China’s Changing Property Law Landscape: A Relational Explanation

The most notable, or at least the most noted, form of property evolution has been the transfer of exclusive rights from collectives to individuals and vice versa, such as the farm collectivization in Soviet Union and the establishment of the People’s Communes in Mao’s China and their reversals. Such radical moments, however, constitute only a small part of history. For the most part, property rights evolve quietly and incrementally, as testified by the ongoing Chinese land reform.

The evolution of Chinese land law exhibits three characteristics. First, law serves as the final confirmation of policy reforms, rather than the precondition of the reform. Second, there is no individual land ownership, and public land ownership (including both state land ownership in the urban area and collective land ownership in the rural area) still matters. Third, due to the rapidly changing nature of the Chinese economy and society, property rights in action are often a pale shadow of what their legal entitlements would indicate in theory. As a result of these three characteristics, Chinese land law poses two related challenges to conventional property theory. First, it tests one of the rarely questioned verities of economic theory: that clear, secure, and judicially enforceable property rights are an essential – perhaps the most essential – prerequisite to economic growth. The second question grows directly out of the first. China’s growth has come through voluntary market exchange on a massive scale, and, in this sense, fully vindicates economic theory. The challenge is to understand how these markets – in our case, the real estate market – operate without the legal framework considered necessary for Coasian bargaining. In a recent chapter, ‘China’s Changing Property Law Landscape,’ we provide an outline of the changing Chinese land regime, including the past, present, and future of land expropriation, small or informal property rights, and rural land reform.

We extend our relational property theory, which was coined in a previous paper ‘The Evolution of Relational Property Rights: A Case of Chinese Rural Land Reform,’ as one explanation of what has enabled the market, without any legal rules or judicial enforcement, to thrive on a literally global scale. Relational property emphasizes the determinative role of social relations in the construction of property. The most important normative implication is that relational property can function without the full and faithful implementation of formal property law; but property law cannot function without embedding itself in social relations. We develop four hypotheses from the relational property concept. First, it is easier to define the stakeholders’ rights than it is to answer who owns the property. Second, besides the right to exclude, other sticks in the bundle of rights may also play a major role in the evolution of property rights. Third, since property rights are created and defined by social relations, when property law lags behind property relations, the latter prevails. Fourth, property rights are relational, rather than absolute and, thus, need to be defined by specific social relationships. Similar actors in the same institutional background might have opposite property arrangements.

Shitong Qiao is assistant professor at the University of Hong Kong Faculty of Law, and Frank Upham is Wilf Family Professor of Property Law at New York University.