How to Convince Entrepreneurs to Trust the Government? / Sheng Hong

Note: From the end of 2018 to the present, we have been listening to the declaration of “protecting private entrepreneurs”, but the incidents of private entrepreneurs being infringed repeatedly, until the Dawu incident finally reached a peak. If a government claims to protect people’s security and property rights without catching robbers, “protection” is an empty talk. If we do not take strong measures against the local administrative agencies that violate the Constitution and violate laws, the document of “protecting private entrepreneurs” will be a blank paper. Reissue the article written in 2018.

The developments between the publication of an essay about “private enterprises leaving the party” by a Mr. Wu Xiaoping on September 12th and the address made by Mr. Xi Jinping emphasizing the importance of private enterprises are dubbed by some people as “exhilarating 50 days for the private sector.” To be fair, this is no exaggerating, nor is it normal. How come a common commentator, Mr. Wu Xiaoping, with no official background, could start such a fuss that only the General Secretary of CCP could later pacify? Right after Mr. Xi’s address, the People’s Daily published an article, claiming that the address “gave private entrepreneurs an assurance”, which was heavily ridiculed online. Some say the assurance did not seem to last long, some say it bordered with “I have a bridge to sell you,” some even dug up decades of People’s Daily propaganda and showed that similar assurances had been given out to people for so long. There are some scholars who commented that the expression of “one of our own”, referring to the intimate relationship between the government and the private entrepreneurs, sent a startling signal to cause private entrepreneurs uneasy, because an equal contractual relationship can only be created between those who are “our very own,” and those who are not. Comments like this ensued. Why the fuss?

Confucius said, “At first, my way with men was to hear their words, and give them credit for their conduct. Now my way is to hear their words, and look at their conduct. It is from Yu that I have learned to make this change.” This might just be the real mentality development of private entrepreneurs’ dealing with government policies. In fact, it is written in the Chinese Constitution that “private property is protected”, and “non-state economy is protected”. Party congresses in recent years also wrote in their rout esolutions to “encourage, support, and guide non-state economy in its development with unremitting efforts.” Judging from the last few decades, we have gotten accustomed to various policies, documents, and minutes of addresses from the government to pacify and support private enterprises. Such instances include the old and new editions of the policy documents entitled “36 Suggestions Regarding Non-State Economy” in the times of former President Hu Jintao and former Premier Wen Jiabao, that is the “Some Suggestions on Encouraging and Supporting Non-State Economy by the State Council”. This policy was issued in 2005, and it included several articles on “improve private property protection institution”, “solidify the principle of equal entry and fair treatment”, and “enhancing fiscal and credit and loans to support non-state economy”, etc.. In principle, they were in line with President Xi’s address.

However, before this policy, there were two well-known cases in 2004 where private enterprises’ property rights were violated and suppressed. One was the case of Tieben Company. In this case, the company was sued for investing in and acquiring land in an unlawful way, and its president Dai Guofang was taken into custory, later tried on criminal charges for “purchasing forged special invoices for value-added tax” and sentenced for 5 years. Inn fact, the investment of a private enterprise would be its own economic freedom that needs no one else to approve; besides, the acquired land was firstly approved by the local government, and if there should be any fallout, it should be the government to take accountability. Another case is the oil field case in Northern Shaanxi. In 2003, some local government in this region abruptly nationalized hundreds of oil wells that were formerly operated by private entities, and compensated them by 20% of their investment value. Faced by the mass protests of the investors, the local government abused its public power and sued them on the charge of “crime of picking quarrels and provoking troubles”. After some investors were thrown behind bars, some of the lawyers on their behalf were also detained for “unlawfully disturbing social order” charges. This act by the local government was no different than that of marauders.

Both these cases were different violation of the private property rights of private enterprises, and they both took place around the time when the policy “36 Suggestions Regarding Non-State Economy” were issued. If the promise of “improving private property rights protection” was kept, even if such cases took place, mistakes would have been corrected. The public litigation against Dai Guofang, though not directly related to the project, caused the project to be canceled. The company lost a fortune on the equipment purchased for this project, and the private property rights were harmed instead of protected by the government. Investors in Northern Shaanxi also found them losing big fortune at last. Similarly, their loss was not only due to the inactiveness of the government to protect their property rights, but also due to the violation of property rights by the government. Forget about “enhancing equal entry and fair treatment”, these two cases were straightforward institutional ownership discrimination. By the time the Tieben Company canceled the project, their state owned competitors, such as Baoji Steel and Wuhan Steel, declared their new big scale investment. And the cause for the oil well disruption was easy, the local government wanted to nationalize local energy business. In hindsight, it was not from the policy document but from these two very peculiar cases that private entrepreneurs learned their lessons in the most realistic and terrifying way.

