Thoughts on economics and liberty

Notes on property rights in China

See Wikipedia: https://en.wikipedia.org/wiki/Chinese_property_law

and this: https://en.wikipedia.org/wiki/Property_Law_of_the_People%27s_Republic_of_China

EXTRACT FROM The Logic of the Market by Weiying Zhang (2010)

progress in China’s economic development is occurring because China has been moving increasingly toward a private property–based economy from a position-based rights economy. Property rights have become less vague and better protected in the past three decades. The success of rural reform in the late 1970s and early 1980s, for example, has its source in contracting out the use of land to rural households. The resulting property rights are much better defined under the household-contract responsibility system than under the collective commune system.

In urban settings, under the planned economy, almost all economic rights were position based, and nonpublic businesses were completely illegal. During the reform, the government has taken several steps to grant legal status to the private sector. Sole proprietorships were legalized in 1982. Privately owned enterprises eventually obtained legal status in 1988 after a long debate. Protection of private property rights was explicitly written into the new constitution in 2004, and those institutional changes have greatly promoted the rise of business entrepreneurship and the related economic growth. By the end of the 1990s, most rural enterprises and small and medium-sized state enterprises were fully or partially privatized. Without those legal steps for implementing private property rights, entrepreneurs would not have emerged, and China would not have been so successful in its economic development. In fact, the Chinese economy almost stagnated from 1989 to 1990.

EXTRACT FROM Coase’s How China Became Capitalist

What the Chinese economists and policymakers found particularly relevant was the idea that the delineation of rights is a precondition for a market economy. If China was moving toward a market economy, it had to clearly define all property rights. This basic idea of property rights economics thus suggested a convenient way to “get property rights right” without changing the ownership structure via privatization.
While the Chinese government shied away from letting broken state enter- prises close and economists debated the issue of property rights, Zhucheng, a small county-level city in Shandong, quietly privatized 272 out of its 288 state or collective enterprises. This happened between late 1992 and mid-1994.

Coase acknowledges some potential risks with Chinese property rights:

The continuous presence of the state in defining and redefining property rights has raised a serious challenge. The discretionary power that the Chinese state still holds undermines the credibility of China’s emerging private property rights. Since the power can be and has been abused by government officials, it remains a big hurdle for the Chinese government to protect private property rights that has been recognized by the new constitution since 2004.

EXTRACT from a FEE article

globalization has increased personal freedom and put pressure on the Chinese Communist Party (CCP) and National People’s Congress to pass a Property Law last March. It recognizes the importance of the private sector and better protects property rights—all with a positive impact on civil society. [Source]

People are free to own their own homes, operate their own businesses, and seek work in the private sector. [Source]

NOTES FROM A 2016 Forbes article

On Sunday, China’s Central Committee of the Communist Party of China and the State Council released general guidelines on shoring up property rights which promise to “raise people’s sense of wealth security, boost social confidence, foster positive expectations and raise the impetus for entrepreneurship and innovation by various economic entities.”

The guidelines lay out 10 tasks of property rights protection, including improving legal enforcement of property rights (as reported by Xinhua, “law procedures should be elaborated concerning the sealing up, distraining, freezing, auctioning or other disposal methods of property belonging to enterprises or individuals that are suspected to be unlawful”).

 

Sanjeev Sabhlok

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