The Telegraph
Since 1st March, 1999
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China no longer public property
- Constitution to be amended to protect private assets

Beijing, March 4 (Reuters): China is to change its constitution to protect private property in a revolutionary manoeuvre that waters down its core communist ideology to raise the status of entrepreneurs once deemed the running dogs of capitalism.

Five decades after seizing power, nationalising private property and waging bloody campaigns against landlords, China’s parliament is set to amend the state constitution to add the words, “private property obtained legally is inviolable”.

One aim of the amendment, to be ratified during the annual session of the National People’s Congress that opens tomorrow, is to give further impetus to the burgeoning private sector that is fuelling China’s breakneck economic growth.

After a 25-year economic reform drive, Communist Party slogans brandished on red banners now vie for attention alongside billboards inviting monied urbanites to splash out on new cars and housing.

“What this symbolises is a leadership that has carried the historical name of the Communist Party, but is now departing from that legacy,” said Laurence Brahm, a Beijing-based foreign economist. The Chinese words for the Communist Party, gongchan dang, literally translates as “public property party”.

The addition to the constitution, adopted in 1982 and altered three times, means all manner of legally obtained assets will now be protected.

It will also require that compensation be paid to property taken to make way for public projects and strengthens references to protection of assets, including income, savings and homes, in the current constitution.

While the clause is seen as giving fresh impetus to protecting entrepreneurs in China’s market-driven economy, it is also seen as a response to growing protests over government expropriation of homes and businesses for government projects.

Foreign investors would also welcome the amendment.

“These values are purely symbolic, but foreign companies could invoke it in court as a guiding principle,” said a Western diplomat.

Entrepreneurs, who have been enjoying a public rehabilitation since a landmark decision by the Communist Party in November 2002 to open its ranks to private businessmen, applauded the change.

“Not only has our economic status improved, but also our political position. This is an opportunity for us,” said Yin Mingshan, chairman of LiFan Group, China’s top motorcycle maker.

But privately, few entrepreneurs expect the amendment to boost their bottom line or prompt a sudden flood of offers of credit from banks that have long shunned the private sector.

One leading Beijing property developer welcomed the change as a way of protecting his wealth.

But a spokeswoman for his firm said developers did not expect easier access to loans at a time when China is trying to curb lending by debt-laden banks to a booming but potentially risky sector.

Still, the move has fuelled some hope of follow-up measures, such as offering more legitimate titles for land deeds to individuals who can use them as collateral when trying to get bank loans.

“The emphasis is on what gets pushed through in practice. If people can secure clear titles to land, property and fixed assets, then that could help,” said Goldman Sachs economist Hong Liang.

Fundamentally, the change is key to ensuring sustainable economic growth.

“It’s not going to affect Mr Zhang’s life today. It’s not going to affect FDI (foreign direct investment) flows today,” said Dong Tao, economist with Credit Suisse First Boston in Hong Kong.

“By protecting property rights, this will provide more incentive for long-term strategic thinking and will also be a factor for social stability,” Tao said.

And while marking a significant shift, diplomats said, it still left the basis of China’s socialist market economy intact. Hundreds of millions of peasants granted long-term land leases from the state are not about to be given their land, they say.

For Chinese experts, the shift also offers protection for the poor — providing them a legal means to seek compensation when their homes are wrested away to make way for public projects.

“Just having the principle isn’t enough,” said Hu Angang, an economics professor at Tsinghua University.

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