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Takeovers of land yield profits of US$4.8t

(Shanghai Daily)

09:39, March 26, 2013

CHINA'S local governments have earned at least 30 trillion yuan (US$4.8 trillion) in profits from appropriation of land from farmers as the country urbanizes on a massive scale, a renowned economist said over the weekend.

By charging real estate developers much higher prices for land parcels they took over from farmers at cheap rates, local governments managed to make huge profits over the past decades, Wu Jinlian, an economist at the Development Research Center of the State Council, China's Cabinet, told an economic forum held in Beijing.

''The urbanization campaign we've undergone over the past decades is mainly propelled by profits taken from land sales and has therefore led to many problems,'' Wu said. ''A reform of the land ownership mechanism should be a top priority for the government as the country proceeds with its urbanization.''

By law, governments may provide compensation worth up to 30 times the value of the land's output which may total, in most cases, at most 900,000 yuan per hectare. However, the land price may soar after the government redesignates it as residential or commercial after taking over from the farmers.

Under the current distribution mechanism, farmers usually get under 10 percent of the profit, which has led to numerous protests and created social unrest in some parts of the country. Investors and local governments often take the lion's share of the profit while village-level bodies usually get between 20 and 30 percent of the profit, according to some earlier research.

Another major problem is that some local governments are now heavily relying on land sales as a major source of income. Land sales in Dalian, Liaoning Province, exceeded 115.7 billion yuan in 2010, or equivalent to 231 percent of the city's fiscal income that year, according to the China Real Estate Data Academy.

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