China’s highest legislative body, the National People’s Congress (NPC), is not known for openly debating policies, but the proposed new law that would guarantee private property rights throughout the communist country is a watershed. The introduction of a national private property law could eventually “undermine the legal foundation of China’s socialist economy,” according to its most prominent critic, Gong Xiantian, an expert in Marxist jurisprudence at Peking University.

The old guard is concerned about what will become of the Chinese Communist Party, known as the Public Property Party in Chinese, if private property is protected.  The business elites, who have been able to join the party since 2002, insist that the economic boom generated by private businesses will falter if their legal claims to property are not guaranteed. Premier Wen Jiabao has said his government will square the circle by “unswervingly” upholding both public and private property, and the Party leadership is working hard not to anger either group.

Leaders within the party know that the emerging middle class sees property ownership, and the ability to use that property as collateral for a loan, as the main path toward a better future. While rural protests are a concern for these leaders, their real fear is a disillusioned middle class. As such, the leadership has inserted language to appease the old guard, but also insisted that the bill will become law at the close of the NPC on March 16.

The fight for private property protections has been ongoing since the 1990’s, and it will continue long after the NPC leaves the Great Hall of the People later this week. Regulations at the national and local level have protected private property since Deng Xiaoping unleashed the wealth-generating power of private business in the early 1990s. However, these were often piecemeal and their legal authority was questionable. A much-debated amendment to China’s constitution in 2004 helped to clarify some ambiguities between these regulations. However, the constitution in China does not have the same legal weight as it would in U.S. courts—real power rests in the laws enacted at the NPC, at the direction of the Party leadership.

The two sides came out swinging last year when a draft of the law was made public. While the capitalists argued that the bill would only clarify existing regulations and was in line with the revised constitution, Gong posted an open letter denouncing the draft. This public debate proved too much for the party leadership, and the bill was pulled from the agenda at the 2006 NPC.  

This year the seven-times revised, 40-page, 247-article bill will be passed, the leadership has decreed.  To that end, the current draft is filled with praises for socialism’s role in China, and will do little but provide legal protections for the existing status quo. Unfortunately for China’s rural residents this probably means a continuation of weak legal protections and state seizures of land.

China's business elites insist that the economic boom generated by private businesses will falter if their legal claims to property are not guaranteed.

Rural areas will continue to be governed under a different system than the booming cities on the coast. “Collective” ownership will remain in China’s inland provinces, where occupiers only have “usage rights” and no individual access to titles that can be bought or sold.  The Chinese press has widely covered a change in this year’s draft that will give farmers the right to renew their leases after they expire. (Under the proposed law, the state will retain ownership of the entire mainland, but city land can be leased for 40-70-year periods with guaranteed renewals, and rural land can be leased for up to 30-year periods.) But the text within the draft dealing with rural land seizures will likely do little to stop officials from taking land for development projects with little compensation because it will be up to those same officials to enforce the laws.

What the law does seem to guarantee, however, is that it will be more difficult to seize farmland to build a factory. Not because of environmental or social concerns, but because of the Communist Party’s general suspicion that global food markets cannot be relied upon to provide food security for the nation. (This same suspicion lies at the heart of China’s push to grab ownership of national resources around the world, rather than rely on existing suppliers.) To this end, the law will attempt to force local officials into maintaining the current amount of land for cultivation at 120 million hectares until at least 2010.  

In the booming coastal cities, this law will likely prove much more important. This is because thriving private property markets already exist in these areas; the law will only guarantee and standardize these rules. One effect may be greater car ownership, as using a car as collateral on a loan will now be easier and protected. Also, state-owned banks will gain greater security for their mortgage portfolios, potentially freeing up some capital for reinvestment.  

To this end, China’s new private property law is an important, if incremental, step toward guaranteeing that the benefits gained by private enterprise are not lost on the mainland. The main beneficiaries of this law will be middle class city dwellers and the state-owned banks that hold most of the country’s mortgage portfolio. But as private property moves farther inland to the rural provinces, so too might the wealth.

Adam Wolfe is a senior analyst with the Power and Interest News Report.

Image credit: "Developing Yangshou" by Flickr user sheilaz413