Liaoning Shantytowns Reconstruction Solves Financing and Land Issues

Recently Probe into the Development Mode of Low-income Settlements in the Urbanization Process ---- the Experience of Shantytowns Reconstruction in Liaoning, collaboratively written by CASS (Chinese Academy of Social Sciences) and UN-HABITAT, was released in Beijing. This report believes that the Liaoning Shantytowns Reconstruction has successfully solved financing and land issues and almost 97% residents have their houses with sole ownership.

This report says that the Liaoning Shantytowns Reconstruction was started in 2005 and all governments at all levels in Liaoning province insisted on market-dominant channel and constructed diversified financing channels to solve the financing puzzle.

At the early stage of the Reconstruction, lots of funds are needed in a very short time. Liaoning governments raise funds from multiple parties and develop diversified financing channels. Liaoning provincial government enacts “nine policies” to raise funds from the whole society and finally solves the problem of capital shortage. From 2005 to 2011, the social financing provided stable funds for the shantytowns reconstruction. The financing channels of Liaoning Shantytowns Reconstruction are summarized as“Nine Dollars”, which means “the government gives one dollar subsidiary, the enterprise raises onedollar, the individual raises one dollar, the market operates one dollar, the bank lends one dollar, the society donates one dollar, the institute donates one dollar and the project saves one dollar”. “Nine dollars” are actually coming from government, market and society channels. The government channel refers to governmental subsidiary, policy reduction and exemption; the market channel refers to fundraising of both enterprises and individuals, marketing operation of some projects and lands, bank loans, and project saving; the society channel refers to social and institute donations. Under the financing structure of“government + market + society”, the funds from government channel accounts for 38.67%, the funds fromsociety channel for 5% and the funds from market channel for 56.33%. Among the funds from market channel, 5.63% to 11.27% is gained by the government through marketing operation, while 36.33% to 46.33% is gained by the participating enterprises through marketing operation.

From 2005 to 2010, Liaoning governments raised 73.246 billion yuan for the Shantytowns Reconstruction; government expenditure leveraged market capitals, while market capitals played the more important role. At the very beginning, fiscal revenue was insufficient and government debts were heavy, but after a few years of market operation, many cities increased their local fiscal revenues by selling the shantytowns lands. In 2011 the fiscal revenue of Liaoning province was 264.1 billion yuan, almost five times of that in 2005.Government debts were also paid on schedule. This financing mode encourages fluid capitals between enterprises and public financial funds.

Ni Pengfei, the leader of this report, says that land bonus has made great undeniable contribution to the Liaoning Shantytowns Reconstruction. “Land bonus” refers to what are gained from land capitalization, namely the incremental benefits gained from land operation and capitalization. Land bonus is like a shadow of China’s development and reforms, and will be the accumulated funds to expedite our industrialization and urbanization for a long time. Governments can take use of these bonuses to improve infrastructure in cities and rural areas, in return, reinvestment on land appreciation will have positive effects on land appreciation, so a sustainable virtuous cycle is formed to promote the development of China’s industrialization and urbanization.

The most critical part of land bonus is allocation and sharing. During the capitalization of low-income settlement lands, the incremental benefits should be shared by all residents, and maximized benefits should be given to people, so “land bonus” can help realize their dreams of houses. The sample of land operation in Liaoning Shantytowns Reconstruction becomes a classic example and model that how to use land bonus to realize house dreams of low-income residents.

The report believes the land operation during the Liaoning Shantytowns Reconstruction has summarized experiences as followed: 1) allocating lands and using commercial lands to supplement residential lands.Land allocation and selling are combined to supply lands; profits grained from land sales are invested into shantytowns reconstruction; some commercial lands are arranged within the new neighborhood for removed residents for the sake of improvement of business and public services; capitals are raised to feed the construction of new neighborhood. 2) Making market operating and granting rights to people. The Liaoning Shantytowns Reconstruction insists on adjusting measures to local conditions. When government regulation is intensified, market mechanism is fully played to allocate land resources, so that lands for shantytowns reconstruction will be efficiently developed. 3) The Liaoning Shantytowns Reconstruction dominated by government and operated by market has made a series of measures to benefit people. 4) Policies related to land supply, development and settlement are issued to make sure Liaoning Shantytowns Reconstruction under smooth development.

After the reconstruction, almost 97% residents have their houses with sole ownership; living area per household increases to 56.6sqm. To realize house dreams of low-income residents by land bonus, government giving benefits to people is the premise, flexible land operating mode featured of government-dominant and market-operating is the key, overall planning of land resources is the guarantee, and ensuring civil rights as fundamental is the core value of low-income settlement governance.

Edward Blakely, an academician of National Academy of Public Administration, USA, believes that what Liaoning province did is to take policies as driving forces and increase industrialization capacity by shantytowns reconstruction so as to promote urban prosperity, rather than just remove those residents and reconstruct their settlements. The highlights of shantytowns reconstruction include:

1) Reconstructing and modernizing old cities to preserve enough spaces for future population, or at least keep space growth consistent with population growth. 2) Strengthening competitiveness of underdeveloped cities to narrow down income gaps between people in different areas. It means thatShantytowns reconstruction policies should be fully carried out and shantytowns reconstruction projects should be started in large-scale cities. 3) Land market should be established to intensify local and national investments on mines and old industrial bases. Start-up capitals are invested to clear lands, which can be sold for residential or other uses. Local residents don’t have to leave and the development imbalance will be less. 4) In new neighborhoods, workers who had no skills or low skills should be trained, so their incomes will rise. (Journalist: Jin Hui)