The State Council has just released a circular saying investors cannot use State-owned land for free or at a reduced price.

It says developing the local economy will no longer be an effective excuse for squandering national property in this way.

The Ministry of Land and Resources will introduce sterner punishments for people and communities who violate the rules, said Hu Cunzhi, director of the Land Utilization Department under the ministry, over the weekend.

"As for local governments which believe they cannot attract enough investment except by promising preferential policies, they will have to find other incentives," said Hu. "No State-owned lands should be used by any investor for free or at reduced prices unless the local people's congress has approved it."

Hu said the circular, released last Thursday, will help put an end to the alarming erosion of State-owned land property. At the same time it will begin a better process of land management across the country on the basis of some local governments' successful experiments.

According to Hu, China's State-owned land is worth about 25,000 billion yuan (US$3,019 billion).

This is more than three times the worth of other kinds of State property such as State-owned enterprises, which are calculated at about 8,000 billion yuan (US$966 billion).

But the country loses nearly 10 billion yuan (US$1.2 billion) each year in land disposal.

This is because over 90 percent of the deals are made through agreements instead of public auctions, some officials reduce or waive land costs when they feel like it, and no effective measures have been adopted to ensure compensation and prevent officials from lowering the actual cost of the land for sale.

The circular states that all land deals must be carried out from now on through public auctions. "The practices of some local governments have made it clear that public auctions are a highly efficient way to maintain the true value of State-owned land," said Hu.

China publicly auctioned 10 million square metres of land in 1999, earning 11.4 billion yuan (US$1.4 billion).

Last year its eight seaside provinces publicly auctioned 15 million square metres of land bringing in 23 billion yuan (US$2.8 billion), among which the single province of Zhejiang earned as much as the whole country in the previous year.

Above all, the decisions should be published before the land is transferred to see if there are any objections.

The circular also, for the first time, stipulates that all local governments should try to buy land so they have better control over land use. The practice has been widely adopted in the country's southern seaside areas, but is becoming more popular in other administrative regions like Beijing, Jilin and Liaoning provinces.

(China Daily 06/04/2001)