance0for0development.pdf (Excerpt from pages 58-59 of 211+)

Regarding property rights to land and "land administration:"

"Landlord estates were prevalent in China, Egypt, Ethiopia, eastern India, Iran, Japan, the Republic of Korea (henceforth referred to as Korea), and Pakistan. In many of these colonial environments, landlords could easily restrict peasants’ alternatives and maintain control over land and labor, and sometimes over output markets. To overcome the long-term effects of outside intervention and non-economic distortions, land reform measures were often needed. The way in which land relations were transformed from feudal landlord estates or haciendas continues to affect systems in place at present and shape the challenges current land policy efforts face. As land reform involves the transfer of rents from a ruling class to tenant workers, it is not surprising that most large-scale land reforms were associated with revolts (Bolivia), revolutions (Chile, China, Cuba, El Salvador, Mexico, Nicaragua, Russia), conquests (Japan and Taiwan [China]), the demise of colonial rule (eastern India, Kenya, Mozambique, Vietnam, Zimbabwe), or the end of major wars (Hungary and much of Eastern Europe). Attempts at land reform without massive political upheaval have rarely succeeded in transferring much of a country’s land or have done so extremely slowly because of a lack of political commitment to provide the funding to compensate owners. This report distinguishes among transformation of landlord estates to smallholder farms, transition to junker estates, and collectivization and de-collectivization. Even in Europe, the reform of land relations has been a lengthy, conflictive, and highly political process (Swinnen 2002), and often the introduction of universal franchise has been essential to constrain the power of landlords (Acemoglu and Robinson 1999). This illustrates not only that greater democratization is often inextricably intertwined with the reform of property rights, but also that, in many instances, far-reaching reforms to the property rights system have been undertaken only in conjunction with major historic events, something that is confirmed by the recent changes of property rights in Eastern European countries. Rapid transition from landlord estates to family farms in a market economy has led to stable systems of production relations. The organization of production remains the same family farm system; the only change is that ownership is transferred from large landlords to tenants who already farm the land and have the skills and implements necessary to cultivate their fields. Government involvement in the transition has often been substantial, ranging from a ceiling on the size of landholdings and on the amounts to be paid for the land, to the establishment of beneficiaries’ financial obligations. Many reforms that followed this pattern provided stronger incentives for tenant-owners to work and invest in their farms and led to increases in output and productivity. The resulting systems have had great stability. Since the end of World War II landlord estates in Bolivia, large areas of China, eastern India, Ethiopia, Iran, Japan, Korea, and Taiwan (China) have been transferred to tenants in the course of successful land reforms. Theoretically, the productivity gains associated with such reforms come about because of improved work and investment incentives associated with increased security of tenure. These gains may be modest if tenants had to compensate landowners at near market prices, if security of tenure had already been high, if cash rent contracts had prevailed, or if the disincentive effects associated with share tenancy had been low (Otsuka and Hayami 1988). ... landlord estates in China, the former Soviet Union, and Vietnam were initially converted into family farms. The redistributed farmlands were later consolidated into collectives, in which land is owned and operated jointly under a single management. In Algeria, Chile, the former Democratic Republic of Germany, Mozambique, Nicaragua, and Peru, junker estates or large commercial farms were converted directly into state farms. In most cases workers continued as employees under a single management, with no change in internal production relations, to maintain the perceived economies of scale and superior management associated with these arrangements." – Pages 9-11. "In China use rights to urban lands are given with longer time limits than for rural lands (70 years for residential use and 50 years for industrial and cultural use); are renewable; and can be transferred, bequeathed, and mortgaged within the specified lease period. As a result, an active market in land use rights has emerged in the advanced coastal provinces (Wang and Murie 2000). Similarly, Botswana defines urban land use rights for 99 years that can either be renewed or require the government to pay compensation for any improvements, whereas many rural rights are under the customary regime. (Kalabamu 2000). Countries where unoccupied land is still available often have rules for “adverse possession,” meaning that long-term, peaceful occupancy of a plot in good faith for a minimum amount of time confers ownership rights to the occupant. This provides a mechanism of awarding secure land tenure that is not only associated with minimal institutional requirements but also, because possession and use are required, is unlikely to be associated with negative equity consequences. Extinguishing