Years later, in 2010, the State Council came up with the new edition of this policy, the key change was the specification in market entry, such as encouraging private enterprises to enter basic infrastructure industries including telecommunication services, power generation, gas, and transportation; public utility including water supply, gas supply, heating supply and waste management; and social enterprises such as healthcare and education. However, in the same time, another case involving Kechiley Investment, an energy investment firm, in Shaanxi Province. This was exactly the area where the State Council meant to encourage private enterprises to enter with the new policy. The case started when the state-owned enterprises tore the contract with Kechiley on the ground that the “the contract was not in line with the relevant policy in the minute of the Shaanxi Provincial Government meetings.” However, the real reason was that the state-owned enterprise found a millions worth volume coal mine reserve in the exploration period and wanted to pocket the profit alone. In 2011, when the Higher People’s Court of the province reopened the case and nullified the contract, Kechiley’s registration license was revoked by the administrative authorities and its legal representative Mr. Zhao Faqi was arrested.

Another major legal case was the case of Zeng Chengjie. Zeng Chengjie along with a real estate developer in Hunan signed a contract with a local government to invest and construct three public stadium and buildings. They also raised public funds when encouraged by the local government. However, when financial policy changed and financial crisis hit, the local government and its officials were the first to leave the party, leaving the private entrepreneur to take the blame. Zeng Chengjie was sentenced to death and his company was sold at a low price to a state-owned enterprise when Zeng’s company was able to pay off the debt and had the will to do so. In this case, Zeng Chengjie lost not only his property rights, but also his life, needless to say there’s anything to do with market entry. Which sent a clearer signal, then, the new policy or Zeng Chengjie’s death sentence? Actually, around 2010, there is another much bigger and more influential event, that was the “Chongqing Crashing Crashing Black Crime”. The black crimes mainly were related to private enterprises, and 13 people were sentenced to death and executed eventually. After Bo Xilai, then Chongqing governor, was taken down on multiple charges, no review or distinction were made on these cases. Li Zhuang, famous lawyer, pointed out that about RMB 100 billion worth of assets was confiscated by the Chongqing Police, yet only around RMB930 million were turned over to the state coffer.

In 2016, the Party Central Committee and the State Council issued yet another policy, Suggestions on Improving the Protection of Private Property Rights Institution and Protecting Private Property by Law, to give another boost when it comes to protecting property, and proposed five principles such as “equal protection”, “comprehensive protection”, “protection by law”, and “mutual participation”. The intention was good, and the words were convincing. A section of this policy entitled “improving the government accountability promise mechanism” emphasized that “for situations where the contract was broken by the government and enterprises’ and citizens’ property rights were violated, compensation, complaint and relief mechanism should be improved, and complaint and relief channels should be established.” However, after this policy was issued, incidents involving violating the property rights of private enterprises went pandemic. For example, party chapters were required to be set up in private enterprises. By the end of 2016, over 68% non-state enterprises set up party chapters. This did not only increase of cost for the enterprises, but also allowed political organizational principles to interfere with the corporate governance structure, which would cause insecurity for private enterprises. By the end of 2017, the act of evicting migrant workers and non-permanent residents and removing rooftop billboards by the Beijing municipal government without noticing people beforehand have caused great damage to private property rights. The victims of these acts were not compensated. And they could not even find the so-called “relief channels”, rendering the policy from the Party Central Committee of piece of scrap.

When Mr. Xi sat down with some private entrepreneurs, he promised to “protect the security of their persons and properties”, and “create an equal competition environment that facilitates the development of private enterprises with enough market room in the areas of market approval and entry, licensing, operations, bidding, and military-civil conversion of industries”, while giving his word to “further cut taxes”. However, almost at the same time, what we saw were another two cases: one concerned the confiscation of eight residential buildings built by Dawu Group, a well-known local conglomerate in Hebei Province, by Xushui District Land and Resources Bureau on the ground of not having the permit before construction; and the other concerned the revocation of the registration license of Beijing Unirule Consulting Co., Ltd, a company of Unirule Institute of Economics, by Beijing Haidian Administration Bureau for Industry and Commerce on the ground of organizing educational training without permit. The first case was a direct violation of the property rights of private enterprises, and the second case was a straightforward refusal to President Xi’s promise in terms of market entry and approval.

It seems that the policy documents and addresses by the decision makers are in contradiction with what we saw in real life. Are these decision makers not sincere or genuine? I don’t think so. In fact, the decision makers know very well that the private enterprises are an indispensable pillar of the Chinese economy and a key source or wealth. As President Xi emphasized, the non-state economy “contributed over 50% of tax revenue, over 60% of GDP, over 70% of technological innovation achievements, over 80% of jobs in urban and rural areas, and over 90% of enterprise entities.” In addition, from the incremental perspective, private enterprises contributed over 90% of the GDP increased margin, and over 100% of new jobs(why over 100%? Because the private enterprises also supplement the jobs lost by state-owned enterprises when they lay workers off.) The decision makers are also aware that the efficiency and innovation capacity of private enterprises are way higher than their state-owned counterparts, and most of state-owned enterprises rely on the development of private enterprises. That is because most of the state-owned enterprises are concentrated in upstream basic industries, such as finance, telecommunication, power, railway, and oil, and only when the downstream industries develop well, will they be able to cut their share of the profit, and they have the monopoly to do so.

