China Daily Interviewed Prof. Sheng 

 
 
Sheng Hong, head of Beijing-based think tank Unirule Institute of Economics, shares his views on the land requisition system.

Q: What do you think is the biggest problem with China's land requisition system?

A: According to the Constitution and Land Administration Law, China follows a socialist public ownership system, that is, ownership by the people and ownership by rural collectives. The State can requisition land held by rural collectives, according to the law on public interests. Hence, China has dual public ownership and a two-level land market. Rural land can only be auctioned after it is converted into State-owned property through requisition.

Local governments are monopoly buyers in the first-level land market, and they gain because of the huge price gap between the two levels of the land market. So farmers' land use rights can be easily infringed upon on the pretext of public interest by local governments.

Q: Many scholars have called for a change in the land requisition system. If there is a reform, what should be its key point?

A: There is a heated debate on "land privatization", but I think the most important thing is neither privatization nor the lack of it. The vital point is to return the land transaction rights to farmers.

Under the present circumstances farmers get little compensation for losing their land, far lower than its true value in terms of urban or even rural use. If we give land transaction rights back to "rural collectives", farmers can deal directly with those who want land such as developers. Then they can sell the land at the market price.

Q: What should be fair compensation amount for farmers?

A: Since public interest projects will continue, we need to keep the land requisition system. But the government needs to compensate farmers on the basis of market prices. That means the compensation should be between the value of rural and urban use of land.

Q: But some scholars are strongly against free trade of land. They worry alignments of local powers and capital will force more farmers to leave their land under the banner of "free trade" and intensify social tension, causing social turbulence. What's your opinion?

A: That's ridiculous. Some scholars think farmers should not get the right to transfer land because they could easily sell it off and lose their last resort of making living. Therefore farmers' land was kept under the custody of local governments. But now it's the local governments who are taking farmers' life guarantee away easily.

Q: Raising compensation could cause a drop in the income of local governments facing financial problems or hinder local economic growths. How does one solve this problem?

A: This is not logical. A local government can't rob the poor to make itself rich. Local governments are meant to serve the people instead of making profit blindly. Furthermore, selling land is not a sustainable way for development.

If local governments raise the level of compensation, they have to widen their other financial resources. For example, they can charge for land trading and property ownership. Such taxes are more sustainable than selling land.