China looks to boost property rights

BEIJING (Reuters) -- China on Thursday unveiled a landmark law proposal on property rights that will bolster protection of private assets and stem illegal expropriation, as the government seeks to balance private investment and state control.

The bill also moves to better protect farmers from land seizures, which have become a major source of unrest in the countryside, but stops far short of moving towards privatizing collectively owned rural land.

"The property of the state, the collective, the individual and other obligees is protected by law, and no units or individuals may infringe upon it," stated the bill, which is set to pass next week at the close of the annual parliament session.

The proposed law endured a record seven readings and was pushed off parliament's agenda last year after critics warned it would worsen social inequalities and trample China's socialist principles by putting private and state-owned property on an equal footing.

In a nod to the criticism, this draft adds language that affirms the state-owned sector as the "leading force."

"The nation is in the first stage of socialism and should stick to the basic economic system in which public ownership predominates, coexisting with other kinds of ownership," it reads.

But with China's economy increasingly dependent on private investment to fuel galloping economic growth, its people "urgently require effective protection of their own lawful property accumulated through hard work," said Wang Zhaoguo, a parliament vice chairman, in his explanation of the bill.

Chinese cities have in the past been beset by protests of workers left idle and often unpaid as state-owned factories were shut down and sold off, often in league with former factory managers.

To address concerns of asset-stripping, the proposed law promises to both stamp out "looting" of state assets and to protect legitimate private assets.

"The lawful property of individual persons shall be protected by law," it states, warning against "illegal sharing or destruction" of such property.

Illegal land seizures in the countryside and the government transfer of farmland to commercial developers - often without adequate compensation - have also been a major source of unrest that the law seeks to address.

"No entity shall expropriate collective-owned land by exceeding the limits of power or in violation of the procedures," the proposed law states.

But while its language suggests the government wants to better protect farmers' rights, it also shows that it is not looking for outright privatization of rural land, which under the current system farmers lease from the collective.

Instead, it allows for collective farmland to be sub-contracted and stipulates that the transformation of land for agriculture into land for development be restricted.

Compensation and resettlement subsidies also must be paid when collective-owned land is expropriated.

"No unit or individual shall embezzle, misappropriate, illegally share, withhold, or pay in default, the compensations for expropriation or other fees," it reads.

Delegates said the law, whose drafting began in 1993, was long overdue.

"Many private businessmen say it is a progress. Some even call it a breakthrough. I think both words have been rightly used," said Weng Lihua, whose home province of Zhejiang is at the forefront of China's market reforms.

Another delegate said that despite the changed wording to mollify leftist critics, the most important elements remained.

"It is good that the state has affirmed the protection of private property in the form of a law, ending meaningless debate, so that we can concentrate on developing the economy," said Meng Guangsui, from the northeast province of Heilongjiang.