REGULATIONS
Private Property in the Land of Mao
March 15, 2007
Christopher Bjorke, AFP

China's government clears the way for private ownership, but implementation is not clear

As China's ruling Communist Party further stretches the meaning of the word "Communist," it is redefining the meaning of property rights.

Though Mao Zedong still lingers as an icon for the government, his ideology of collectivization has eroded to nearly nothing as the country has ridden capitalism to the heights of the global economy. The latest blow to Maoism is the approval of private property, transferable by sale or inheritance.

Commentators have savored the irony of a private property law written by a group whose name roughly translates as the "Public Property Party," and some questions still remain about how a group with a 50-year-old grip on power will implement the new law.

"There may have been some thinking among senior folks in the Chinese government that they had reached or were beginning to reach the limit of economic growth without having private property," said Michael Burke, an attorney in the international section of the law firm Williams Mullen. "This law just didn't pop up in the past few months. This has been under discussion for 14 years."

China's economic success may seem meteoric from the outside, but the government's decision-making is often pragmatic and incremental. It does not apply to agricultural land, which is often grabbed by local Party officials for development after its occupants are evicted. So far, it seems that the new law applies mostly to the new urban entrepreneurial class and its homes and businesses.

"Traditionally, as China's laws develop, the Chinese will adopt a law, then will leave a lot of the definitions or operational parts of the law to implementing regulations," Burke said. "In this case, we know what the broad strokes are of the property law. What we won't know until the implementing laws come out is what this specifically means."

One concern, according to Burke, is that large pieces of public property will transfer to private hands in questionable sweetheart deals and then re-sold for big profits. One need only remember the Yeltsin years in Russia to imagine the dark side of privatization deals.

Burke said that this aspect of the law may actually make property deals more complicated. Foreign companies with limited access to information may not be certain how sellers acquired the properties and if the ownership is strictly on the up and up.

"It's going to be incumbent on foreign investors to do the equivalent of a title search, to make sure that everything's in order," he said. "The take-away for foreign investors is that it may make some transactions harder."

In the West, people think of private property as concrete, literally and figuratively. It is the cornerstone of wealth creation and they understand how it works. In China, the land where the Public Property Party has embraced privatization, it may take some time before the true shape of things firms up.

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