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Planting Houses in Shenzhen: A Real Estate Market without Legal Titles1

  • Shitong Qiao (a1)

Abstract

Can a real estate market operate without legal titles? The answer has conventionally been no. But in Shenzhen, the iconic city of China’s market economy, an opposite phenomenon exists: half of the buildings within the city, which has 1,993 square kilometers of land and over 10 million people, have no legal titles and have been rented or sold to millions of people illegally. These illegal buildings are called small properties, because their property rights are “smaller” (weaker) than legal properties. Based on my one-year fieldwork, this paper is a first step toward explaining the small-property market. It reveals that legitimate organizations and professionals have developed a network to facilitate impersonal transactions of illegal small properties. Set against the backdrop and context of China’s transition, this paper presents a feasible plan for building a market economy in transitional countries, where property laws are often less than ideal.

Est-ce qu’un marché immobilier peut fonctionner sans titres juridiques ? La réponse a traditionnellement été non. Mais à Shenzhen, la ville symbole de l’économie de marché de la Chine, le phénomène inverse existe : la moitié des édifices situés à l’intérieur des limites de la ville, qui s’étend sur 1 993 kilomètres carrés et compte plus de 10 millions d’habitants, ne possèdent aucun titre juridique et ont été loués ou vendus à des millions d’individus illégalement. Ces bâtiments illégaux sont dénommés « petites propriétés », puisque leurs droits de propriété sont « plus petits » (plus faibles) que ceux des propriétés légales. Fondé sur mon expérience d’un an sur le terrain, cet article cherche d’abord à expliquer le marché des petites propriétés. Ce texte précise comment des organismes et des professionnels légitimes ont développé des réseaux afin de faciliter les transactions impersonnelles de petites propriétés illégales. Avec pour toile de fond la transition de la Chine, cet article propose une option viable pour bâtir une économie de marché dans les pays en transition, là où une législation sur la propriété est souvent moins qu’idéale.

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3 Barros, Benjamin, introduction to Hernando de Soto and Property in a Market Economy, ed. Barros, Benjamin (Burlington: Ashgate, 2010), 12. See also Di Taranto, Giuseppe, “Towards a Renewed Development Theory: Hernando de Soto and Institutionalist Contractualism,” Journal of European Economic History 41 (2012): 81.

4 See Rapaczynski, Andrzej, “The Roles of the State and the Market in Establishing Property Rights,” Journal of Economic Perspective 10 (1996): 87.

5 A lot of research focuses on the impact of titling on value and investment in the houses. See, e.g.,Galiani, Sebastian & Schargrodsky, Ernesto, “Property Rights for the Poor: Effects of Land Titling,” Journal of Public Economics 94 (2010): 700;Atuahene, Bernadette, “Land Titling: A Mode of Privatization with the Potential to Deepen Democracy,” Saint Louis University Law Journal 50 (2006): 761.

6 Soto, Hernando de, The Mystery Of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000), 46.

7 See Soto, Hernando de, The Other Path (New York: Harper & Row, 1989), 1757, 133–72.

8 King, Winter, “Illegal Settlements and the Impact of Titling Programs,” Harvard International Law Journal 44 (2003): 433.

9 See Wending, Chen, No Intra-City Village in the Future [Weilai Meiyou Chengzhongcun] (Beijing: China Democracy and Law Publishing House, 2011).

10 Interview with a government official, Shenzhen, June 7, 2012.

11 Song Linfei, “No Special Economic Zone for Legalization of Small-Property Houses,” People’s Forum, July 4, 2012, http://theory.people.com.cn/n/2012/0704/c112851-18443279.html, last accessed February 15, 2013.

12 Shitong Qiao, “Small Property, Big Market: A Focal Point Explanation” (forthcoming, on file with the author).

13 Shitong Qiao, “Small Property, Adverse Possession and Legal Entitlements” (forthcoming, on file with the author).

14 Statistics Bureau of Shenzhen City & Shenzhen Survey Office of the State Statistics Bureau, 2011 Shenzhen Statistical Yearbook 2011 (China Statistics Press, 2011), 4.

15 Jie, Feng, “Two Decades of Land Administration in Shenzhen,”Shenzhen SEZ Daily, June 22, 2006, A1.

16 Ibid.

17 See Article 2 of the Amendment to the Constitution of the People’s Republic of China (1988), effective date: April 12, 1988, an English version available at PKULAW (beida fabao) CLI.1.3784(EN), website address: http://en.pkulaw.cn/display.aspx?cgid=3784&lib=law; and Article 2 of the 1988 Land Administration Law, effective date: December 29, 1988, available at PKULAW (beida fabao) CLI.1.4163, website address: http://www.pkulaw.cn/fulltext_form.aspx?Db=chl&Gid=4163&keyword=%E5%9C%9F%E5%9C%B0%E7%AE%A1%E7%90%86%E6%B3%95&EncodingName=&Search_Mode=accurate.

18 See Dingcai, Li, Sanlai Yibu zai Bao’An nongcun de shijian [The Practices of Sanlai Yibu in Bao’An] (Haitian Press, 1999).

19 Zhonglin, Zhang, “Tequ zaoqi de shenghuo[“Life in the Early Period of the SEZ”], Shenzhen Humanities and History 11 (2009): 1.

20 Migrants are largely excluded from the mainstream housing distribution system, as the linkage between household registration and urban housing is largely intact. See, e.g.,Weiping, Wu, “Migrant Housing in Urban China: Choices and Constraints,” Urban Affairs Review 38 (2002): 90.