ownership claims after a certain period eliminates the risk of past owners suddenly surfacing and claiming the land, and at the same time prevents valuable land from being left vacant for long periods at the cost of monitoring of land use by the owner. This implies a tradeoff between the social objective of having land visibly utilized and the insecurity that may prevail if adverse possession is recognized after only a short period of time. Adverse possession was the main mechanism whereby most settlers in the United States acquired their land (de Soto 2000), and all 50 U.S. states have legal provisions upholding the ability of squatters to acquire ownership rights through continued possession of a property in good faith for a specified period.9 Short horizons for recognition will increase the security of current owners’ property rights and provide greater incentives to invest, but will require owners to spend more time monitoring their vacant land to prevent squatters from obtaining title. Empirical analysis of the length of time for which a squatter must occupy a property in good faith, enacted by 46 U.S. states in 1916, confirms that better title records, a more effective legal system, and higher gains from development can all be linked statistically to shorter statute lengths (Baker 2001). Thus, even though adverse possession reflects a trade-off between investment and imposing costs on current landowners, it is justified, because in most cases long-term occupants have made land-related investments, and providing them with basic protection can increase investment." – Pages 20-21. "The importance of productivity benefits associated with more secure and individualized forms of tenure, even in a single period without any investment effects, is illustrated by the transition from collective to private cultivation that has been associated with large increases in productivity, as in the case of China (Lin 1992; McMillan 1989). In addition, the key result from a number of studies is that under formal as well as informal regimes, greater tenure security, as measured by the extent of rights possessed by the owner, significantly increases landowners’ investment incentives. Especially where investments are labor-intensive but involve few cash outlays, the unambiguous conclusion is that higher levels of tenure security -- even if they are not associated with high levels of transferability and are defined only at an informal level -- do provide an important incentive for increased investment. Results from China, Pakistan, and Vietnam confirm the importance of tenure security for investment. Comparing plots planted with the same crop by the same household but under different tenure regimes, Jacoby, Li, and Rozelle (2002) find that farmers tend to apply more manure and labor, and to obtain significantly higher yields, on plots that are privately owned and are therefore more secure. In India, land values for titled land are, on average, about 15 percent higher than for untitled land, suggesting that possession of formal title reduces the probability of land loss (Pender and Kerr 1998). In Thailand land ownership titles induced higher investment in farming capital (attached investments and other capital), and titled land had significantly higher market values and higher productivity per unit. Output was 14 to 25 percent higher on titled land than on untitled land of equal quality (Feder 1988). A comparison of housing prices in non-squatter residential areas and squatter areas of the city of Davao in the Philippines revealed that prices were 58 percent higher in the formal area than in the informal one and rents were 18 percent higher (Feder and Nishio 1999). Accounting for a possible impact of greater tenure security on crop choice, for example, shifting to orchards instead of growing maize, may further increase these benefits. In Vietnam, Do and Iyer (2002) provide evidence suggesting that land registration contributed to increased levels of perennial cultivation and irrigation. Higher levels of tenure security in Chinese villages have a strong and significant investment-enhancing impact, such as the application of green manure (Yao 1996). Panel data from China confirm that, controlling for other factors, land transfer rights boost agricultural investment (Carter 2002). In India investment in conservation is much lower on leased plots and on plots that are subject to sales restrictions, supporting the hypothesis that more secure land rights significantly affect household behavior (Pender and Kerr 1998)." – Pages 38-39. " China after 1978, rural land was initially given on informal lease contracts for 15 years, a period that has now been extended to 30 years. The gradual evolution of tenure security on state-owned land..." – Page 48. "Given the complexity of the institutional structures involved, in most situations simply introducing private property rights will be neither feasible nor cost-effective (Blewett 1995). Experience with nationalization of property rights previously held by traditional communities has been disappointing as well. It prevented tribal leaders who in the past apportioned access to and use of tribal pastures to efficiently manage their resources, leading to private land appropriation and conflicts, as in Jordan and Syria (Masri 1991; Nesheiwat, Ngaido, and Mamdoh 1998). In Ethiopia conflict ensued because traditional authorities manage access to and use of grazing resources, but are prohibited