New York Times
December 23, 2003

China Moves to Protect Property, but the Fine Print Has a Caveat

SHENZHEN, China, Dec. 22 China's national legislature moved to amend the Constitution on Monday to protect private property rights, the first time the Communist Party has formally protected private wealth since taking power 55 years ago.

The change, expected to be enacted early next year, is a milestone in China's 25-year economic reform effort. It marks a victory for advocates of China's emerging class of entrepreneurs, who have argued for years that the Marxist Constitution discriminates against them and gives leeway to the police and the courts to seize their property according to party dictates.

The amendment, subjected to a prolonged debate behind closed doors during the past six months, says that "private property obtained legally shall not be violated," at least nominally putting it on the same footing as public property, which the Constitution now deems "sacred and inviolable."

But the wording of the amendment made public on Monday differs in crucial ways from a simpler version put forward by supporters of more fundamental changes to the Constitution. By including the phrase "obtained legally," the amendment still makes the legal system, controlled by the Communist Party, the arbiter of property rights.

Officials are determined to avoid the rush to privatization that occurred in Russia in the early 1990's, when entrepreneurs assumed ownership of valuable properties in sales that were later considered flawed.

Corruption is rampant in China and some intellectuals and government leaders have long warned against steps that would make it easier for well-connected people to take control of public property and treat it as their own.

The watered-down amendment also seems geared to give the state continued sway over wealthy businessmen who fall out of favor.

Local and national authorities often confiscate land and money of people they consider threatening or disobedient, generally arguing that they lost their rights because they violated a law or regulation while accumulating their property.

Sheng Hong, director of the Unirule Economic Institute in Beijing, said the amendment as unveiled by the legislature on Monday is crucial for economic development, but also shows the continued unease about the level of corruption in Chinese society.

"This change should give private property holders more clarity and long-term predictability," Mr. Sheng said in a telephone interview. "But the phrase `obtained legally' really stands out. It is clearly meant to ensure that corrupt income does not become legal income."

The amendment is the latest in a series of steps that the party has taken to end formal discrimination against private businessmen and make a claim to represent them on equal terms with peasants and workers.

Last year, entrepreneurs were officially allowed to join the party for the first time, and they now constitute a tiny fraction of the party's membership roll of 66 million.

The changes do not have a direct impact on China's peasant class. Farm land is still owned and controlled by the state and leased to farmers.

Both the amendment to protect private property and the decision to open the party to businessmen is part of the legacy of Jiang Zemin, who retired as China's president and Communist Party chief in favor of Hu Jintao in a transition that began a year ago. Mr. Jiang remains China's military chief.

Mr. Jiang sought to update the party's core ideology to reflect major changes in the economy, which now depends far more on private entrepreneurs, peasant farmers and foreign investors than state companies.

Reflecting that contribution as well as his continuing influence over party affairs, the legislature on Monday also moved to enshrine Mr. Jiang's theory of the "Three Represents" alongside "Marxism, Mao Zedong Thought and the Theories of Deng Xiaoping" as the guiding ideologies of the state as written in the Constitution.

The Three Represents maintains that the ruling party should represent advanced production forces, advanced cultural forces and the "overwhelming majority of Chinese people."

It is a recognition, although a convoluted and vaguely worded one, that China is no longer primarily an egalitarian state and that it recognizes that capitalist-style development is essential to the survival of the Communist Party.

The Chinese Constitution, unlike the American, is effectively subordinate to the ruling party and is easy for leaders to amend at will. The latest changes do not include any measures clearly associated with Mr. Hu, who was once viewed as open to considering more ambitious legal reforms, like setting up a constitutional court or guaranteeing broader democratic rights.

Debate on those topics in the state-controlled media was firmly shut down over the summer months, and the legislature does not appear to be considering measures that go beyond the theories and reforms promoted by Mr. Jiang.

China's economy has been expanding at an annual pace of nearly 10 percent for the past 20 years, creating, in cities like Shanghai and Guangzhou, an elite of wealthy tycoons and an emerging middle class, many of whom own homes and cars. The amendment on private property is a belated attempt by the party to catch up to that reality.

The current Constitution says that the state "protects the legitimate rights and interests of individuals and the private economy." The amendment would back private property explicitly.

Entrepreneurs and legal experts say the amendment now needs to be followed by more detailed changes in laws and regulations clarifying real estate rights and the rules for stock and bond holdings. Chinese already buy and sell property freely, but they often do so in a legal vacuum.

The amendment could also make it easier for private businessmen to get loans from state banks. They now lend almost exclusively to companies that have at least some state ownership, forcing the private sector to seek other sources of financing


22 Dec 2003

China to Protect Private Property In Constitution


BEIJING -- China unveiled a much-anticipated proposed constitutional amendment that offers the strongest legal footing for private property in a half-century of communist rule.

The introduction of the proposed amendment to the national legislature Monday signals the close of an at-times fractious debate within the Communist Party over the increasingly critical role the private sector -- and personal wealth -- are playing in a once officially egalitarian society. The proposal offers a significant boost to private property yet falls short of calls by liberal reformers to elevate private wealth to the same status as state-owned property.

The amendment says "citizens' lawful private assets are inviolable" and commits the state to protecting private wealth and the right to inherit it. By contrast, the constitution declares public property not only inviolable, but sacred. It also accords the state-owned sector the dominant role in the economy. The amendment is "not the best result. But it's the best under the circumstances," said a legal adviser to the legislature, the National People's Congress.

The proposal was part of a package of amendments to the 1982 constitution forwarded to the congress's executive, or standing, committee by the party leadership, and many of the changes are meant to bolster China's transition to a market economy. Although the party and authorities routinely ignore the oft-amended constitution -- for example, enumerated rights to freedom of speech and religion are frequently infringed -- the proposed amendments show how far China has moved from central planning and state diktat.

Crucial in that transformation is the private sector, which already generates much of China's job growth but which needs better legal protections to continue thriving. The proposed amendment on private assets and another on land-use rights explicitly give the state the power of expropriation, but require authorities to provide compensation -- an issue not addressed in the current constitution.

Members of congress's standing committee are scheduled to discuss the proposed amendments this week. They aren't expected to significantly alter the measures, which have been worked out behind the scenes by senior party members over the past two months. The full congress, whose delegates are overwhelmingly party members, is then expected to adopt the amendments at its annual session in March.

Among the other amendments is one that would enshrine the party's latest ideological campaign, known as Three Represents. This political theory allows the party to widen its traditional embrace of peasants, soldiers and workers to include private entrepreneurs. It is intended to keep the private sector from forming alternative centers of authority to the party.

Meanwhile, China's state-run Xinhua news agency said trade rights in China, once the preserve of powerful state monopolies, are to be extended to individuals under proposed legislation prompted by the country's entry into the World Trade Organization.

Previously, jealously guarded trading rights were issued to state companies, which stifled competition for imports, as well as reduced domestic companies' access to export markets. Trading rights have gradually been extended to a much wider range of companies as part of China's market reforms. But the law currently prohibits individuals from undertaking foreign trade.

Under the draft amendment to the Foreign Trade Law submitted to the Congress, all individuals, legal entities and organizations can take part in foreign trade, Xinhua said. The draft is expected to be passed next year, Xinhua said.