CIIDWPNo.43-Vendryes, Thomas; Li, Shi-Real Estate Activity, Democracy and Land Rights in Rural China
Vendryes, Thomas; Li, Shi
Published: 2016/5/26 13:42:13    Updated time: 2016/5/26 14:01:42
Abstract: Land-related conflicts have recently become a primary cause of social unrest and a major political issue in China. Indeed, as is generally the case in the course of development, the process of institutional change, which also affects land rights in rural areas, generate tensions and frictions. Using survey data on land practices and governance in Chinese villages and national statistics about investment in the real estate sector, we confirm the results of the handful of empirical studies on this topic in China, by showing that practices such as administrative reallocations of land by village leaders positively depend on the level of real estate activity but that this effect is mitigated by the development of village-level democracy. We thus bring empirical evidence on the factors behind the evolution on land rights in China’s rural areas and the related conflicts, as well as, more generally, on the dynamics of institutional change that accompanies development.
Keywords: Land rights; urban expansion; governance; China



        Vendryes, Thomas --------Ecole Normale Superieure de Cachan, Centre d’ Economie de la Sorbonne & CREST

        Li, Shi --------China Institute for Income Distribution, Beijing Normal University

1. Introduction

As other countries in the course of development, China undergoes a deep structural change. Since the beginning - and the overall success - of the "reform and opening era" initiated by Deng Xiaoping in 1978 (see for ex. Brandt and Rawski, 2008), and in parallel with the increase in GDP and in Chinese citizen’s standards of living, the very structures of China’s economy and society have been radically changing: demographics, sectoral structure, international integration, etc., among all these dimensions, China today is very different from what it was 40 years ago. These changes accompany and drive development and the associated increase in standards of living (Kuznets, 1971; Chenery, 1979). However, they also have distributive consequences (Chenery, 1979), and if these transformations allow for a general growth of production, they also often generate tensions and conflicts. And from this point of view China is far from being an exception. Even if there are no precise and reliable sources of quantitative data on conflicts and social unrest in China, the general consensus is that social instability has been on the rise. For example, Knight (2013, p. 18) writes that “the number of ‘mass incidents’ (cases of civil unrest, officially recorded) rose from under 9000 in 1993 to 180,000 in 2010” - a multiplication by 20 while GDP per cap. increased more than fivefold over the same period.

This social unrest has many causes - Knight (2013) for example mentions changes in income, inequality, insecurity and governance. However, a source of conflicts and socialtensions which is often overlooked - in China and elsewhere - is the frictions generatedby the process of urbanization. Urbanization is indeed one of the main dimensions ofthe process of structural change that accompanies development, as the share of urbanpopulation constantly and sharply increases when a country moves from low-income tohigh-income status. And it does not only imply a movement of populations from rural tourban areas, but also a geographical expansion of the latter. Development thus entails adynamics of land-use change, with rural and agricultural lands being turned into urbanand built-up ones. This change in land-use naturally means, very generally, a very significant increase in land values, and a change of land-owners or at least of land-users, openingthe door to distributive conflicts. Even it has not (yet?) been fully acknowledged as apriority issue by most developing countries’ governments or international organizations,a long series of case studies have pointed up such land-use change conflicts in a greatvariety of contexts, in different developing countries.

China today is not an exception, and even, rather, a good illustration. Indeed, ur-banization has been rapidly rising over the last decades, from a rate of 20% in 1980, to35% in 2000, and 50% in 2010.2 This steep increase has been accompanied by a verysignificant expansion of urban and built-up land area. For example, using satellite imagery data for the period 2000-2005, Liu et al. (2010) evaluate that built-up land arehas increased by more than 17,000 km2, which is roughly equivalent to the whole area ofBeijing province. This geographical spreading of the urban space puts pressure on ruraland agricultural lands: Liu et al. (2010) for example estimate that roughly 75% of thenew built-up land area over the 2000-2005 period was taken out of cultivated land. Andthese changes appear to fuel numerous and important local conflicts in rural areas. Forexample, Cao et al. (2008) report that, during the first nine months of 2006, 17,900 “massincidents” took place in Chinese rural areas, with roughly 80% of them triggered by conflicts around illegal land acquisitions taking place at the expense of farmers and villagers.This is largely driven by local authorities, which still have the practical - if not entirelylegal - means and strong incentives to acquire villagers’ land in order to transfer it tonon-agricultural users, seizing most of the benefits associated with the correlative changein land value (see for example Guo, 2001; Ding, 2007; Lichtenberg and Ding, 2009).

The objective of the research presented here is to propose empirical evidence on theconsequences of urbanization on the local practices and institutional arrangements onland in Chinese villages. It aims to bring two contributions to the existing literature.First, as for China itself, despite a growing and convincing body of case studies on theconsequences of urban sprawl on land distribution an thus land conflict, there is almostno evidence at the national level, using econometric methods, on the factors fueling landconflicts in rural China. To the best of our knowledge, the only exception is the recentarticle by Wu and Heerink (2016) on the consequences of FDI on reported cases illegalland use, taking into account the degree of fiscal decentralization. Second, our resultshopefully shed some light on the consequences of urbanization on rural citizen’s landrights in developing countries in general, for which China can be seen as an illustrativecase study for that matter.

Practically, from a statistical and empirical point of view, the main issue is that, asmentioned above, no data exist specifically on land conflicts in rural China. We then relyhere on information taken from the Chinese Household Income Project (CHIP) survey for 2002, which report, for 961 villages, the occurrence of a administrative reallocationsof villagers’ land over the period 1998-2002. This variable is taken as indicating theintrusion of local authorities in local land allocation and use. As for our main explanatoryvariable of interest, the dynamics of urbanization, we use here the investment in the realestate sector, at the province-level: indeed, real estate investment signals the intensity ofurban development, both in terms of physical expansion and of related financial stakes.Finally, we use information provided by the CHIP survey on local governance, and morespecifically whether village elections take place or not. Indeed, if there is actually a causalrelationship running from real estate activity to administrative reallocations of land, itis very likely to be affected by the local governance context, in particular the balanceof power between local authorities and villagers, which should be more favorable to thelatter if local democratic processes exist.

Our results are in line with the existing literature, and confirm our hypotheses thaturban dynamism affects land rights in rural China, but that this impact is lessened whenvillagers are empowered through local democracy processes. Indeed, we find that morereal estate investment, at the province level, is correlated with a higher probability ofadministrative reallocations of land in a province’s villages - and this effect is decreasingwith the distance between a village and the province capital city, which tends to confirmthat this correlation is indeed manifesting a causality. And this effect of real estateactivity on local land practices is much less pronounced in villages where citizens electtheir local leaders.

The remainder of the paper is organized as follows. Section 2 presents the generalcontext of urban expansion and its impact on rural land in China. Section 3 details ourdata and the related literature, and results are discussed in section 4. Section 5 concludes.


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