However, on the other hand, the decision makers are the direct beneficiary of the tax revenue increases, and the high level executives and administrative officials are, in essence, the same group of people who could trade their positions in times of need. Therefore, the government officials don’t find it reasonable to either constrain the fiscal expenses, or break the monopoly of state-owned enterprises. They would not constrain the abuse of public power, either. In a fairly long period of time, doing so has not produced any telling negative results. The reason lies in the comparison before and after the reform and opening-up. The government took it as a baseline that in the planned economy period, Chinese people were poor, and so was the government, and the tax rate was, therefore, lower. However, with the market economy flourishing and wealth pouring in, and without proper limit of the government power, macro tax rate was raised constantly and administrative monopolies were set up along the way. Those who violate the property rights of private enterprises were also allowed to get away with it. That is why the decision makers know the importance of private enterprise and can not resist the temptation to exploit them anyway.

In a rather long time, protection of property rights does not go against limiting the public power. That is because, the tax rate is raised gradually, and from a very low leve. In the process, private enterprises felt it was still bearable, though their profit margin was dwindling. It was not a serious problem. At first, the violations of private property rights were not so concentrated. People were mistaken to think that they were just separate peculiar cases. However, when the tax rate rose to a certain level, those private enterprises that are not doing so well would feel the pressure first and complain about the tax burden. And abusing the unlimited public power to exploit private business and take their private property goes pandemic and in larger volumes. This explains why private entrepreneurs feel that the tax burden is too heavy and their private property rights are not protected properly. For decision makers, there is the conflict between protecting property rights and letting loose public powers.

As a result, when entrepreneurs begin to worry about their property rights, they don’t invest anymore. Some of them even begin moving overseas for their own good. The accumulated result would, then, influence the macro economic state. As for the first half of 2016, growth of private capital investment witnessed a consecutive decrease to 2.1% in July, 2016, which sent very serious signal to the decision makers. It is fair to say that the Suggestions on Improving the Protection of Private Property Rights Institution and Protecting Private Property by Law was issued, to some extent, to address this issue. The address by President Xi this time also has a lot to do with the current bleak economic situation. What we see is that mastic financial losses are witnessed by private enterprises, and most of their net asset return rate is lower than the sum of risk-free interest rate and reasonable risk profit margin rate. The Chinese economy is apparently taking a downturn, and there is the external pressure from the ongoing trade war with the US. Therefore, what we can see is the utilitarian purpose of the central government in issuing policies that seemed to have the best interest of the private enterprises, while what they really care about is the short term effect, instead of sticking to the principles they set out in those policies. As a response, private entrepreneurs could only go so far and think that these Suggestions were just for the short term relief for the government, instead of for their interest.

At an expert meeting with the National Development and Reform Committee in 2016 on Suggestions on Improving the Protection of Private Property Rights Institution and Protecting Private Property by Law, I emphasized along with some other experts that policy documents would have far less impact than cases. Ever since then, the central government did try to review some cases. Some of the well known cases include the Kechiley case where the company won the lawsuit eventually; the Wu Ying case review resulted in reduction of the defendant’s sentence; the Zhao Shoushuai case review acquitted the defendant innocent; and it goes on and on with the Gu Chujun case and the Mu Qizhong case. Recently, Mr. Liu He, the Vice Premier, stressed that “one act is louder than a dozen programs.” On November 12th, the supreme court issued a Notice on Creating a Good Legal Environment for Entrepreneurship and Innovation for Entrepreneurs(Court[2018]No.1), reemphasizing the execution of the spirit of the above mentioned policies in the judicial practices. This, apparently, is a major act that aims to make people hear and see, though it still has a utilitarian hue for the short term goal, it signified an institutional change. On the one hand, such an act reminds people of policy movement, or campaign, that does not last long or mean what it says; on the other hand, once demonstrated in the judicial system, cases would be amplified to showcase principles as examples, which could have seminal influences.

However, this is not enough to reassure private entrepreneurs. More importantly, reviewing and redressing some cases are not enough. There has to be institutional assurance that such cases would never occur again. The Notice issued by the supreme court sounds like it was targeting certain people, instead of applying to everyone in the form of written articles in the Constitution or laws. It is definitely not a normal institutional that is to be followed and practiced in due process by judicial bodies. And the phrase “redressing wrong cases” is innately contradictory. If it is known to be a wrong case where justice is not done, then it is a deliberate act to make it a wrong case by the court. From the statistical perspective, it is to admit that the current judicial system is problematic, and the problem lies in the failure to comply with the due process of law. “Redressing” is an administrative goal, and in the process, we can be sure that further ignorance of due process of law will be witnessed. And doing so might inflict new wrong cases. What’s really reassuring is stable expectation for the institution. When one believes that by following the Constitution and the law in due process of law while resisting the interference of administrative entities, still one could get a roughly expected result, then he can be assured.

