WENZHOU, China — Chen Furong and his wife bought their home 23 years ago for its proximity to the city center and for the tree-lined canal just outside. Their dream was to pass it on to their children and grandchildren, a piece of wealth giving their family a share of China’s economic miracle.
Then their neighbor tried to sell her place — and it was all thrown into doubt.
Like every other homeowner in China, Mr. Chen and his neighbor own their homes but not the land underneath them. All land in China is owned by the government, which parcels it out to developers and homeowners through 20- to 70-year leases.
When the neighbor — whose surname is Wang — tried to sell her apartment, local officials told her that her lease on the land had expired. To sell her apartment, they told her, she would have to pay them one-third of the sales value.
Ms. Wang protested in a move that drew national attention. Suddenly millions of Chinese who had socked away billions — and possibly trillions — of dollars were worried as well. If the local authorities in other parts of China did the same thing, they thought, a big chunk of their own wealth could end up with the government as well.
“What will happen after our land lease expires?” asked Mr. Chen, 69, who with his wife holds a 70-year lease. “I will be dead when the lease expires, but will I be able to give it to my son?”
China’s erratic stock market and its strict limits on sending money overseas have prompted many Chinese families to invest in residential real estate. China’s families have put nearly two-thirds of their wealth into housing, estimates Li Gan, a professor of economics at Texas A&M University who runs a widely read survey of Chinese households. Some own two or more homes and buy or sell them the way American investors play the stock market.
That pot of household wealth is crucial to China’s efforts to take its economy to the next level. As reliable sources of growth like exports and manufacturing falter, China is trying to turn its households into American-style consumers. Faith in their home savings would make them more likely to open their wallets.
But even as it has pushed for increased homeownership, the Chinese Communist Party has done little to loosen its grip on the nation’s land. The party attacked private landlords during its rise to power, and when it took control, it nationalized all land, following the Soviet model. Although the death of Mao Zedong led to reforms that allowed people to own their own homes, the central government continued to retain title to the land, giving it a major lever in China’s economy.
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Some experts say the central government cannot continue to serve as national landlord. “Our country still believes in an ideology that is already outdated,” said Mao Yushi, a prominent economist who previously directed the Unirule Institute of Economics, a Beijing research firm. “The patriarch of public ownership, the Soviet Union, has collapsed already, but we are still holding onto public ownership.”
Giving land to the people would not be easy. Local governments in China do not have the power to levy taxes, so leasing land is one of the few ways they have to raise money.
Allowing Chinese to own land could also concentrate wealth in the hands of a few, Mr. Mao said. “So how would we tax those who end up owning the vast swath?” he asked.
In 2007, China moved to reassure homeowners by requiring local governments to renew 70-year leases automatically. Yet the law was silent on whether homeowners would have to pay for the renewal and what would happen to those with shorter leases.
China’s Legislature needs to resolve this issue, said Sun Yuhua, an associate researcher at the East China University of Political Science and Law. “Otherwise,” he said, “it will trigger huge disputes.”
Uncertainties about land leases come at a time of broader concerns about the affordability of housing in China. Some smaller cities have gluts of unoccupied apartments, but housing prices have risen steadily in wealthy cities like Shanghai and Beijing.
As the state-run Global Times said in a May 4 commentary, “For millions of home buyers, after paying an already exorbitant house price in the overheated market, another hit to their savings will be hard to accept.”
Beijing is keeping a close eye on events in Wenzhou, a coastal city of eight million people in eastern China that was one of the first to set up private enterprise after China opened up its economy in the late 1970s. The government’s land ministry sent an inspection team to Wenzhou in April, according to state media. National and local government officials declined to comment.
At least three Wenzhou neighborhoods have been hit by government requests for money to renew land leases, including Henghe North, where Ms. Wang and Mr. Chen live. The Chens’ home is typical of the area’s modest dwellings. Nestled on the third floor of a gray-tiled building, the apartment crams two bedrooms into 580 square feet.
A blocky complex of buildings, Henghe North is bordered by a busy avenue lined with noodle stands, vegetable markets and other small shops. Trees and flower beds grow along the canal that abuts the development. Mr. Chen said local people pooled their money to build a community center designed like a Chinese temple.
The unassuming neighborhood was turned upside down by Ms. Wang’s discovery. Local apartment owners started checking their lease documents. Chinese reporters went door to door, especially in Ms. Wang’s building. “There were so many journalists here that she didn’t want to talk to anyone,” Mr. Chen said.
Reached by telephone, a woman who identified herself as Ms. Wang said she was waiting to see how the government would resolve the problem. She declined to comment further.
Property records in China are spotty, relatively new and unavailable to the public. According to her neighbors and local media, Ms. Wang and her family bought her 860-square-foot apartment three years ago for 1.4 million renminbi, or about $210,000 at today’s exchange rates.
Several blocks away, residents of another affected neighborhood, Shuixin, wondered what would happen when they tried to sell their apartments.
“People don’t know what to do,” said Ge Qingchuan, a retired real estate agent who stopped his motor scooter to talk. “No one paid attention to land leases, but now there are problems.”
“For example,” he added, “if you are buying a new apartment and using your current apartment, with a 20-year lease, as collateral to borrow money, you won’t be able to do so. If the banks see your land lease is expiring, they won’t lend you money.”