a de-facto public sector monopoly that may encourage rent- seeking.<sup>10</sup> Second, even if compensation is paid for agricultural land subject to conversion, the payment is not pegged to market values but rather the value under agricultural production, usually as a multiple of average annual output value, plus compensation for standing crops and structures.<sup>11</sup> Court cases charging village officials with corruption for doing so and pocketing part or all of the proceeds have mushroomed (Cai 2003, Brandt _et al._ 2004). In the 1999-2002 period alone, more than half a million land-related corruption cases were filed and 3,800 officials were put formally under investigation (Zhu 2005).

In this context, it is not surprising to find that large land tracts were acquired for non-agricultural purposes without ever being able to carry out the planned developments; in fact an official survey shows that 43% of expropriated lands are left idle (Xie _et al._ 2002).<sup>12</sup> While this caused numerous complaints (Guo 2001), including violent protest (Guo 2004), draconian measures to prohibit land conversion were unable to eliminate it. As previous efforts to increase tenure security against the state such as the 1998 LML had proven largely ineffective to counter these trends. This was partly due to absence of a clear legal basis, limited awareness of applicable provisions, lack of a well-defined process for appeal, and the conflict of interest arising from the fact that in many cases local governments responsible for conversions are also the first instance for resolution of disputes, all of which meant that local leaders were often able to violate laws with relative impunity (Zhu 2004). For example, in 2001 only 12% of farmers were confident that their land will be protected against administrative readjustment (Schwarzwalder _et al._ 2002).

# **2.4 Main innovations introduced by the RLCL and hypotheses to be tested**

Against this background, the RLCL, which became effective in March 2003, aimed to increase the security of property rights against taking by representatives of the state. Three innovations are relevant. First, the RLCL defines farmers’ land rights more widely than was the case earlier and, for the first time, gives them legal status as property rights rather than merely contractual arrangements between two parties (Prosterman _et al._ 2006).<sup>13</sup> This makes it possible to seek redress for violations through the courts rather than only through administrative means, as had been the case earlier. Second, the law clarifies that the collective can not take (back) land from individual users without providing compensation (Art. 16) even

> 10 In fact, Art. 43 of the land management law stipulates that all non-agricultural land use must occur on state-owned land. As a consequence, all land intended for non-agricultural uses must first be expropriated or “taken” by the state, something that makes direct negotiation between farmers and entrepreneurs impossible.

> 11 By law, in case of compulsory acquisition compensation needs to  be paid for land and related investments as well as resettlement. 12 Reports indicate that, in 1996, 1.74 million mu had been converted to non-agricultural uses but could not be properly utilized. In fact, it is reported that the public monopoly over urban land markets led local governments to heavily rely on incomes from land transfer fees to supplement their regular budgets and are using land that has been compulsorily acquired as a collateral for bank loans (Cai 2003).

> 13 There are three reasons for this. “First, land rights obtained through household contracting are a legal entitlement created under the law; the contract issuing party, namely, collective entity, is mandated to allocate such rights to individual households even if it is not willing to do so. Second, the term, scope, rights and obligations of such land rights are regulated by law, rather than by contract provisions mutually agreed by relevant parties.  Third, remedies for violation of such land rights include not only damages, but equitable remedies as well, such as returning the original thing and restoring to original state (RLCL, Art. 54). Lastly, the General Principles of Civil Law include farmers’ land contracting and operation rights under the category of “property ownership rights and other property rights related to property ownership rights (Chapter V Art. 80), thus creating an implication that farmers’ land rights are property rights” (Prosterman et al. 2006, p22).

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