Then, what is such an institution that matches the stable expectation of private entrepreneurs? Such an institution is one that could limit and counter balance the abuse of public power. “Protecting property rights” is not done when it is said, but is done when a series of institutional structures are set up and a series of operations are undertaken. These operations include complaint, warning, application, litigation, judgement, execution and constrain. In summary, 1) people have the right to complain and express their opinions, a right that is protected by Article 35 of the Constitution; 2) the government administrative entities are limited by the institution, that is when the government interferes improperly, such error can be corrected, and the personnel should be held accountable; and 3) an independent judicial system that is not interfered by the party or the government, and personnel of this system are expected to be committed to handling cases in a just manner.

Allow me to elaborate. Firstly, without the right to complain and express their opinions, people would not even know whether the rights of entrepreneurs are being violated. Therefore, this is the first and foremost right. In hindsight, the right to complain by entrepreneurs has been severely suppressed in recent years. Many cases where property, even life, was jeopardized did not get expressed and discussed publicly. For example, in the Zeng Chengjie case, he was sentenced to death in 2013 and executed in 2015. During this two-year period, no discussion was in the public discourse. According to the assistant of Mr. Zeng’s lawyer, she almost visited all the websites, newspapers, magazines and other public media Chanels in over a year only to be told that there was paramount pressure to cover negative stories or that the superiors would not allow the coverage of this case. In comparison, the Wu Ying case was taken to the media since the beginning. Unirule Institute of Economics also held seminars to discuss the case. And Wu Ying’s sentence was great reduced, from death to life imprisonment. After Zeng Chengjie was executed, Unirule also held meetings which were twice interrupted and changed the venue for that matter. Some experts were even coerced not to attend the meeting. Therefore, the first institutional signal would not be received by entrepreneurs if Article 35 of the Chinese Constitution is not fully implemented.

In addition to the meetings on the two cases, Unirule Institute of Economics also held other seminars on cases related to entrepreneurs, such as cases of Sun Dawu and Kechiley. It is fair to say that Unirule Institute of Economics is one of the few private organizations in China that spoke out for private enterprises. We have also set up a China Entrepreneur Research Centre that publishes Index of the Survival and Development Environment for Private Enterprises every year and organizes seminars on the same topic. In the end of 2016, Unirule Institute of Economics published a Report on the Tax Burden of Chinese Private Enterprises and the Tax Reform that undertook surveys and meetings with over 100 entrepreneurs and 113 valid questionnaires in 4 provinces and key cities. This report found that the tax burden for Chinese private enterprises was too heavy, nearing the “Death Tax Rate”. However, such a finding was immediately suppressed. What’s more serious, Beijing Unirule Consulting Co., Ltd., a company of Unirule Institute of Economics, was revoked of its registration license the same time when Mr. Xi made his address. The existence of this company sent a significant institutional signal. If this company cannot survive, what other reassurance for “one of our own” would ever work?

A second institutional signal is the effective constraint on government administrative departments. One simple and key constraint is that all of these departments should be abided by the Constitution and laws. Article 11 of the Chinese Constitution stipulates that “The state protects the lawful rights and interests of the non-public sectors of the economy, including individual and private sectors of the economy. ” All the administrative departments are but public organs established under the Constitution and should only have the mandate to serve the citizens’ constitutional rights(including non-state property rights). Therefore, one of the most important principles for them to follow is that property rights precedes administrative power. When I see that the Xushui District Land and Resources Bureau believed it had the power to confiscate the private property of a private enterprise, I know this bureau has no understanding of the Constitution and no respect for private property rights. This is not a peculiar case, it is pandemic in mainland China. Otherwise, there would not have been the mass eviction of the nonpermanent residents from Beijing, or the coercive removal or rooftop billboards. Up till today, we are still seeing many administrative departments violating property rights relentlessly without due respect for such rights. Even when such violations are called off, no one was held accountable. Therefore, there is a need for an example incident where the violation by administrative departments is punished.

A third institutional signal is judicial independence. That is the constitutional principle. Article 131 of the Chinese Constitution stipulates that “The people’s procuratorates exercise procuratorial power independently, in accordance with the provisions of law, and not subject to interference by any administrative organ, public organization or individual.” One key indicator is whether private enterprises (and of course all citizens) could get judicial services. Nowadays, one the most widely used tool to interfere judicial independence is to demand the court “not to hear” the litigation raised by private enterprises against the administrative departments. For example, when Dawu Group, a company in Hebei Province, tried to sue the local government administrative departments for removing its billboards, the local court “refused to hear the case”. Apparently, “protecting of property rights” is a widely needed public service which cannot be done by some promise of the political leaders but by the nationwide judicial system. If a court refuse to take a well-founded litigation, there is no measure of relief for the security of property rights of private enterprises. Under such a judicial system, “protecting of property rights” is no more than empty words. Besides, there is a question of whether there will be a just trial even if the court accepts the case. Is it possible to have a just trial with direct and powerful interference from the administration? Apparently not. The due process of law is the first to take the impact.

