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Date Posted: 10:34 17/03/2005

A real state

Chaos and murder in the real estate sector

THE SHANGHAI government this week held a little news event to help explain the intricacies of its 'demolition and relocation' (chaiqian) schemes. The city's plans for urban renewal mean that whole swathes of slums and tenements need to be demolished to make way for some gleaming new edifice capable of lighting up the night sky. They are also committed to reducing the population density in the central districts, and to building parks.

The old houses are, of course, terrible. Drafty and ramshackle and rat-ridden, they house most of the city's urban poor. Many of these teeming patches of poverty have already been destroyed, with the people consigned to the far reaches of the municipality. The major issue is not so much whether or not they should be forced to move, but the actual process of relocation, and particularly the compensation payments.

And so, we turn to a case that took place earlier this year on Urumqi Road, where a long line of foul and crumbling residential buildings were earmarked for destruction. Unfortunately, two stubborn old timers refused to leave, despite being subject to the usual rounds of intimidation by hooligans hired by the development company. Soon enough, the hooligans decided to set fire to the building, burning the couple to death. A vice-head of the company has been arrested.

The site has now been boarded up on all sides. One old and decrepit building with its windows taken out still stands in the courtyard, and the foundations for the new construction are already being put down. Things move on quickly. Within a matter of months, some new office or apartment block will be there.

At the event organized by the Shanghai government news office on Tuesday, we were taken to see two sites in the Pudong and Baoshan districts of the city. We were shown new apartment complexes being built to house the citizens displaced by various new construction projects, including ones associated with the Shanghai Expo. We were told that house prices would be fixed within the broad range of the compensation payments, that amenities would be better, transport more convenient, and conditions generally more salubrious than the cold and crowded old flats. And this, as far as it went, was all probably true.

But since the whole event seemed to have been designed to reassure journalists about Shanghai's notoriously unsound real estate industry, it seemed logical to bring up the case on Urumqi Road. And thus, an official with Shanghai's Real Estate Management Bureau told us that the incident was an exception, and involved an unscrupulous private company. With government involvement, these problems would not happen.

However, according to information we have received from elsewhere, the company involved is actually owned by the government of the city's Xuhui district. So what gives?

The recent policy document issued by the Shanghai government to strengthen the management of what is referred to as 'demolition and relocation' work, stresses that the issues relate to the 'sustainable and healthy development of the economy and society of the whole city' and 'the improvement of the living conditions of the city's residents'. It said that 'criminal penalties' would be imposed on those construction companies found to be using unscrupulous tactics to force residents out of their homes.

Beijing has issued similar regulations this week, with the specific aim of obviating what it describes as 'barbaric relocation and demolition'. More fines will be imposed on offending companies, with the aim of preventing the sort of unsavoury incident that occurred to one Beijing resident in 2003. The resident, surnamed Su, went to work one day, only to return home to find that his house had suddenly been demolished.

Mr. Su's story is a familiar one. His house was previously a dormitory for engineers, but was transferred to him in July 2000. However, over the course of 2003, most of the other buildings in the area had been demolished. On September 14 last year, he went to work, returned the next day and found that his house had gone too, replaced by a pile of rubble. All his furniture had been destroyed, and only a double bed and a few domestic appliances remained. He immediately called the police. The real estate development company involved, Qingyuan, refused to admit that they had done it. 'If they have the guts to knock down my house, why don't they have the guts to own up?' he said.

Real estate is, of course, one of the biggest earners in China today. With the right friends in the local construction bureau, you can make millions blowing up the national housing bubble still further, but if you want to raze a tenement to the ground and replace it with a range of expensive luxury villas, you must first get rid of the old residents. With so much at stake, many developers have quickly abandoned all their scruples.

But we are not just talking about the lure of rising property prices in urban centres. The Daily Telegraph's Richard Spencer reported earlier this week that the new SAIC/Rover plant to be built in China requires the relocation of hundreds of peasants, many of whom have been arrested for protesting against the plan to the government in Beijing. The peasants at the proposed site of the plant in Yizheng are apparently refusing to move.

We all know by now about the relocation problems associated with hydropower, particularly at the Three Gorges. Peasants have been shifted about to find the room for petrochemical complexes, coal mines, steel mills and thousands of other industrial facilities. Worst still, the authorities have even been known to approve the relocation of peasants to make way for golf courses.

According to the 2005 Global Corruption Report, released this week by Transparency International, construction is at the heart of China's problems with corruption. With the government in charge of the tendering process, bribes are frequently paid and regulations subsequently ignored. In the cities, there are 'opportunities for officials to misappropriate the property in their charge', and many householders are forced to move out to make way for construction projects, including what has become known as 'image projects' designed to bolster the professional record and reputation of the officials responsible.

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