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What Will China Do When Land Use Rights Begin to Expire?

Posted by on Monday, July 3, 2017 in Articles, Blog, Left column, Vol. 50 No. 3, Volume 50, Volumes.

China does not permit the private ownership of land. Instead, private parties may obtain the right to use property for up to seventy years. These parties own the structures on the land but not the underlying real estate. China’s recent economic boom hinges on the success of its real estate market, but the government has not yet addressed three critical questions it must answer soon: Does the holder of a land use right have the ability to renew that right when it expires? If the holder has this ability, must it pay to renew the right? And, if the holder must pay, how much?

While it is always perilous to guess how the Chinese government will act, it is instructive to examine how the government has behaved in similar situations in the past. To begin with, the Chinese government expends great effort to avoid social unrest and upheaval. In addition, the government frequently sidesteps new problems and waits to see how the private market responds, later endorsing and officially implementing the most successful outcomes. Finally, both government bodies and individual government officials are heavily invested in the real estate market and thus care personally about the answers to these renewability questions. By keeping these facts in mind, it becomes somewhat less hazardous to forecast how China will act as the first land use rights approach their expiration dates.

This Article addresses the renewability of Chinese land use rights. Part II describes the different paths the government might follow as land use rights begin to expire. Part III assesses how the government has acted in the past in an effort to predict which of these different options the government is mostly likely to choose. Part IV pulls back and seeks to locate the resolution of these important questions in the broader context of China’s uncertain movement toward the rule of law.

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