For instance, in Chongqing’s “Crashing Crashing Black Crime” there was even ridiculous scenes where the consignor report on their lawyers. In Li Zhuang’s trial, a famous lawyer, eight witnesses were prevented from attending the trial. In the second instance of the Wang Chengzhong case in Liaoyuan Intermediate People’s Court, the judge were colleagues of the defendants’ and yet still involved in the trial. In addition to being directly involved in the trial and pressuring the witnesses, what we also see that is commonly practiced is pressuring the non-governmental subjects, such as pressuring the lawyers hired by private enterprises. This indicates that the government departments consider the judicial system their own tool instead of a mechanism that generates justice. In general, Chinese judicial system cannot fully implement the judicial independence principle of the Constitution, and understandably is not trusted by people, especially private entrepreneurs. Hence, in order to change people’s perception of this system, a series of example events should be undertaken, such as 1) punishing the courts that refuse to take well-founded cases; 2) punishing the administrative personnel that pressure lawyers or witnesses; and 3) punishing courts that are not following the due process of law, etc.. It is not hard to find such cases. What’s needed is resolve.

As long as such institutional signals are sent and institutional reforms are undertaken full heartedly, with or without reassurance, people will find themselves reassured. Even though the conventional short term utilitarian goals are being met, the effect of reassurances decreases the more it is used, till such measures become invalid. therefore, even for the purpose of the present situation, the ruling authorities should adopt institutional changes that has a long term perspective. In the meantime, the authorities should also adopt a long term strategy, instead of being trapped with the short term tactics. A shift from focusing on the interest of the authorities’ own to a focus on the interest of everyone is needed. Even though it feels like a change under pressing situations, it is about time that a transcending mentality was adopted. What we see now, be it suppression of expression, indulgence of administrative departments, or distortion of the judicial system, are a mentality of games, that is dealing with problems from the win-or-lose point of view. However, in fact, those who win in this one game will eventually lose in repetitive games. To explain, one would make more misjudgment and mistakes if he suppresses others’ complaints and criticism; one would not gain assets but evidence of crimes when he abuses administrative power to take over other people’s property; the direct interference on judicial independence is likely to lead to injustice to himself in the end. Therefore, a fair institution is the best institution for the ruling authorities as well as for everyone else.

What we see in China today is a perfect demonstration of how the market(private property) is supplemented by rule of law(limit on public power) in principle and in practice. This relation was discovered by Mancur Olson. In an article “Dictatorship, Democracy, and Development”, he wrote “the conditions that are needed to have the individual rights needed for maximum economic development are exactly the same conditions that are needed to have a lasting democracy. Obviously, a democracy is not viable if individuals, including the leading rivals of the administration in power, lack the rights to free speech and to security for their property and contracts or if the rule of law is not followed even when it calls for the current administration to leave office. Thus the same court system, independent judiciary, and respect for law and individual rights that are needed for a lasting democracy are also required for security of property and contract rights.” That is to say the market economy implies the principle of rule of law that constrains the public power. Besides, there is no room for maneuver between protection of private property rights and not limiting public powers. To address the problems we are faced with today, we need a long term strategy.

Confucius once said “I would rather walk my life than talk my life.” Institutions are not abstract. Institutions emerge from the interaction among people. That explains why institutional changes would be accompanied by specific actions and the institutional signals that come with them. We also should believe that people are not significantly smarter than others. If we are to play another game of pacifying and pretending to be pacified, we are merely wasting precious time. In the various specific actions, judicial reform seems to be the most important. Because the judicial institution is one that showcases to the public the just rules of conduct by judicial cases, instead of one that supervises everyone and interferes with their affairs every minute. The latter cannot be implemented, because it cannot decide who is suppose to supervise whom. The just judgement of a case benefits the authorities more than a judgement that favors the authorities(such as local governments), because it wins the authorities credibility and integrity. In this light, in the dire situation where private enterprises are not doing well and Manny private entrepreneurs are losing confidence in the economy, it is only right to turn the table by implementing constitutional rights, judicial independence, and limiting administrative powers as a start for further reforms.

Translated by Mr. MA Junjie, This essay was first published by FT Chinese on December 5th, 2018:

Rights are Established by Defending / Sheng Hong

Yesterday (January 18, 2021) two major events occurred in the history of protecting Constitution and resisting demolition. One is Yang Yusheng, an owner of Xiangtang and a professor at the China University of Political Science and Law. After his house was cut off of water, electricity, and gas by illegal demolishers, and normal living facilities were destroyed. After 38 days in a cold house and a difficult environment, he chosed to evacuate. The illegal forced demolishers played the “Volunteer Army Song” to celebrate their “victory” when he evacuated. This nakedly vented their despicable and nasty psychology, used the financial resources and police power temporarily entrusted to them by the abused citizens to destroyed the homes of these bare-handed entrusters, and showed off  this asymmetrical coward “success” . They also want to get rid of the guilt sense in their minds, with the longing for being appreciated by their superiors. They are naturally the rats that Professor Yang despised extremely. Professor Yang proved to people his determination to protect the Constitution and rights by enduring the unbearable suffering in the world. His calm evacuation was grandly seen off by the owners of Xiangtang. Soon after he left, the illegal forcible demolishers destroyed his homeyard, but their own conscience had been destroyed before then.

