The Evolution of Relational Property Rights: A Case of Chinese Rural Land Reform

• Author: Shitong Qiao & Frank Upham
• Position: Assistant Professor, University of Hong Kong Faculty of Law; J.S.D. (expected May 2015), Yale Law School/Wilf Family Professor of Property Law, NYU School of Law
• Pages: 2479-2506

The Evolution of Relational Property Rights: A Case of Chinese Rural Land Reform Shitong Qiao  & Frank Upham  I. INTRODUCTION ........................................................................... 2480 II. IN REM PROPERTY AND THE EVOLUTION OF PROPERTY RIGHTS ........................................................................................ 2481 III. RELATIONAL PROPERTY AND BOTTOM-UP INSTITUTIONAL EVOLUTION ................................................................................. 2489 A. R ELATIONAL P ROPERTY ......................................................... 2489 B. B OTTOM -U P I NSTITUTIONAL E VOLUTION ............................... 2492 C. F ROM C LOSE -K NIT C OMMUNITY TO U NBOUNDED N ETWORK OF S OCIAL R ELATIONS ................................................................ 2493 IV. CHINESE RURAL LAND REFORM: THE EVOLUTION OF PROPERTY RELATIONS .................................................................................. 2495 A. W HO O WNS C HINA ’ S L AND ? .................................................. 2495 1. The Collective’s Ownership........................................ 2496 2. Farmers’ Use Right to Rural Land ............................. 2496 3. State Monopoly on Rural–Urban Land Conversion ................................................................... 2497 B. S MALL P ROPERTY : A O NE -S TICK E VOLUTION .......................... 2498  Assistant Professor, University of Hong Kong Faculty of Law; J.S.D. (expected May 2015), Yale Law School.  Wilf Family Professor of Property Law, NYU School of Law. Empirical research for this Essay was conducted by Qiao. This Essay was written jointly. The authors would like to thank Richard Brooks, Ruoying Chen, Richard Epstein, Henry Smith, Katrina M. Wyman, and especially Yun-chien Chang, and other participants of the Symposium for comments and suggestions. Shitong Qiao also thanks Robert Ellickson and participants of the Governing Access to Essential Resources workshop at Columbia Law School, in particular Hanoch Dagan and Katharina Pistor, for discussions on the concept of property rights. 2480 IOWA LAW REVIEW [Vol. 100:2479 1. Social Relations (Not Law) Decide Property Rights ........................................................................... 2499 2. The Same Market, Differentiated Property Relations ...................................................................... 2504 V. CONCLUSION .............................................................................. 2506 I. INTRODUCTION The most notable, or at least the most noted, form of property evolution has been the transfer of exclusive rights from collectives to individuals and vice versa. The competition between individual and collective property, according to Harold Demsetz, was a main theme of the 20th century. 1 Attention has been primarily on the radical property reforms that resulted in the shift of exclusive control over resources from one to another, such as the farm collectivization in Soviet Union or the establishment of the People’s Communes in Mao’s China and their reversals. 2 It is undeniably true that a sudden and fundamental change in the form of ownership of an entire society or economic sector is exciting. That is perhaps why the literature on the evolution of property rights has focused on the transition from communal to private, or the reverse. 3 Such radical moments, however, constitute only a small part of history. For the most part, property rights evolve quietly and incrementally, which is hard to explain if we take exclusive rights as the core of property, or, to put it more generally, if we are focusing solely on the question of who owns the things. 4 This Essay argues that the right to exclude is not always at the heart of property evolution, and, further, that other sticks in the bundle of property rights can play a central role in property evolution. As we demonstrate with the Chinese example, the metaphor of “bundle of rights” can better capture the nuanced, flexible, and idiosyncratic processes that have actually characterized the evolution of property rights. To describe the evolution of property rights in China, we employ the concept of relational property. It is a concept that is heavily influenced by Joseph William Singer’s “social relations model” 5 and Ian Macneil’s 1. See generally Harold Demsetz, Toward a Theory of Property Rights II: The Competition Between Private and Collective Ownership , 31 J. LEGAL STUD. S653 (2002). 2. Robert C. Ellickson, Property in Land , 102 YALE L.J. 1315, 1318 (1993). 3. See generally Thomas W. Merrill, Introduction: The Demsetz Thesis and the Evolution of Property Rights , 31 J. LEGAL STUD. S331 (2002) (summarizing scholarship in response to the Demsetz thesis). 