China Backs Property Law, Buoying Middle Class
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By JOSEPH KAHN
Published: March 16, 2007
BEIJING, Friday, March 16 — After more than a quarter-century of market-oriented economic policies and record-setting growth, China on Friday enacted its first law to protect private property explicitly.

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Chinese Leader Strikes Defensive Tone (March 16, 2007) The measure, which was delayed a year ago amid vocal opposition from resurgent socialist intellectuals and old-line, left-leaning members of the ruling Communist Party, is viewed by its supporters as building a new and more secure legal foundation for private entrepreneurs and the country’s urban middle-class home and car owners.

But delays in pushing it through the Communist Party’s generally pliant legislative arm, the National People’s Congress, and a ban on news media discussion of the proposal, raise questions about the underlying intentions and the governing style of President Hu Jintao and Prime Minister Wen Jiabao, experts say.

Despite a high level of interest among intellectuals and businessmen and the unexpected decision last year to withdraw the measure from the legislative agenda at the last minute, neither leader has spoken about the matter publicly.

Mr. Wen’s two-hour address to the nation on the opening day of the annual two-week legislative session last week did not mention property rights.

The measure could not pass the legislature, which acts under the party’s authority, without the active support of the top leadership. Yet the conspicuous silence of Mr. Hu and Mr. Wen appears to be a form of tribute to the influence of current and former officials and leading scholars who argue that China’s economic policies have fueled corruption and enriched the elite at the expense of the poor and the environment.

“My own view is that the leftist voices that have emerged are not going to disappear because we have a property law,” said Zhu Xueqin, a historian and government expert who supports the law. “On the contrary, they are stronger now than they have been in some time.”

The leadership did not so much overcome opposition to the property law as forbid it. Unlike in 2005, when leaders invited broad discussion about property rights, the latest drafts of the law were not widely circulated. Several left-leaning scholars, who favor preserving some elements of China’s eroded socialist system, said they had come under pressure from their universities to stay silent.

When one financial magazine, Caijing, defied the Propaganda Department’s ban on reporting on the matter and published a cover story last week, it was ordered to halt distribution and reprint the issue without the offending article, people associated with the magazine said.

While the law’s final wording — and the nature of any compromises necessary to build a consensus to pass it — remain unclear, many mainstream scholars and business people have welcomed it.

Several said they also approved of the way Mr. Hu and Mr. Wen had handled the opposition.

“I think the low-key approach was the best way to get this law passed,” said Mao Shoulong, a public policy expert at People’s University in Beijing. “The point is to enact a new law, not to pick a fight.”

Mr. Zhu agreed. “Their style is to say less and do more,” he said.

But the leadership’s strategy did not resolve the underlying tensions. Hundreds of scholars and retired officials signed a petition against the law, which they said “overturns the basic system of socialism.”

The petition claimed the law did too little to distinguish between private property gained legally through hard work and public property that falls into private hands through corruption. They also argued that China could not give state-owned property and private property the same legal status and still call itself socialist.

Supporters of the law dispute the assertion that it will protect the ill-gotten gains of corruption, arguing that it will protect only legal property. In the past, Chinese have bought and sold property freely, but doing so in a legal vacuum. Supporters say they hope the law strengthens the rights of property holders, especially middle-class homeowners.

China’s urban middle class has fueled a real estate boom, even though all land is owned by the state and purchasers trade only the right to use property on the land for up to 70 years. The disposition of property after that term expires is one of many unsettled issues.

But proponents of the law tend to remain quiet on the broader complaint that China’s pretense of socialism has become more and more hollow. Leftists do not seem likely to give up their offensive.

They scored an important victory recently when online petitions and an intensive campaign in the state-run news media appear to have prompted a leading American private equity company, the Carlyle Group, to scale back its planned investment in one of China’s largest construction machinery manufacturers, Xugong Group. The investment had become a test of China’s willingness to sell majority stakes in core industrial companies to foreign investors.

Amid this tussle, Mr. Hu and Mr. Wen appear to have sought a middle ground. In public statements, Mr. Hu has promoted a “harmonious society” that does a better job of distributing wealth equitably and alleviates some of the excesses of pollution and corruption that have accompanied rapid growth.

Mr. Wen has focused mainly on lifting rural incomes and increasing social spending. Those approaches have addressed some concerns of people on the left. But in practice, the two leaders have also sought to keep faith with business leaders and the rising middle class. Under their leadership, state-run banks have sold shares to foreign investors and overhauled bank management systems with the help of foreign consultants.

As well as approving the property law, the legislature revised a corporate tax, ending an advantage foreign investors enjoyed over local companies for more than two decades.

Mr. Wen and Mr. Hu have so far steered relatively small amounts of government revenue into the country’s rudimentary social welfare system. And they continue to invest heavily in infrastructure and industrial expansion, helping the economy expand even faster than in the 1990s.

Those measures, along with the property law, suggest that they will not casually abandon the pro-growth policies that have made China a leading economic power.
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