Chinese philosopher Mencius, who lived over 2,200 years ago, once said, "People can have a long-term life plan only after knowing their private properties are secured."

This teaching deeply influenced China for more than 2,000 years, but after the People's Republic was founded in 1949, public ownership gradually played a dominant role.

Since China began to embrace the market economy in the early 1980s, private property rights and ownership have been increasing, but they remain an unfamiliar concept for many in the country.

Following a revision to China's Constitution to include private property rights protection, the country is now expected to adopt the Property Law this March. If passed at the annual session of China's parliament, the National People's Congress (NPC), that law would define and regulate property rights across China for the first time.

A draft property law had its first reading in China's legislature in 2002 as part of a civil code. Since then it has been deliberated on for seven times. During those deliberations the full text of the draft law was also released to the general public to solicit opinion. At the 25th session of the 10th NPC Standing Committee held last December, lawmakers reached a consensus on the draft law.

Land rights

Beijing's real estate market is bubbling as a result of China's surging economic development, rising incomes, and the Olympic Games, due to take place in the capital in 2008. According to a report released by the Web portal Sina.com and New Real Estate magazine, in January, real estate prices in Beijing have increased by 42 percent over the past three years.

While real estate booms are common in cosmopolitan capital cities around the world, what Beijing's property investors have been paying for is slightly different from most. In Beijing house buyers are not buying their property outright. According to Chinese law, land cannot be owned by any individual as urban land belongs to the state and rural land is collectively owned.

These government land ownership rules have proved a contentious issue in China. In some cases, both in rural and urban areas, the government has been accused of expropriating land for lucrative real estate development or infrastructure construction in the name of public interests without adequately compensating the people that development has displaced.

When dislocated farmers or rural residents fail to get sufficient resettlement compensation from local governments, they find it difficult to use the law as a weapon to protect their interests. The grievances of farmers who have lost their livelihood, or city residents who have lost their homes to demolition in the name of development, have become a serious social issue, which causes increasing concern for China's leaders.

Land expropriation is the most frequent subject of petitions made by Chinese farmers, said Chen Xiwen, an official involved in the rural work of China's Central Government, at a recent press conference in Beijing. He warned that if the government fails to address farmers' issues in a timely and efficient manner, a single petition could lead to "a mass incident" involving public protests or even a riot.

Making a speech at a central conference on rural work in December 2005, Premier Wen Jiabao raised the issue of loss of farmland to urbanization. He said the rapid development of many cities relies on capital and land resources expropriated from rural areas. The result is that the prosperity of urban areas is often at the expense of rural ones, and farmers are rarely adequately compensated for their losses.

He warned that seizing rural land without offering farmers resettlement or adequate compensation was leading to growing anger and instability in rural areas, and added, "We must absolutely avoid committing an historic error over land problems."

During discussions about the Property Law draft, a passage that read "the expropriation of land from collectives and property from individuals and entities can be allowed only when public interests demand it" was hotly debated. Some people argued that in order to check the abuse of this concept by local government a clear definition of "public interests" had to be established.

Although a definition of "public interests" remains absent from the latest version of the drafted law, it does devote considerable space to ensuring adequate compensation for people who lose their homes as a result of government expropriation. One section of the draft reads, "Nobody or no entity is allowed to pocket, embezzle or delay the payment of compensation."

Positive signal to entrepreneurs

Sun Dawu, a billionaire and a private entrepreneur based in Hebei Province, became well-known nationwide in 2003 because of his arrest. Owning a company once ranked 344th among the top 500 private corporations in China, Sun made a name for himself because of his harsh criticism of government policies that he said were prejudiced against the private sector. In one article on his website he described how he was repeatedly blackmailed by local government agencies and banks for being rich and how he refused to give in to their pressure.

In July 2003, Sun was arrested by local police charged with illegally taking over private deposits, a financing practice outlawed in China. Support for Sun from entrepreneurs and scholars, as well as tens of thousands of online petitions, helped to get him a relatively light punishment-three years in prison with four years on probation.

According to Hu Xingdou, Professor of Economics at Beijing Institute of Technology, actually China has thousands of private enterprise owners facing a similar fate to Sun-inviting trouble for themselves with their riches-and the prospective Property Law will be a positive signal to them.

Hu, who has conducted several surveys of China's private companies, claimed that a large group of private entrepreneurs operate companies only for short-term interests for fear that too much wealth will bring them fame and, as a result, trouble. Instead of investing their money into expanding their scale of production, Hu said, these entrepreneurs choose to deposit their money in overseas banks. In some cases private companies are forced to give local officials a stake when going public, which creates blurred property rights and sabotages the efficiency of these firms, he added.

In recent years a group of renowned Chinese economists has supported a notion of "original sin" which backs penalizing the country's entrepreneurial class. This theory suggests that most, if not all, private entrepreneurs started their businesses through illegal activities during China's "gold rush" period in the 1980s, and now it is time for them to pay their fines.

The introduction of the Property Law could put an end to this kind of entrepreneur bashing, according to Hu, providing a boost of confidence to the private sector and propelling China's economic development forward even faster. According to official statistics, the private sector now accounts for more than 57 percent of all enterprises in China and employs 64 million people.

Backfire

The marathon legislative process for China's prospective property laws has been strongly influenced by Gong Xiantian, a professor of jurisprudence at Peking University Law School.

