Private holdings to get legal protection
Beijing: After 14 years in the drafting and seven rounds of readings, a landmark property rights bill that gives private and public property equal protection under law was passed on Friday by China's Parliament, the National People's Congress (NPC). NPC delegates also approved a new corporate tax law that abolishes preferential rates for foreign companies.
The property bill had proved contentious, drawing sharp criticism from Left-leaning thinkers who argued that it would only widen inequalities by hastening the process of privatisation. Such criticism, in fact, forced the draft law off the NPC's agenda last year.
But despite unusually fierce opposition, the bill was passed by legislators this time around, with 2,799 delegates voting in its favour, 52 members opposing it and a further 37 abstaining from voting.
The new law, which is due to come into effect on October 1 this year, stipulates, "the property of the state, the collective and the individual is protected by law, and no units or individuals may infringe upon it."
The property law is a reflection of the Government's recognition of the increasingly important role the private sector plays in China's economy. The private sector has grown to account for 65 per cent of the country's Gross Domestic Product (GDP) and up to 70 per cent of its tax revenues. The law also bolsters the rights of the rising middle class, which has in recent years, pushed China's urban home ownership rate to more than 80 per cent.
Although the bill has undoubted symbolic significance, its critics and supporters are united in their belief that the real test will lie in the manner in which the law is implemented. China already has several laws governing property rights but the country's poor track record in the implementation of those laws is admitted even by the Government.
The tax law that was also passed on Friday unifies the tax rate for foreign-funded companies with those of domestic enterprises at 25 per cent. The new law thus ends an era in which China used low taxes in special investment zones to attract billions of dollars in foreign investment, a strategy that helped facilitate its transformation into one of the largest economies of the world.
The move, which will take effect from January next year, is expected to help China in its goal of weaning its economy away from an overly export-driven model of growth.