4. See generally Henry E. Smith, Property as the Law of Things , 125 HARV. L. REV. 1691 (2012) (suggesting property law is best understood as a system of laws with many parts). 5. See generally Joseph William Singer, Property and Social Relations: From Title to Entitlement , in PROPERTY AND VALUES: ALTERNATIVES TO PUBLIC AND PRIVATE OWNERSHIP 3 (Charles Geisler & Gail Daneker eds., 2000) [hereinafter Singer, Property and Social Relations ]; Joseph William 2015] RELATIONAL PROPERTY 2481 “relational contract” 6 and, in particular, their emphasis on the determinative role of social relations in the construction of property and contract rights. The bundle of sticks metaphor is at the heart of relational property because it recognizes that property rights can be, and often are, disaggregated as they adapt to changing social, economic, and technological demands. As we will show in the context of the reform of Chinese rural land, the combination of the metaphor of separable interests—the sticks in the bundle—and the dependence of property interests on social relationships can explain the evolution of property rights more accurately than a perspective that stresses a single central meaning of property. The core of our argument is simple: it is analytically more accurate to define each stakeholder’s specific interests in rural land than to answer the question of legal title. Identifying the distinct powers of developing and transferring rural land, for example, tells us more about control of the land than the right to exclude. What’s more important, when property law lags behind property relations, the latter will prevail and shape the eventual allocation of economic, social, and political powers. It is the social relations of particular villages in similar or identical institutional structures that determine their future development. Different villages make different and even opposite property arrangements. The normative implication is that relational property can function without property law, but property law cannot function without embedding itself in social relations. The rest of this Essay is structured as follows: Part II criticizes the in rem view of the evolution of property rights. Part III develops the concept of relational property and evaluates its compatibility with the bottom-up evolution of property rights. Part IV utilizes the concept of relational property to analyze Chinese rural land reform. Part V concludes. II. IN REM PROPERTY AND THE EVOLUTION OF PROPERTY RIGHTS Who is eligible to serve as an owner of property? Individual persons, close-knit communities, and governments “all can and do own property.” 7 But what do property rights mean? Some scholars believe that property is a bundle of rights and indicates which of the designated individuals is entitled to engage in which uses of particular resources. 8 This in personam approach defines property as social relations between persons with respect to resources Singer, The Reliance Interest in Property , 40 STAN. L. REV. 611 (1988) [hereinafter Singer, The Reliance Interest in Property ]. 6. See generally Ian R. Macneil, Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law , 72 NW. U. L. REV. 854 (1978) [hereinafter Macneil, Contracts ]; Ian R. Macneil, Relational Contract: What We Do and Do Not Know , 1985 WIS. L. REV. 483; Ian R. Macneil, Relational Contract Theory: Challenges and Queries , 94 NW. U. L. REV. 877 (2000). 7. THOMAS W. MERRILL & HENRY E. SMITH, THE OXFORD INTRODUCTIONS TO U.S. LAW: PROPERTY 3 (2010). 8. Id. at 4–5. 2482 IOWA LAW REVIEW [Vol. 100:2479 and is analogized to a bundle of rights. Another school of thought holds that “property is a distinctive type of right to a thing, good against the world.” 9 This in rem concept of property consists of two parts. The first part is the emphasis on “property as the law of things.” 10 As Henry E. Smith argues, “the definition of a thing and its role in mediating private interactions lie at the heart of property.” 11 The “thing” plays a role in depersonalizing and formalizing property relations. 12 In general, this in rem concept views property as the relationship between human beings and resources, instead of a web of social relations among human beings. “First, it identifies particular resources (‘things’), and specifies which person (the ‘owner’) is to act as the gatekeeper or regulator of the thing.” 13 Things are “modules” through which law can organize the complex relationships into “lumpy packages” of legal relations. 14 This approach, according to Yun-chien Chang and Smith, presents a structured bundle of relationships that minimize information costs. 15 The second part of this in rem theory of property is the emphasis on the right to exclude. The right to exclude others from some definite thing is central to what the owner owns. 16 To describe someone as an owner of some thing is to say that such person has the right to exclude others’ use of the thing. Thomas Merrill holds that the right to exclude is more than just one stick in the bundle of property rights. “Give someone the right to exclude others from a valued resource...