One month after the Standing Committee of the NPC published the full text of the draft Property Law in July 2005, Gong posted a letter online entitled, "A Law That Goes Against the Principles of Socialism and the Constitution." In this letter, he said that although the law set out to protect ordinary people's property rights, its effect would in fact be to protect the rights of an extremely rich minority. "It equally protects a rich guy's limousine and a beggar's rod," he said sarcastically in the letter. He also indicated that the embezzlement of state-owned assets during the reform of state-owned enterprises could worsen should the draft be made into law without major revisions.

Gong said that his primary concern with the proposed law and the Constitution's section on property rights was that they failed to include a clause stating that state property is sacred and inviolable, "which is the foundation of socialist legislative work." Gong's requirement challenged the foundation of the emerging law reforms, which said that private property, state property and collective property should receive equal rights and protection.

Gong's letter proved highly controversial, provoking widespread debate about the natures of socialism and capitalism, which had been unheard since Deng Xiaoping's 1992 tour of southern China to renew his call for a push towards a market economy.

While Gong was attacked by legal experts, especially the drafters of the new property law, for delaying an essential part of a prospective civil code, he was also widely supported by tens of thousands of Internet users, who were worried about the country's widening income gap and about a growing level of fraud and corruption, which they saw as linked to the headlong pursuit of private wealth.

The war of words that Gong prompted between two camps of Chinese scholars and citizens attracted the attention of China's legislature, and led to compromises in the draft proposal.

At a seminar to debate the new Property Law, China's top legislator Wu Bangguo asked the law's drafting team to bear in mind that the basis of China's socialist economy is public ownership, which is essentially different from Western capitalist private ownership.

As a result, the last version of the law added a series of provisions on the protection of state-owned assets, including prohibiting the illegal possession, looting, secret partition and demolition of state assets by any entity or individual. Another newly added article said, "Those working for state assets management and supervision agencies should bear legal liability for causing the loss of state-owned assets due to mismanagement and abuse of power."

Certain hotly debated issues, such as whether affluent urbanites can purchase residential land from farmers to build holiday homes, and how people can renew a lease on land or property when the 70-year term expires, were not included in the final draft because they were deemed too sensitive.

According to Hu of the Beijing Institute of Technology, concerns that approval of the new Property Law could accelerate the privatization of state-own assets are unfounded. He believes that, on the contrary, the law could help to protect state assets. "If who owns what becomes clear, state assets will not be easily invaded," said Hu. "In the longer run, the law of ensuring the exercise of citizens' rights over their property will offer the basic rules for a market economy and a civil society."

Drafting the New Law December 2002, the law was deliberated for the first time by the NPC Standing Committee. 2004, the revised Constitution added an article on private property, which stated, "Citizens' lawful private property brooks no violation," to replace the original statement that read, "The state protects citizens' lawful income, deposits, housing and the ownership of other lawful property." July 9, 2005, the Standing Committee of the NPC published the full text of the third draft of the Property Law on its website to solicit public comment. More than 10,000 suggestions were collected from the public as a result and the NPC Standing Committee also hosted more than 100 meetings to collect opinions from economists, law experts and the public. October 2006, the NPC Standing Committee reviewed the Property Law for the sixth time, making it the most-deliberated law in China's legislative history. In December 2006, lawmakers reached consensus on the seventh version of the draft law at a regular session of the 10th NPC Standing Committee. Comparing the Sixth and Seventh Drafts On state property The sixth draft: "What are regulated as state properties by laws and administrative regulations belong to the state or the whole people." The seventh draft: "What are regulated as state properties by laws belong to the state or the whole people." On collective property The sixth draft: "The ownership of movable and immovable properties of township collectives applies to stipulations in laws and administrative regulations." The seventh draft: "Members of the township collectives enjoy the rights to hold, use, benefit from and dispose of the movable and immovable properties of the township collective according to stipulations of laws and administrative regulations." On farmers' residential land The sixth draft: "With permission of the collective, the using rights holder of rural residential land can transfer the legally built housing to households of the same collective. The transfer of using rights of residential land happens with the transfer of the housing. Township and city dwellers are forbidden to purchase farmers' residential land." The seventh draft: "The procurement, exertion, and transfer of using rights of rural residential land apply to regulations of laws and regulations, such as the Land Administration Law." On the rights of co-owners of high-rise multi-story buildings The sixth draft: "In construction layout, car parking spaces and garages should first meet the demand of co-owners. Unless there is a clear agreement between the parties on the ownership of parking spaces and garages, they belong to the co-owners." The seventh draft: "In construction layout, car parking spaces and garages should first meet the demand of co-owners. In construction layout, the ownership of parking spaces and garages is to be agreed between the parties through sale, rent or giveaway. Parking spaces built on the road or land co-owned by property owners belong to the co-owners." On protection of properties of different entities The sixth draft: "The state practices a socialist market economy." "The state, collective and private property rights are protected by law, and brook no violation of entity or individual." The seventh draft: "The state practices a socialist market economy and guarantees the equal legal status and development rights of all market entities." "The state, collective and private property rights, and property rights of other obligees, are protected by law and brook no violation of entity or individual." On security rights The sixth draft: "The pledge of the right to collect toll from a road or a bridge and the account receivables can be mortgaged." The seventh draft: "In the case of the mortgage of account receivables, the right of pledge takes effect after the pledge contract is registered with a credit agency or a credit reporting agency."