Lay of the land (part 1)


part 1 | part 2 | part 3

Home prices fell for the seventh straight month in November according to the China Index Academy, and Merrill Lynch Hong Kong's China economist recently suggested in a research note that the surprise interest rate cut by China's central bank late last month "sends a strong signal that the property market will likely bottom out soon". However, the academy also said home prices in the mainland's 10 biggest cities rose 0.07% in November over October—their first gain in half a year.

As realtors like to say, all real estate is local. That goes doubly for China today, as it has since roughly the eighth century. A look back at the last few centuries reveals how much has changed since imperial times, and how much has stayed the same.

Way, way back to the basics

While it's sometimes assumed that all land belonged to the ruling dynasty to grant as it pleased in perpetuity during imperial times, estates tied to aristocratic status and office-holding got broken up substantially when the devastating An Lushan Rebellion (755-763) mortally wounded the Tang dynasty. That made land transactions more common in the years that followed, and land sale contracts later proliferated again in the Ming (1368-1644), which saw a number of innovations facilitating land transfers.

Professor Yang Guozhen of Xiamen University holds that by the late Ming, all the features characteristic of land markets up to the end of the Republic of China's term of rule on the mainland (1912-1949) had already come into being, including:

1. The evolution of the "one field, two masters" system, which granted separate rights for subsoil ownership and topsoil ownership. The latter conferred usage rights to the land, and could be held by peasants; only landed gentry could own subsoil rights. By the 1500s, both of these rights could be bought, sold, or mortgaged separately, and spread over much of China during subsequent centuries—particularly the more economically prosperous regions.

2. The widespread popularization of "live sales" that provided a seller with a set period of years within which he could try buying back the land he had sold before losing all rights to it.

Celestial empire, earthly owners

It seems that most land during the Ming, and especially in the Qing and Republican eras was privately held. Early Ming rulers did confiscate great swathes of land, but by the 1500s most of it had drifted back into private hands. The ruling Manchu elite of the Qing dynasty set a few million acres aside in North China for hereditary use by soldiers and the imperial household. But much of that got sold off anyways, and an attempt in the early 20th century to reassert the crown's ownership was successfully rebuffed by those already using it as private land.

More land was held in what history professor Kenneth Pomeranz at the University of Chicago calls "theoretically inalienable trusts" by private entities like temples, schools and lineage trusts. Only the latter were large and widespread enough to be of much impact in keeping land from being bought and sold. But even those plots leaked into the private market often enough, and in any case full ownership of land wasn't the crux of most property transactions. Usage rights were. This double-dipping might seem like a good way to muck up markets, but Pomeranz argues eloquently to the contrary that land sales from the period were actually quite efficient (see this pdf for a draft of the linked paper).

Tax code changes in the late 16th century known as the Single Whip Reforms required payment of land taxes only in silver, not in kind or through corvee labor as had previously been the case. Farmers, no longer able to simply pay taxes with the grain they grew had to sell it at market to get silver first. To minimize tax payments, peasants and gentry often entered into leases in which they assumed topsoil and subsoil rights, respectively. In these agreements, the heavily taxed peasants were assigned farming duties, while the lightly taxed gentry complete responsibility for tax payment. (For more see this pdf of a study by He Yang of Xiamen University.)

Rights by region

It's worth noting that all of this applied to different degrees in different regions, and while it's hard to discern the finer details in many cases, it seems like the economically prosperous regions of the central plain's south and east generally had far more tenancy – peasants who had bought usage rights so they could till the soil that technically belonged to higher classes. These regions also provided much more protection for tenants than others, had more land owned by private entities, and had a more complex system of property rights.

In short, the residents of places like Shanghai and Guangzhou (née Canton) have been playing the property game for longer and at a higher level than anyone else in China today. To get down to business and keep others out of theirs, they used contracts. Lots and lots and lots of contracts. Seriously, it's kind of nuts. 

Next time in part 2, Take a look—it's on the books: We look at how land transactions really worked during the Qing dynasty, and ask whether the popular narrative of dastardly landlords running rampant before communist rule is all it's cracked up to be.

Author: Hudson Lockett