Private Property in the Middle Kingdom

Travis Tanner

In the currently ongoing 2^nd Session of the 10^th National People’s Congress, Chinese lawmakers are discussing a constitutional amendment aimed at protecting private property.  The NPC’s Vice-Chairman of the Standing Committee, Wang Zhaoguo, officially presented the proposed constitutional amendment, along with nine other proposed amendments, before congressional deputies on March 8, 2004.  The NPC Standing Committee already approved the amendment in December 2003. 

The Chinese constitution, adopted in 1982, has been amended on three previous occasions.  An amendment requires the support of a two-thirds majority, a margin that is all but certain in the largely ceremonial National People’s Congress and which is due to be voted on this Sunday.  The proposed amendment would constitutionally guarantee that “private property obtained legally shall not be violated.”

Many observers charge that the amendment is merely rhetoric and too vague to result in any substantial consequences.  So why is a communist state interested in providing private property protection—something that has not been done since the founding of the People’s Republic of China in 1949—to its citizens?  The answer is threefold: to promote new economic growth, bolster the legal system and achieve greater social balance. 

The proposed constitutional amendment will ensure continued economic growth for the PRC.  The argument goes, by legally safeguarding the acquisition of private property, entrepreneurs will feel encouraged to forge ahead in their economic pursuits and thereby promote economic growth through the trickle-down effect.  In 1978, the private sector was practically non-existent and the state sector accounted for 85% of GDP.  Today, however, the pendulum has swung the other direction, and the private sector now makes up approximately 75% of China’s GDP.  By protecting private property, the Chinese leadership is encouraging the transition from reliance on the state sector to the private sector and views this structural adjustment as a method to guarantee future economic growth. 

In recent years the central government has committed to implementing the “rule of law” across the PRC.  Presently, all property is subject to arbitrary confiscation and penalty.  Despite repeated prohibitions, the media continues to frequently report instances in which state-owned developers evict residents from their living quarters or forcibly confiscate croplands, providing little, if any, compensation, in order to engage in new commercial development or urbanization.   This type of arbitrary disregard for individual private property must be eradicated if Beijing seriously intends to institutionalize a system of law throughout the country. 

Major social gains will be achieved with the adoption of this proposed amendment to protect private assets.  The benefits will be reaped by members spanning all socio-economic strata.  First, the rich will be able to keep their wealth within China without fearing that their assets may be arbitrarily confiscated by suspicious officials.  Second, the middle class, who is rapidly amassing material wealth, will feel additional security in their efforts to acquire more assets.  Furthermore, individuals will be more willing to direct their savings into domestic investment, which will act as a further boost to the economy.  And third, the interests of the low-income earning class, which are more easily jeopardized, will be protected from arbitrary confiscation and indiscriminate fees. 

In addition, the proposed amendment is part of a larger “people-centered” approach the new leadership in Beijing seeks to promote.  Other constitutional amendments being proposed in the National People’s Congress include: improving the land acquisition system, developing the non-public sector of the economy, establishing a social security system and instituting respect for human rights—all measures aimed at improving the lives of the general population.

Despite the various advantages, certain drawbacks to such an amendment will certainly crop up.  For instance, in order to implement the amended constitution, the government will need to revise relevant laws currently on the books, create entirely new regulations and issue judicial interpretations to accommodate such change.  Additionally, Chinese leaders must define clearly the phrase “legally obtained private property” and specify which state organs shall have the authority to interpret its meaning; otherwise, conflicting interpretations among different localities and institutions will certainly arise.  The lag between the adoption of the new amendment and the implementation of new regulations and judicial interpretations will inevitably result in a period of confusion for both the general public and law enforcement officials. 

Thus, the question remains, will the new constitutional amendment actually promote economic growth, strengthen the legal system and advance social welfare through the protection of private property or will the bureaucratic process of updating past laws and enacting new regulations be so cumbersome as to void out the intended positive outcomes?

Three previous amendments to the constitution were adopted in 1988, 1993 and 1999.  The 1988 amendment affirmed the legal status of the private sector.  The amendment adopted in 1993 declared that China would practice a socialist market economy in place of a planned economy.  It also established the contract responsibility system in place of rural people’s communes, which allowed remuneration to be linked to farmers’ output.  The 1999 amendment declared that China would practice the rule of law, as well as upgrad the private sector from a complement of the socialist economy to an important component of the country’s market economy.

While these three previous amendments share a similar rhetorical tone, China’s successful economic transformation of the past 25 years – the focus of these three amendments – testifies that these constitutional revisions did indeed bring about long-lasting change.  The proposed constitutional amendment to protect private property being discussed in Beijing possesses the potential to positively influence China’s legal framework, economic development and social system.  As long as the necessary regulatory adjustments and accurate legal interpretations can be efficiently executed, private property protection will be another step forward in China’s ongoing development. 

Travis Tanner is the Assistant Director of the China Studies Program at The Nixon Center.