Another major incident was that Sichuan Normal University professor Tuo Jiguang committed suicide by jumping off the building because his house was illegally demolished and he had nowhere to complain.  Some people suspect that if only because of the two houses, he would not commit suicide, there must be other reasons.  In fact, the harm caused by illegal demolitions is not only the loss of houses or property, but also the flagrant infringement of citizens’ rights, which in turn tramples on their rights to fair justice and free expression, which insulted to their personal dignity, deeply damaging their psychology.  I once said in an article, “If our rights are violated, we cannot pretend to be dignified.”  Professor Tuo chose to commit suicide because he was rudely rejected when he sought legal relief.  What’s more serious is that he himself was studying law, and he was powerless, so he said to his wife, “Neither we study journalism nor law can save ourselves.”  This is a desperate statement to justice and freedom of expression. He used his death to issue a final protest against the administrative agency that violated his rights.

These two events once again sounded the alarm to the society and the authorities of illegal demolitions.  If the administrative department of the government regards its administrative purpose as higher than the constitutional and moral purpose, “complete the task” by means of infringement of citizens’ rights, and in order to eliminate citizens’ resistance and illegally deprive citizens of their rights to use the judicial system and freedom of expression. What kind of social disaster and loss of life will they bring if they have no means of resistance?  This kind of human tragedy should end.  I said in this article that “rights are established by defending.”  Professor Yang has made his own contribution to the protection of the constitution and rights by enduring hardship.  Although we do not approve of protecting the constitution at the cost of death, we understand Professor Tuo’s actions. He sacrificed to rebuild the country’s property rights system.  One day the solid property rights system will reappear in the land of China, and we must not forget their struggles and efforts.  (January 19, 2021)

On June 27, 2020, I saw SOS for help from two places, one from Shanshuizui community and the other from Wayao Village. Both said that there would be up to a thousand of police and employed demolition personnel to besiege the community and carry out illegal demolition.

Shanshuizui community is located in Yesanpo, Laishui County, Hebei Province, with Juma River in front and Ruyi Peak in the back, with pleasant scenery. This is a villa area with complete legal procedures. Its opening sale of 2012 was a proud project of the local government at that time. However, on April 21, 2020, the Management Committee of Yesanpo scenic area suddenly posted a notice on demolition violation, claiming that the residential buildings in Shanshuizui community were “illegal buildings” and ordered the owners to demolish them within three days. In the face of doubt, the local government responded with “it was legal at that time, but it is not in line with the plan now”, and its ignorance of the rule of law made it to be laughed nationwide. The owners rushed back to fight against illegal demolition. They created the public WeChat account of Shanshui Speaking, published rights protection articles, and held an oath to “defend the Constitution and protect the homes”. They were in a standoff with the local administration for two months. During this period, the government unilaterally proposed the compensation scheme and induced the owner to sign. But we don’t know the specific arrangement of the compensation plan, nor have we heard of any negotiation.

Wayao is the name of a village in Changping District of Beijing. The villa area of Wayao Village is composed of several communities on the mountain south of Wayao Village, including Authors’ village, Shanzuo courtyard, Guanyun, Russian style garden and Presburg. It is said that there are more than 1800 households in total. Wayao villa group was first developed with the theme of “Wayao Cultural Industry Creative Park”. It is a key project launched by Changping District Government in 2003. There were dozens of writers and artists in the earliest Authors’ village. Wayao Village has attracted more than 1000 senior intellectuals, most of whom are university professors, writers, actors, doctors, and financial circles, political and legal circles. They have put in more than 3 billion yuan to settle down in Wayao Village with their savings or even the money from selling downtown houses. These villas are jointly built by Wayao Village and developers, and sold in the form of franchise members’ right to use them. In 2012, the court ruled that the villa in Wayao was illegal, and the owners refused to accept it. Some people filed an administrative lawsuit, but there was no information afterward. On June 15, 2020, some houses in the community were pasted with “forced demolition notice”, which limited the owners to move out and demolish them within 7 days.

Sure enough, on the second day of SOS, on June 28, 2020, Laishui county government launched an attack on Shanshuizui community. According to the Shanshui Speaking, “at 6 o’clock in the morning, the Laishui county government led more than 1000 staff members and more than 1000 special policemen forcibly entered Shanshuizui community. Four people have been arrested and many people’s mobile phones have been robbed. Two owners fainted. An old man had a heart attack. The number of injured is still unclear. If somebody’s voice of opposition is louder, he or she would be captured out What’s more, someone even stepped on one of the female owners and (June 28, 2020) in order to force the residents and cover up the illegal behavior of the demolishers, they cut off water, power and power in advance. In order to facilitate access from the riverway beside the residential area, the demolishers also destroyed the dam and let the water run out (Shanshui Speaking, June 27, 2020). After June 28, many owners lost contact, and Shanshuizui’s WeChat public account, “Shanshui Speaking”, was also “voluntarily cancelled”.

