Compensation Policies for Agricultural Land Requisition in China: A Review

Land requisition is a major means in China to accommodate rapid urbanization, but at the price of social injustice and economic inefficiency. The low satisfaction level of the peasants whose land is requisitioned by local governments is caused by both inappropriate compensation packages and improper handling of these packages. In this paper, applying the property rights approach, we examine why these peasants are unsatisfied with the current practice of agricultural land requisition in China. More specifically, we compare three land compensation price regimes that are below, at, and above the market equilibrium price respectively in terms of gains and losses of the three parties involved in the transaction process, that is, the local government, peasants, and developers. The results of the analytic comparison are consistent with the empirical observations that though the Land Administration Law stipulates that the compensation packages should be valued above the market price, the handling of these packages is inappropriate in that the local government retains a proportion of them so that the affected peasants may receive the compensation price level well below the market price. Recommendations as to how to remedy these flaws of the agricultural land requisition practice in China are proposed.