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Abstract
This paper reviews the informal sales of rural residential land tenure and rural housing in China which emerged and developed in the past decade against a framework involving the relationship between property system, privatization and local public financing. Focusing on rural residential land system in China, this paper used this framework to explain the legal position taken by Chinese governments, both central and local, and Chinese courts towards to the informal sales. Analogy was drawn to takings cases in the United States. Two popular lines of reaction to the informal sales are reviewed and objected: (i) to maintain the status quo based upon paternalistic concern to protection farmers and to maintain food production; and (ii) to immediately privatize the title in rural residential land with full alienability. This paper instead argues for a two-stage reform: (i) immediately grant and register private title in rural residential land tenure without free alienability and rural housing and impose an obligation upon local government to provide a state-run safety net; and (ii) grant free alienability when two other legal systems in China when two institutional infrastructure are ready. This shift shall happen when the government's eminent power in takings of housing and land tenure substantially improves and alternative source of revenue sources for local government develops and matures. Such a two-stage strategy could prevent strategic move of government and private parties taken in response to the embedded problems in the two above systems that could cause long-term damage to the infant legal system for rural residential land. Such a strategy would deliver immediate benefits of enhanced private property to Chinese rural residents as well as long-term efficiency, justice and stability to China's property system in land.