In the early morning of June 29, 2020, information and videos I got showed in Changping, Beijing, police and demolition workers attacked Wayao Village again. Five police cars led the way, followed by hired demolition workers pushing into the residents’ lines. The owners fought hard to defend their homes. During the attack, the demolishers used hot pepper water and tear gas to drive away the anti-demolition owners. A woman was knocked down and trampled, some residents were injured, and some residents fainted in the tense confrontation. More than a dozen owners are said to have been kidnapped, including Cao Bisong, a physicist at Tsinghua University. In this process, the forcible demolition also took the means of cutting off the network. Police and employed demolition personnel finally captured the villa area of Wayao, and quickly illegally demolished dozens of houses, and continued to block the villa area. On July 2, power was cut off in Wayao villa area, and on July 7, many houses were pasted with “notice on demolition within a time limit” issued by Changping court.

Of course, from the perspective of legal procedures, there are still some differences between Wayao villa area and Shanshuizui community. Laishui Yesanpo Scenic Area Management Committee’s “Notice of demolition within a time limit” on April 21 is only an administrative penalty. The owners have the right of administrative reconsideration and administrative litigation, and the effective period of administrative litigation is to October 20. Therefore, this forced demolition is obviously in violation of the Administrative Compulsory Law. In 2012, Changping District Court has ruled that some villa areas in Wayao are “illegal buildings”. Because the owners didn’t receive the written judgment, their legal response is somewhat scattered, resulting in this forced demolition in the name of the court, and court vehicles and police were deployed. However, the two forcibly demolitions did not give fair compensation to the third party in good faith, so there was no legality of the forcibly demolitions on the whole (detailed later). The most serious violation of the two evictions is the public use of up to 1000 police officers to intervene in the demolition. The police was originally set up to protect citizens’ constitutional rights. To use the police for forced demolition is to use it for the purpose opposite to the constitutional purpose, that is, to abuse the police force. What’s more, it also violates the State Council’s ban on “using public security police to participate in forced land acquisition and demolition” (General Office of the State Council, 2010).

The second serious violation is the use of financial funds to hire a large number of demolition personnel to act as thugs. Since forced demolition is illegal, employing personnel to participate in forced demolition is an illegal contract, and the acts of these demolishing personnel are also illegal. The financial revenue comes from the tax payment of citizens, including those whose houses have been forcibly demolished. It is intended to be used for the government to fulfill its constitutional obligations, rather than for other aspects, especially for the forced demolition in violation of the Constitution and the law. The forced demolition by employing personnel also violates the Budget Law and exceeds the scope of financial funds. The two forced demolition incidents employed hundreds even thousands of demolition personnel. It is said that tens of millions of Yuan were spent in the illegal demolition of Changping tile kiln. While deterring residents from defending their homes, they are also challenging the Constitution and the laws.

The third noteworthy point is that in addition to the previous illegal acts of water and power failure, the two forced demolition incidents also increased illegal acts such as shielding mobile phones, spraying hot pepper water, throwing tear gas, and damaging dams. The act of shielding mobile phones first violates the freedom of communication and expression protected by the constitution, which makes mobile phone users unable to transmit information for help to the outside at the time of crisis. At the same time, it covers up the illegal acts of the local government, and also violates the “crime of damaging public telecommunications facilities” in the criminal law. Only when the police are authorized to spray hot pepper water and throw tear gas can they be implemented cautiously in the public sphere. The hired demolition personnel are not the police, but the private sector personnel, so they have no right to use such “weapons”. What’s more, they were used in the invasion of Wayao community, and they had already entered the private territory of the owners of the community, which became an illegal act of attacking others. According to Article 114 of the criminal law, “the penalty is not less than three years but not more than ten years.” In a word, the two forced demolition incidents, especially the demolition of Laishui County, took more illegal actions and reached the peak in the history of forced demolition.

Why do they dare to commit so many illegal acts? Is there a “Imperial Sword” given by the superior administrative department, to make them not be afraid of breaking the law? I thought so before. However, I recently saw a record on the Internet about the “national call conference on rectifying illegal villas”. I don’t know whether it is true or not. If it is true, it will not be so. Although, I hold a negative attitude towards the premise of this “conference call”. The theme of the whole conference, that is, to “rectify illegal villas” is a problematic administrative goal. Villa as a form of residence should not be “rectified”. Especially in China, the word “villa” is quite ambiguous. In the eyes of many populists, the demolition of a villa is at least not sympathetic. However, the Chinese “villa” refers to the city people’s houses in the countryside, which is a kind of ordinary residence, corresponding to the house in English. Especially in today’s city land prices soaring and private cars have become popular, to buy “houses” in the suburbs is a way to avoid high house prices, not to inconvenience life, but also to live decent form. Therefore, the implication of “renovating villas” to crack down on powerful or corrupt officials obviously conceals the fact that most villa owners are middle class or even lower income people.

