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New Developments in Chinese Property Law

New Developments in Chinese Property Law. Donald Clarke Oct. 24, 2008. Bottom line: not much change. Urban land Rural land. Urban land. Pre-Property Law (March 2007) State “ownership” “Granted” LURs of 40, 50, or 70 years “Property” rights good against the world Transferable

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New Developments in Chinese Property Law

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  1. New Developments in Chinese Property Law Donald Clarke Oct. 24, 2008

  2. Bottom line: not much change • Urban land • Rural land

  3. Urban land • Pre-Property Law (March 2007) • State “ownership” • “Granted” LURs of 40, 50, or 70 years • “Property” rights good against the world • Transferable • Reversion back to landlord (state) at end of term

  4. Urban land • Property Law • Housing LURs • “Automatic” renewal • Non-housing LURs • Renewal “according to laws and regulations” • Does it matter? • PV of 70-year LUR > 95% of fee simple

  5. Rural land • New policy? • Oct. 19th Central Committee communique

  6. Rural land • Pre-Property Law • Rural land “owned” by “collectives” • Land contracted out to farmers for 30 years (30-year LURs) • Deemed contract rights • Transferable with limits • Assignments: if transferor has stable income • Subleases: other collective members have ROFR

  7. Rural land • Sublease • Assignment T’or T’ee T’or Owner 0 10 29 30 T’or T’ee Owner 0 10 30

  8. Rural land • Consequences of transferability under existing rules • Farmer can realize full (almost full) PV of remaining LUR term by assignment (sublease) • No safety net if farmer sells remaining LUR term • So why the concern about farmers losing land through mortgage foreclosures?

  9. Rural land • Property Law • Includes rural LURs as “property” • Consequences • More security against land readjustments? • No approval needed for transfer? • Direct compensation from state upon taking?

  10. Rural land • Property Law • Renewal of rural LURs • Art. 126: When the contracted term expires, the contractor may continue the contract according to relevant provisions of the State. • Anything new?

  11. Rural land • Central Committee communique • No intention to abolish collective ownership • Affirms existing rights to transfer, sublease, etc. • May sell, but may not use as collateral • New developments • Chengdu rural LUR exchanges

  12. Rural land • Bottom line • Lack of credit not caused by existing rules, won’t be fixed by changing rules to allow collateralization • Caused by poor definition and documentation of LURs and rigid system of rural finance

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