In China, homeowners anxiously wait for government to give them land rights

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When Yang Fan bought an apartment in Beijing in 2012, she knew she was joining hundreds of millions in making what has become one of the biggest financial bets on Earth. Housing makes up more than 70 per cent of personal wealth in China. But homeowners cannot own the dirt beneath their houses. Land in China belongs to the government, an enduring Communist legacy in a country that has embraced market economics. So Ms. Yang, 33, can buy her house, but secure only temporary rights to the ground on which it stands. Her lease is for 70 years, and though she will be a very old woman when her lease runs out, the thought still weighs on her, and the legacy she can leave to her family.

"What I'm not sure is whether the house is still going to be mine after it expires," she said. "And if I am still able to keep it, I don't know how much I will need to pay" – for another lease – "particularly given how expensive house prices are in Beijing."

If she can believe the country's leadership, she has nothing to worry about. The renewal of land-use leases, Chinese Premier Li Keqiang pledged, will be automatic and simple. He offered no details, saying those are being worked out, but assured that it "will not be any problem."

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But such a plan, long discussed, has yet to be fulfilled in China, leaving deep worry among people whose financial well-being is tied up in property without a certain future – an uncertainty whose many consequences include the flight of money out of China and into property markets overseas.

The status of property also ranks among the more visible ways China has struggled to deliver on bold promises of modernization and reform. President Xi Jinping is now nearing the end of his first five-year term, ahead of a fall party congress that will determine the next half-decade of elite Communist Party leadership. Mr. Xi has amassed significant power, and is widely expected to use the congress to imprint an even heavier influence on the makeup of the top ranks.

His growing authority, however, is renewing questions of what he hopes to achieve, beyond establishing his own dominance. The Chinese President has from his inaugural speech as top leader pledged to "insist on reform and opening up."

The reform agenda is staggering in length and breadth, touching on the role of state-owned companies in the Chinese economy, the independence of courts, trade policy, innovation and a host of other thorny problems.

But with Mr. Xi, "it's becoming clearer and clearer that his ability to actually deliver on his grand promises is falling way short," said Richard Ye, a political analyst with China Policy in Beijing.

Support for that theory has come from prominent places. Earlier this year, an institute of China's powerful state-run National Development and Reform Commission published a lengthy report that came to a sharply worded conclusion, reported by The New York Times: "Reform has to some extent fallen into stalemate."

The European Union Chamber of Commerce in China has lamented the "lack of progress in market reforms." The Mercator Institute for China Studies has observed that Beijing has been "hesitant" in initiating "urgently needed reforms," and that the country's "domestic reform backlog limits its capacity to shape the trajectory of globalization."

Government ownership of land is a policy with roots in the earliest days of the Communist Revolution, when China executed and cast out landlords as Chairman Mao Zedong proclaimed "the emancipation of the exploited working masses," in part through the collectivization of land ownership.

As China modernized, it issued leases to land, giving occupants certainty that they could stay in one spot for long periods of time. But as some of those leases have reached their expiry date, intense worry has spread about the ownership stability of a bedrock financial asset for many families, particularly as real estate prices have roared over the past decade. A nationwide poll found that the land-lease issue was the matter of single greatest concern among Chinese people today.

The Chinese Premier promised help is on the way, pledging that existing land leases would be automatically extended.

If that happens, it will mark a landmark change. The automatic renewal of land leases will bring Chinese land ownership rules "very similar to fee-simple in Western countries," said Shitong Qiao, a law scholar at the University of Hong Kong who has studied land reform in China.

But the wait has been long.

In 2007, China adopted its first property law, which for the first time provided a legal basis for the private ownership of houses and their contents. House prices soared by 53 per cent in the four years that followed, and have continued to rise since then.

But land leases, which have been issued since at least 1990, have gone unchanged, retaining an element of uncertainty beneath people's homes – a worry that has grown more acute over the past year, as people in several cities bumped against the end of their ownership right contracts. Local governments were forced to respond.

In Wenzhou last year, protests broke out after the government threatened to impose fees of up to 33 per cent of a property's value to extend contracts. Months later, local officials backed down, saying they would issue new leases without a fee.

That decision stirred hope for a similar policy of free renewals nationwide – seemingly confirmed by the Chinese Premier's remarks.

"Our ancestors believed that one shall have peace of mind when he possesses a piece of land," he said as he sketched out his plan to revive that principle in modern China earlier this year.

But in Wenzhou, the government has done nothing of the sort. It has instead agreed to give homeowners with expired leases what Donald Clarke, a professor at the George Washington University Law School, has called "nothing more than temporary squatters' rights" – a mere reassurance that, for now, they can stay in their homes. The leases themselves are not renewed or extended, nor are there answers to the tricky questions of how to do so, which are complicated by the fact that those with 20-year leases initially paid less than those who bought 70-year rights.

Without the bureaucratic systems in place to renew and extend leases, "at this point the statements made are just predictions of what will actually be," said Mark Kielsgard, an assistant professor at City University of Hong Kong who has written about evolving property rights in China.

There is "a tremendous amount of regulation that has yet to be done."

Meanwhile, the long wait for concrete action has undermined trust in government, with far-reaching consequences – including the flight of money out of China and into overseas property markets, such as Toronto and Vancouver.

"Many of these urban, bourgeois Chinese who bought houses in the past 10 years have now come to the conclusion that there can be no real guarantee for the security of your assets – not when you are in the mainland. If you want absolute legal protection, you need to resettle, immigrate," Mr. Ye said.

It is illustrative, he said, of the country's direction under Mr. Xi, who has proclaimed broad ambitions for China's future as a superpower that will eradicate poverty at home even as it takes on a new leadership position among foreign countries.

But China, in its size and in the strength of its vested interests – from local functionaries to wealthy developers and entrenched state-owned enterprises – is tough to change. And the idea that the Communist Party wields control over all land is difficult for some to relinquish.

There are "ideological barriers within the regime, because property rights are still a hotly contested ground for ideological struggle," said Prof. Qiao. In addition, land transactions have been a central financial pillar for local governments, meaning there is a great deal of institutional resistance among lower-level officials. Particularly "in poorer parts of the country, they are not comfortable with giving up their power over land completely," he said.

Slow progress in China does not come from a lack of desire, Prof. Qiao said. It instead stems from the fact that, after four decades of reform, the problems that remain are difficult ones. Chinese scholars call it the "deep water zone."

"They are touching the fundamental institutions of the country," Prof. Qiao said.

"Now there are more tensions or conflicts of different interests, which you have to take care of before you can move to the next stages. That's the difficult part."