21 Du Anna, “Illegal Building Rush in Shenzhen,” Guangzhou Daily, November 24, 2009, http://news.qq.com/a/20091124/000211.htm, last accessed February 20, 2012.

22 Zhuang Haobin, “Frontier Report of Illegal Buildings in Shenzhen,” Nanfang Daily, July 10, 2009, http://news.dayoo.com/shenzhen/200907/10/67208_9881497.htm, last accessed September 10, 2013.

23 Shenzhen Municipal Government, Investigation Report on Illegal Buildings in Shenzhen (2010), on file with the author.

24 Interview with a government official, Shenzhen, June 29, 2012.

25 de Soto, supra note 7 at 160–67.

26 Shenzhen Municipal Government, supra note 23, at 11.

27 Ibid. at 66–67.

28 Ibid.

29 Ibid. at 77.

30 From 2000 to 2009, the official market of residential houses supplied 59,220,000 square meters of housing in total. Huang Ting ed., Shenzhen Real Estate Year Book 2011 (Shenzhen: Haitian Press, 151).

31 Interview with a government official, Shenzhen, June 26, 2012.

32 See Geng Nuo, “Honorable Villager-Ship: A New Stunt of Small-Property Houses,” Beijing Daily, June 13, 2011, http://house.focus.cn/news/2011-06-13/1337355.html, last accessed February 20, 2012.

33 Interview with a villager, Shenzhen, March 2, 2012.

34 See small-property ads, collected by and on file with the author.

35 QQ is the most popular online chat program in China.

36 “Shenzhen Land Developers Issue Certificates of Small-Property Houses,” Sina, June 13, 2009, http://finance.sina.com.cn/china/dfjj/20090613/22346345587.shtml, last accessed February 20, 2012.

37 Interview with a government official, Shenzhen, April 5, 2012.

38 See Greif, Avner, “Impersonal Exchange without Impartial Law: The Community Responsibility System,” Chicago Journal of International Law 5 (2004): 109.

39 Notice of State Council Office on Prohibiting Land Speculation (No. 39, 1999).

40 Shenzhen Land Planning and Monitoring Network, Review of the Municipal Policies of Illegal Buildings, March 12, 2012, http://www.szpls.gov.cn/whkj/xxdy/201203/t20120312_71655.html, last accessed September 20, 2013.

41 Interview with a government official, Shenzhen, March 1, 2012.

42 Shenzhen Municipal Government, supra note 23, at 26.

43 “Making a Town for Huawei,” Southern Weekly, August 8, 2010, http://www.infzm.com/content/49064, last accessed September 5, 2013.

44 Interview with a government official, Shenzhen, July 1, 2012.

45 CCTV is the abbreviation for Chinese Central Television, the official television broadcaster of the Chinese central government.

46 Geng Nuo, “Honorable Villager-Ship,” supra note 32.

47 Du Yawen & Wan Jing, “Billions of Hot Money Bet on the Legalization of Small-Property Houses,” China Securities News, August 21, 2009, http://biz.xinmin.cn/rehouse/2009/08/21/2410786_6.html, last accessed February 20, 2012.

48 SeeDemsetz, Harold, “Toward A Theory of Property Rights,” American Economic Review 57 (1967): 347–57;Merill, Thomas, “Introduction: The Demsetz Thesis and the Evolution of Property Rights,” Journal of Legal Studies 31 (2002): 331–38;Fitzpatrick, Daniel, “Evolution and Chaos in Property Rights Systems: The Third World Tragedy of Contested Access,” Yale Law Journal 115 (2006): 9961048.

49 de Soto, supra note 6, at 162.

50 See, e.g.,Lieberthal, Kenneth G., “The ‘Fragmented Authoritarianism’ Model and Its Limitations,” introduction to Bureaucracy, Politics, and Decision Making in Post-Mao China, eds.Lieberthal, and Lampton, David M. (Berkeley: University of California Press, 1992).

51 de Soto, supra note 6, at 75.

1 For their helpful comments and suggestions, I would like to thank the participants of the 7th Annual Conference of the Asian Studies Association of Hong Kong; the 2012 Beijing Workshop of the Coase Institute; the Summer School in Law and Economics Colloquia of the University of Chicago; and the faculty workshop of Peking University School of Transnational Law. I would particularly like to thank Professors Robert Ellickson, Susan Rose-Ackerman, and Paul Gewirtz for supervising this project from the beginning. Comments and suggestions from Professor Mariana Valverde and two anonymous reviewers contributed greatly to the revisions of this paper. This research also benefited from discussions with or comments from Ray Campbell, Yun-Chien Chang, Lee Fennel, Tom Ginsburg, Xin He, Jeffrey Lehman, Saul Levmore, Gary Libecap, Randal Picker, Eric Posner, Henry Smith, Francis Snyder, Frank Upham, Qi’ren Zhou and many others, which I greatly appreciate. Xia Linfei and Ma Ji of Peking University School of Transnational Law, and Wen Zewei and Zhong Jiaxin of Shenzhen University, provided excellent research assistance during my fieldwork. Without the cooperation of my anonymous interviewees in Shenzhen, this research would have been impossible. I am also grateful for the research support from the Oscar M. Ruebhausen Fund and the Kauffmann Summer Fellowship of Yale Law School. This work is dedicated to Carol Pang for her invaluable company and support. All errors are my own.

2 JSD candidate, Yale Law School; research scholar, US-Asia Law Institute, New York University School of Law.

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