HONG KONG - Chinese government efforts to clean up land sales, a major source
of official corruption as the thriving economy chews up increasingly valuable
arable territory, face a rethink with the revelation that the bulk of income
from such sales is going off-budget and much is siphoned off for illegal
purposes.
Illegal transfers, corruption in land deals, and buying land on lease from
villagers for non-agricultural use instead of through public tender or auction,
is rampant in major cities, according to an investigation published by the
National Audit Office (NAO) last week.
The NAO report said that about 71%, or 186.41 billion yuan (US$27 billion), of
261.87 billion yuan net income from land sales
from 2004 to 2006 in 11 cities investigated was not put into a special account
under budget management as required by regulations.
Governments in the 11 cities, including Beijing and Shanghai, were also found
to have misused 8.4 billion yuan from land-grant fees, Zhai Aicai, of the NAO,
said in the report.
China has for years been trying to make the sale and use of land more
transparent. Since 2004, the government has banned the sale of government sites
through bilateral agreements between developers and local governments and
ordered that land be sold by way of tenders, auctions or a stock listing.
Some cities have given a flexible interpretation to the rules and the auction
system has often existed in name only, resulting in a lack of competition among
developers and the winning developer being able to secure the land at below its
true market value.
The NAO findings were among several violations discovered in the audit carried
out at the end of last year. Other cities whose land-grant records were
investigated included the Beijing port city of Tianjin, Chongqing municipality,
Harbin in northeast Heilongjiang province, Jinan in Shandong province, Changsha
and Guangzhou.
The 11 cities sold a total of 86,773.34 hectares of state-owned land between
2004 and 2006, which earned income of 351.04 billion yuan and net income of
261.87 billion yuan, the audit report on the NAO website said.
According to state rules, local governments must put the net income from land
transfers into a special account and manage it as a special budget fund, making
sure its use falls under the supervision of the local people's congresses.
Billions misused
Among the net income of which was not included into the special account, about
8.4 billion yuan was misused, Zhai, who is deputy head of the agriculture,
resources, and environment audit department NAO, said.
Of the misused money, about 5.24 billion yuan was spent on construction or
renovation of government buildings while 3.14 billion yuan was used for loans
and investments against rules.
Separately, the governments illegally deducted (or exempted) 4.8 billion yuan
in land-grant fees from investors and even gave state-owned land free to
attract investments, Zhai said.
Land users in the cities excluding Beijing and Tianjin have also still to pay
17.33 billion yuan in land-grant fees. To make matters worse, some cities
granted the use of land before receiving the required fees from users, Zhai
said. After central government requests, the city governments recovered 6.83
billion yuan of unpaid fees by the end of January this year, he said.
Pressures to maintain the pace of economic expansion may be a factor behind
some fee mismanagement, with some governments keen to speed up growth inviting
big developers to invest in their cities by offering "flexible terms",
according to Yi Xianrong, a researcher with the institute of finance and
banking under the Chinese Academy of Social Sciences (CASS).
"As local governments hold private negotiations with developers before sites
are offered for public tender or auctions, the developers are able to get land
at lower-than-market price, and so the existing land market management system
exists in name only," he said.
The grant by local governments of land use before the required fees are
received increases risk facing commercial banks, as once property developers
have the land-used certificate they can easily borrow money.
"If the developing company collapses during the construction period or come up
with weak apartment sales, they might not be able to pay back bank loans," he
said.
Private land negotiations between local governments and interested parties are
common as it is rare for more than one developer or prospective buyer to be
interested in a particular site, said a Hong Kong toy manufacturer, who
preferred to remain anonymous.
Even so, corruption was an important motive when local governments place the
net income from land sales outside their budget, he said. "With a large sum of
money not included in the budget and not under the supervision of local
people's congress, the local government can spend it in whatever way they
like," he said.
Illegal land grabs
Corrupt dealing by local governments reflects the growing extent of illegal use
and occupation of land as China becomes increasingly urbanized. About 43,000
hectares was illegally acquired in 2007, up 67.6% from 2006. according to a
separate report, the Shanghai Daily.
"In recent years, the situation of illegal land grabs has worsened in terms of
scope and amount," said the unnamed Ministry of Supervision official, adding
that official malfeasance was linked to the illegal activity.
The issue strikes at the core of the government's determination to pursue a
policy of "social harmony" as farmers and others among the country's 750
million rural residents are among those most affected by illegal land dealings.
Late last year, 40,000 farmers in the area of Fujin city, Heilongjiang
province, declared rights to 250,000 acres they claim local officials had
stolen from them since 1994. A similar declaration was made in Shaanxi province
claiming to represent 70,000 farmers. Police arrested leaders of both protests
linked to the declarations. In May, 2007, dozens of farmers in Qingdao,
Shandong province, barricaded themselves in their homes in an attempt to stop
the demolition of their neighborhood. The residents said the amount offered by
the government was below the market value.
A spokesman for the Ministry of Supervision, which monitors government workers,
declined to comment on the issue of illegal land occupation, saying only that
the country is trying its best to ensure the proper use of 121 million hectares
of arable land.
CASS researcher Yi said it was now up to the NAO to continue supervising land
transfers in cities and to help local governments correct their mistakes by
placing the net income from land sales back in their budgeted accounts.
He called for a more transparent local land market management system, as only
open and fair competition can ensure that the land is sold at its true market
value.
Olivia Chung is a senior Asia Times Online reporter.
(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
