China: Potential reforms in the granting of industrial land in China

Last Updated: 15 May 2014

By Yingying Wang

In order to increase land utilization efficiency and enco urage economical and intensive use of industrial land, the Chinese governments on the central and local levels are exploring some new practices in respect of industrial land supply, which is expected to have an impact on land acquisition by industrial land investors, developers and manufacturing companies in the near future.

Rise of Industrial Land Price

The industrial land price is expected to rise. This is explicitly mentioned as one of the points to implement paid utilization of resources by the Communist Party of China (CPC) in the Decisions of the Central Committee of the CPC on Several Major Issues Concerning Comprehensively Deepening Reforms ( 中共中央关于全面深化改革若干重大问题 的决定 ), which was passed by the 3 rd Plenary Session of the 18 th Central Committee of the CPC on November 12, 2013.

The current minimum industrial land price guidelines were issued by the Ministry of Land and Resources in 2006. With the rapid growth of economy in China during the past eight years, these benchmark land prices are out of date and no longer reflect the actual industrial land grant price le vels in different areas in China, nor do they match the existing economic development conditions. The industrial land prices are anticipated to go up in the near future.

Shortened Land Use Term for Industrial Land in Certain Areas in China

In some small cities and industrial zones in China, for example Yizhuang Economic and Technological Development Zone in Beijing ( 北京亦庄经济技术开发区 ) and City of Linyi in Shandong province ( 山东临沂 ), the local authorities are implementing a more flexible land grant term system, namely, to shorten the grant term from a maximum of 50 years to 20 years.

The rationale behind such new practice is to increase land utilization efficiency and at the same time, increase government's tax revenues.

Under PRC law, the land authority is entitled to grant a plot of industrial land with a term no more than 50 years; and in practice, such 50-year term is usually fully granted. With such a long-term land use right at hand, many land users are not motivated to commence its construction immediately and develop the project within an efficient time frame, causing many idle land issues. Now with shortened land grant term, it is hoped that a plot of industrial land can be utilized at a higher efficiency during a specified period of time . On the other hand, shortened land use right term leads to less land premium, which is more cost-efficient for land users. And from the perspective of a local government, the increased land utilization efficiency is more likely to bring about increased tax revenue during a given period of time.

Exploration of A New Grant Approach of "Lease before Grant"

The Ministry of Land and Resources published the Regulations on Economical and Intensive Utilization of Land (Draft ) ( 节约集约利用土地规定 ( 草案 ), the " Draft Regulation ") on October 29, 2013 for public consultation and comments .

In accordance with the Draft Regulation, the local land authority, when supplying industrial land, may lease the state-owned construction land use rights to a land user first through public tendering, auction or listing, and specify in the lease contract the conditions for grant (e.g. completion of the construction on the land and/or achievement of the investment commitment). After the land granting conditions are fully satisfi ed, the authority will then grant the land use rights to the land user and sign a separate land grant contract. Such approach is called "lease before grant ( ?? ?? )", which is different from the existing practice whereby land use rights are granted to a land user for a term of 50 years from day one without any land lease arrangement or any preconditions to be satisfied before land grant.

The rationale behind such new approach is the same as that for shortened land use right term. This approach aims to encourage the land user to develop the industrial land in a timely manner pursuant to the time limit specified in the land lease contract or required by the local land authority; if it fails to complete the development within the requested time frame or fails to satisfy any other land granting conditions, the local authority is entitled to take back the land after the expiration of the lease term or even early terminate the land lease according to the lease contract. The Draft Regulation is not clear as to the guidelines and schemes on detailed aspects of the leases before grant, such as the permitted term, price threshold, which are likely to be formulated after public consultation.

Other Potential Changes to Promote the Land Use Efficiency

Moreover, in accordance with the Draft Regulation, the local land authority may also require in the land grant contract that, if the land user's development intensity or investment standard fails to reach the required level, the local land authority has the right to purchase back the land. In the current land grant contract templates, failure to comply with the development intensity or investment standard will usually entitle the land authority to charge a penalty equivalent to the shortfall, which in reality may not be strictly implemented. The Draft Regulation intends to introduce a more powerful remedy for choice by the local government in such cases, in order to promote the efficient use of industrial land.

The Draft Regulation further proposed to encourage the land users to enhance the land use efficiency by adding stories on or redeveloping the existing factory buildings or workshops. In certain cases wher e the plot ratio is increased because of land use efficiency enhancement on the existing industrial land with the same usage and in compliance with the planning requirement, the land price for the increased construction area may be waived. This seems a tempting incentive for the existing land users to remodeling the current facilities and expand the output by using the same piece of land.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
CMS Cameron McKenna Nabarro Olswang LLP
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
CMS Cameron McKenna Nabarro Olswang LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions