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Posted July 25, 2013 | comments Leave a comment

Joel Brinkley: China's land-seizure problem

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By Joel Brinkley

China has evicted more than 400,000 Tibetans from their homelands over the last several years.

These forced relocations, sometimes hundreds of miles away, all fall under a program deceptively named "Comfortable Housing."

Part of the unstated reasoning is China's resolve to pull Tibetans and other minorities out of their semi-autonomous regions and integrate them into the larger Chinese society. But another unspoken motivation, Human Rights Watch says in a new report, is the determination to exploit the Tibetan plateau's natural resources, while also resettling other Chinese communities in Tibet.

The 130-page report will make you quite angry. But don't look at Tibet's problems in isolation. The truth is, evictions and land seizures are endemic to China. Officials are reported to evict 4 million rural people from their property every year.

Just a few days ago, a U.S.-based land-rights group called the Sparrow Initiative demonstrated in front of the Chinese embassies in Washington and Ottawa. Protestors spray-painted the Chinese character chai, meaning demolish or dismantle, on the embassy gates. They were referring to the Chinese government.

Soon after Xi Jinping became China's leader late last year, he proclaimed his intention to curtail land seizures. But the truth is, the national government can't easily accomplish this. The vast majority of forced evictions are actually the work of local government officials who seize people's property to raise money so they can make payments on their massive debts. And the amazing thing is, the central government has little idea how much money those local officials owe. They keep that secret.

This month, Tsinghua University of Beijing published a survey of 289 localities that found only 13 cities, or 4 percent of those surveyed, were willing to disclose their level of debt.

What does this have to do with land seizures? Xia Yeliang, an economics professor at Peking University, told me that local government officials grab residents' property, sell it to developers and use the money to make their minimum debt payments. Then they pocket much of the rest, leaving the standing debt for the next mayor, who is likely to behave the same way.

HSBC bank reported last year that local governments derive 70 percent of their income from constituents' land sales.

All this began in 2008, at the start of the worldwide financial crisis, when China was splurging on infrastructure projects to stimulate the economy while also urging local governments to take on smaller, hometown projects. But the local officials didn't have the money. That's when they started accruing debt and seizing land to make the debt payments -- previously a relatively infrequent local act, though in 1950 Chairman Mao seized millions of properties and executed at least a million landlords.

Estimates of total local-government debt today (no one knows the precise numbers) range from $2 trillion to $3 trillion -- or up to 40 percent of the nation's GDP. This at a time when the Chinese economy is in such deep trouble that the International Monetary Fund issued a report this month warning that China's economic growth is not sustainable.

Among the issues the IMF cited is the proliferation of debt-financed spending by local governments. "Further rapid growth of debts would raise the risk of a disorderly adjustment in local government spending," the report warned euphemistically.

Sooner or later, these local officials are going to run out of land to confiscate, leading to defaults on their ever-larger debts. Moody's rating service warned that such a scenario would hobble the nation's banks -- and the larger economy.

So why can't the national government get this under control? After all, millions of Chinese are furious about this. They stage more than 200,000 so-called "mass incidents" a year, large demonstrations about social and economic problems. And a Chinese Academy of Social Sciences report notes that land disputes are the motivation for more than half of these protests.

The truth is, China has so many serious problems that the land-seizure and local-debt problems have simply fallen through the cracks -- while the debts and the threat they pose grow larger and larger every day. But finally, the new government is waking up to the problem.

This month, Zhu Guangyao, the vice finance minister, warned: "A very important task for this administration is to clearly determine the level of local financing platforms." And the State Council, China's cabinet, declared after a mid-July meeting that it will "strictly control financial risks, especially those associated with local government debt," Xinhua, the state news service, reported.

With the Tibet relocations still under way, one wonders if they're really serious.

Email: joel.brinkley@stanford.edu


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