from diverting land to crop use (Swallow and Kamara 1999). Tenure insecurity increased because herders repeatedly lost their pastures to neighboring farming communities or to new migrant farmers (Ngaido 1993). Giving greater management authority to local communities is also the principle behind the gestion du terroir and natural resource management approaches that have been used extensively to implement community-based pastoral or integrated natural resource management projects, especially in West Africa. Although not always fully successful (Delville 2002), these approaches have highlighted the importance of local resource management and responsibility. The negative impact of increasing scarcity of land during the lean season is compounded by increased pressure to becoming settled within pastoral communities themselves. The increase in the value of land with higher population pressures will eventually lead to increased individualization of land, implying significant changes for pastoralism (Jarvis 1991). Indeed, China’s 1985 Rangeland Law emphasized individual household tenure as a necessary condition to improve incentives for sustainable rangeland management. Such contracting of grassland to households is appropriate in some areas with high human and animal population densities, such as large parts of Inner Mongolia. At the same time, in less densely populated areas pastoral tenure arrangements often continue to be based on collective access and management (Banks 2001; Ho 2000). This has led to the development of herder-driven cooperatives in Jordan that are reclaiming the management of parts of traditional pastures as grazing reserves. Many communities are adopting such an approach, and the positive results of these initiatives are being replicated elsewhere (Ngaido and McCarthy 2002). Responding to this need, initiatives in a number of Sahelian countries, such as Burkina Faso, Mali, Mauritania, and Niger, seek to grant greater tenure security to pastoral communities, building on the positive experience with giving greater property rights and responsibility for resource management to local communities. Mauritania, for example, is introducing so-called focal-point management of lands vital to the sustainability of pastoral livestock production, together with national policy reforms to create the basis for a pastoral code that legally recognizes customary resource management practices and property rights and provides protection against encroachment by outsiders. Given that rangelands are not only fragile but, in most instances, also characterized by a legacy of mismanagement and unsettled land tenure, arriving at a sustainable policy will require recognizing the importance of ensuring access, taking account of the fragility of the land and focusing on risk management, and acknowledging the multiple-use forms and objectives of different groups of users. Improve Functioning of Land Administration Institutions: Even if property rights are well defined by law, legal concepts need to be translated into something that can be physically identified on the ground, referred to, and transferred if desired. This creates a need for demarcation and surveys of boundaries, registration and record keeping, adjudication of rights, and resolution of conflicts. All these activities, together with other land management functions the state performs, are normally referred to as land administration (UNECE 1996 United Nations Economic Commission for Europe The state has an essential role to play not only in the legal definition of property rights, but also in providing the infrastructure used to demarcate and record property rights to enable their cost-effective enforcement. To secure property rights to land, countries will therefore have to establish institutions that carry out land administration functions. While private users will appropriate some of the benefits provided by such institutions, the reliability and comprehensiveness of the information they provide, their accessibility, and the trust they command will be critical for granting tangible tenure security to the poor. Land administration can contribute to the achievement of broad efficiency and equity goals if a number of preconditions are satisfied. First, the institutions involved need to have clear mandates and a structure that allows them to function efficiently and free from political pressure. Second, the poor will be the first to be left out of sporadic approaches that cover part of the territory at high cost, and may even lose their rights if nontransparent processes of sporadic titling are adopted. Thus, where social and economic conditions warrant titling or other forms of land rights regularization, the danger of excluding the poor by adopting approaches that are nontransparent, fail to make the required information widely accessible, or impose high fixed or upfront costs must be taken into account. This suggests that the scope of any program should be comprehensive.19 Regularization efforts need to be undertaken at costs that are commensurate with the benefits, thereby allowing sustainability in the long term. Finally, as a public good, the information on land ownership maintained in the registry needs to be publicly available and accessible at low cost to minimize the transaction costs for other users and to allow land and financial markets to operate at minimum cost. The cost at which these services are provided and the way in which users are charged