Opening the System: Granting Land Use Rights by Public Notices

By Florence Li, Baker & McKenzie, Hong Kong

The PRC Granting and Assigning Leaseholds in State-owned Urban Land Tentative Regulations (中华人民共和国城镇国有土地使用权出让和转让暂行条例, the Land Grant Regulations), promulgated in May 1990, provide that land use rights shall be granted by agreement, by invitation of tenders or by auction. But as at June 2002, according to unofficial statistics about 95% of all land use rights had been granted via private, bilateral agreements between local land bureaux and grantees, and only 5% had gone through the process of tenders or auction. Obviously then, there has been little transparency in granting land use rights, and it has been reported that billions of dollars in state revenue has probably been lost due to the practice of granting land use rights at prices below market values.

With the implementation of the PRC Administration of Urban Real Property Law (中华人民共和国城市房地产管理法, the Urban Real Property Law), effective January 1 1995, the land use rights for commercial, tourism or entertainment purposes or for the construction of luxury residences shall, if certain conditions exist, be granted by auction or invitation of tenders. If the conditions do not exist for auction or invitation of tenders, the land use rights may be granted by bilateral agreement. Crucially, and unfortunately, the Urban Real Property Law fails to elaborate on what "certain conditions" actually refers to.