Study Sheds Light on the Dark Side of China’s Urbanization

Study Sheds Light on the Dark Side of China’s Urbanization


Oct. 30, 2013 11:10 a.m. ET

BEIJING—As many as 64 million Chinese households have had their land seized or their homes demolished during a decadeslong building boom, a study said, throwing an uncomfortable light on the dark side of the country’s urbanization process. China’s new generation of leaders, which took office in March, has championed urbanization as an engine of economic growth. China’s urbanization rate, at 53%, remains low by international standards. Bringing more workers from the agricultural sector into more productive work in cities could help lift China’s economic growth rate, which in 2012 fell to its slowest pace in more than a decade.But the country’s urbanization carries a social cost. About 16% of Chinese households covered in a survey by Beijing’s Tsinghua University have seen their land expropriated or their homes hit by the wrecking ball at some point.

The estimate of the total number of households affected was based on a survey of 12,540 adults and 7,517 children across China last year. It was designed to be representative of the whole population.

Most of those who lost their land were in rural areas on the fringes of cities that are rezoned for development, according to the study.

China’s farmers don’t have the right to sell land themselves, and are often at the mercy of local authorities who seize land for development projects, often with little concern for compensation. The issue is a frequent source of friction between farmers and local governments.

“If we understand that there is such a large-scale process of demolition, perhaps we will not be surprised that there are so many disputes,” said the report.

Farmers are typically rehoused and receive cash compensation, but they often struggle to find work or adapt to city life. About 80% of those who lost land received some compensation, though the study didn’t say how much they received.

The study also said that only 10% got access to social-welfare benefits in the cities where they were relocated.

Under China’s Mao-era household registration system, benefits like health insurance and pensions are tied to residency. Only 28% of the population has an urban registration, though more than half live in cities. Migrant workers from the countryside, working at low-paid jobs in manufacturing and construction, normally have no access to benefits.

Just 4% of those rehoused were given help finding work, the Tsinghua survey found.

China’s leaders are expected to discuss changes to land policy at a Communist Party meeting next month, but reform will be difficult to push through. Local governments rely on the profits from land expropriations and sales for most of their revenue, and land reform requires big changes to the tax system to give them an alternative source of income.

“Land-grabbing is the single biggest source of social instability,” said Meina Cai, an expert on China’s land policy at the University of Connecticut. “The logical reform would be to unify the rural and urban land markets, but it’s unlikely to occur. The biggest beneficiary of the system is the state, the local governments.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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