will have a critical impact on the level of formality voluntarily chosen by landowners, and thus on the extent to which the conceptual advantages associated with well-defined and secure property rights can be realized in practice. Two main instruments used for land administration are a registry that handles information on land ownership and transactions and a database, called the cadastre, that contains the boundaries of parcels as defined by surveys and recorded on maps and any additional information about these parcels. The cadastre provides the basis for a number of other functions, such as land use planning, management and disposal of public lands, land valuation and taxation, provision of other public services, and generation of maps. The establishment of well-functioning land administration systems was a lengthy process in the industrial nations (de Soto 1993; Kawagoe 1999). Where these do not exist, developing a strategy that would provide a comprehensive spatial data infrastructure at low cost and in an accessible and transparent manner will be critical. Once such a data infrastructure is available and can provide a frame of reference, registries of different categories of land can often be managed at the local level, provided that ways to link the cadastres to the registry and keep the latter up to date are available. These can be quite simple, for example, information can periodically be transferred from local institutions to the center. Similarly, there is a strong trade-off between speed and the accuracy (and therefore cost) of land records. As the physical demands on a registration system can be immense, depending on the number of land parcels in a particular country, the system must be designed in such a way that it can deal with such demands quickly, efficiently, and in a sustainable way. As illustrated in box 2.5, the demands of title and deed systems differ considerably from each other in this respect. In doing so, two dangers have to be avoided. On the one hand, bureaucrats have in the past often been over-ambitious in the design stage but subsequently failed to deliver, or covered only very small areas. As a result, the land administration system has often failed to ensure even the basic goals of providing affordable ways to maintain tenure security and facilitate the emergence of a market. On the other hand, political imperatives of awarding a large number of titles within a short period of time should not undermine the quality and long-term sustainability of the titles awarded. Studies of land administration systems worldwide suggest that institutional rigidities, overstaffing, corruption, and limited outreach often seriously undermine public confidence in the land registration system (Adlington 2002; Sanjak and Lavadenz 2002). Many of the services public sector institutions provide, such as surveying and mapping, can be contracted out to the private sector, thereby reducing the scope for political interference and allowing the reduction of staffing levels in the public sector. To achieve this, proper regulation will be critical, something that includes the public sector’s ability to enforce regulation. At the same time, the creation of private sector capacity, and the feasibility of free entrance for qualified professionals, needs to be maintained. In Zambia, as in many other African countries, surveyors’ associations restrict entry by qualified individuals, resulting in backlogs of up to seven years for issuing titles (Moll 1996). These entry restrictions are similar to those observed in Indonesia, Malaysia, and the Philippines (Brits, Grant, and Burns 2002). A common shortcoming in many countries is that different entities deal with rural land, urban land, and natural resources or state land. These entities may lack coordination and even compete with each other. In the Philippines the Ministry of Environment and Natural Resources, which is responsible for “protected areas,” theoretically controls 72 percent of the land, but in practice much of this land is used for agricultural cultivation (World Bank 1998). Similar inconsistencies are observed in Ghana (Kasanga and Kotey 2001), Indonesia (Wallace and Poerba 2000), and Sri Lanka (Abt Associates 1999), among others. Failure to clearly assign responsibilities and define the specific type of land for which an institution is responsible will run the danger of creating overlapping mandates, which at best will increase transaction costs, and at worst will undermine tenure security and the validity of titles or land use certificates, result in resource degradation, and give rise to avoidable conflict.20 Examples abound where lack of clarity in institutional responsibilities has resulted in the issuance of multiple titles to the same plot. This erodes confidence in the land administration system and creates a need for corrective measures that can be politically difficult and economically costly (Munoz and Lavadenz 1997) The example of El Salvador, which undertook far-reaching institutional reforms in a post-conflict situation, demonstrates that in many instances, institutional reform and clarification of responsibilities are key to establishing an effective land administration system." – Pages 62-66. "... in ancient China a key function of the bureaucracy was to allocate and enforce land rights." – Page 71. – World Bank, Property Rights To Land, Chapter Two. 93005849D2/$FILE/LandPolicies_Ch02.pdf (Pages 9-11, 20-21, 38-39, 48, 62-66 and 71 of 72)