Land and Finance Ministries Issue New Joint Notice on Payment of Land Use Fees

Various Chinese domestic media (1, 2) report that the Ministry of Land and Resources, the Finance Ministry, and the People’s Bank have issued a joint notice designed to crack down on abuses in the payment of fees for land used in construction and to prevent local governments from offering essentially free land in order to attract investment. According to an MLR spokesperson, China’s recent land rectification campaign revealed that the failure to pay land use fees and the unlawful diversion of land use fees are "serious" problems in a majority of locales.

The notice, entitled Notice on Management of the Collection and Use of Land Use Fees Owed on Land Used for New Construction, appears to contain several tough new provisions.

• As of January 1, 2005, land management and finance departments will institute a system of "first pay, then distribute" with respect to land and land use fees. When fees are paid, the entire amount will be deposited in the state treasury on the spot. Thirty percent of the fees will go to central government coffers and seventy percent will be distributed to local government in accordance with local regulations. The notice introduces new filing requirements to track fees.
• With respect to land used in new construction from 2003 to April 2004, if land use fees stipulated by regulation have not been paid, the government department at the next level shall order rectification and payment of the arrears within a set period. During this period, land management bureaus are prohibited from accepting new land transfer or land expropriation applications from the locale in question.
• With respect to new projects, "without exception," land management bureaus may not issue approval documents for land transfers and land expropriations until land use fees are paid as stipulated by relevant regulations.

The MLR recently disclosed that Chinese farmers are owed more than 15 billion yuan in unpaid compensation for land requisitions. Improper diversion of land use fees and low compensation for forced evictions have led to a growing number of conflicts and protests in China. To address these and other problems, the State Council issued a new circular on tightening land management. The new MLR noti