The main reason for rectifying villas is to “protect the environment”. But the house in a society has higher value and significance, it contains personality right and property right, including family affection and cultural value. Although sometimes it may conflict with “environment”, the solution is not to rectify or demolish, but to develop new solutions or methods under the premise of protecting the right of residence, with the goal of ensuring the harmony between human settlements and the environment. Of course, what’s more important is that if the construction of villas in the past is really in conflict with the environment, new rules can be used to limit the increment, instead of demolishing the houses that people have lived in for many years. The latter is obviously, not to say the worst, the clumsiest solution. In this “record of the call conference”, a notice issued by the State Council in 2004 is also used as the standard to judge whether the construction is “in violation of the law”. This is to place the administrative departments’ documents above the laws, and it is also a problem that the administrative officials cannot distinguish between the government documents and the law. However, there are also some statements in this “record of the call conference” that are worth affirming and can be used to reduce the destructiveness of the current illegal demolition campaign.

For example, the first is the definition of “illegal villa” by Mr. Lu Hao and Mr. Han Zheng. If the definitions of Lu Hao and Han Zheng are put together, the scope is very narrow. One is “great damage to the ecological environment”; the other is “intertwined with substantive and procedural violations”, and it was built after 2004. According to the definition of “illegal villas”, both Wayao villa area and Shanshuizui community are not qualified. According to legal theory, if we want to prove that these two places have “great damage to the ecological environment”, Laishui county and Changping district government should bear the burden of proof.

According to data, the area where Wayao villa is located was originally a mountain wasteland, and its geological structure is andesitic porphyrite and marl. If the status quo is better than the original mountain wasteland, there is no “destruction”. We did not find the “2012 Changzhi Zi No. 25 administrative ruling” mentioned in the Changping court’s “deadline demolition notice” and the relevant “Beijing land and land (Chang) sub Bureau punishment Zi (2011) No. 58 punishment letter”. We don’t know how Wayao villa district “destroyed” the ecological environment. However, judging from the fact that the two documents were not made public, the government at least failed to fulfill the burden of proof for the determination of “illegal construction” in Wayao villa area. Only in the reply letter from Changping District natural resources and Planning Bureau to Wayao residents, we can see that it implies that Wayao Village is classified as “ecological control area” in the “Beijing urban master plan (2016-2035)”. However, in the previous planning, it was “conditional construction land”. This kind of planning change not only violates the provisions of the Urban and Rural Planning Law to solicit experts and public opinions (Article 26), but also classifies the areas with a large number of residential buildings into “ecological control areas”, which obviously contains malice. What’s more, “Law does not rule the past.”

There are mountains and water in Yesanpo scenic area where Shanshuizui community is located. Therefore, Shanshuizui gets its name and the owners buy their houses. Human settlement and environment are so mutual promotion and complement each other. In the “notice on demolition within a time limit” on April 21, the Management Committee of Yesanpo did not cite any legal provisions or any illegal evidence. It just arbitrarily said that “the illegal villas located in Xiazhuang village and Duya village, Sanpo Town, Laishui County will be demolished.” It doesn’t even have the form of legitimacy. And we did not see any words related to “Shanshuizui” on the website of Laishui county government and its Bureau of natural resources and planning, that is to say, it did not provide evidence, how to identify “great damage to the ecological environment”?

And then look at “substantive illegality and procedural illegality interweave”. The so-called “procedural illegality” refers to the failure to comply with the legal procedures for building and buying and selling houses. In the market economy, the commercial housing is obtained through purchase, and its legal procedure is to sign a contract with the seller, fulfill the contractual obligations, pay the house price, and the other party delivers the house, which should be regarded as fulfilling the legal procedure. If the house seller needs to purchase relevant resources, such as land, when building a house, it should also perform due process of law, pay money to the land seller, and ensure that the purchased land is not prohibited by law from building houses. In this sense, the owners of Wayao villa and Shanshui Zui community have obviously fulfilled the legal procedures. Of course, the “procedural violations” referred to in the “record of call conference” focus more on the legal procedures of land use, but we also do not see the evidence from the government. And if there is any defect, it is not the responsibility of the owner, but the builder-seller. As for Shanshuizui community, it is the so-called “complete five certificates”, and there is no “procedural violation”.

The so-called “substantive violation” means that the illegal act has caused bad results. Here, it overlaps with “great damage to the ecological environment”. The fact is, after the formation and development of Wayao villa area, the owners have improved the local ecological environment through hard work and introduction of Technology (all franchisees of Wayao cultural and creative industry cluster area, 2018). According to the previous discussion, since Laishui county government and Changping District government did not provide evidence, and there was no cross examination process, it was impossible to determine that Shanshuizui community and Wayao villa district were “substantially illegal”. It should also be seen here that Lu Hao’s definition is that if there are both “procedural violations” and “substantive violations”, that is, “procedural violations” and “great damage to the ecological environment,” then the premise of remediation, even the most severe means of remediation, “forced demolition” would be formed. If there is only “substantial violation” or “great damage to the ecological environment”, but there is no “procedural violation”, the actor should not be punished, but remedial measures should be considered. For example, the drainage of buildings with risk of water pollution should be rectified to ensure that the water source will not be polluted. If the appearance of the building causes damage to the scenic area, the appearance of the building can also be changed. If there is a real need to change the location of the building, since the original location is agreed by the government, the government should also compensate another similar location of land.

If it is only a “procedural violation” but not a “substantive violation”, that is, there is no “great damage to the ecological environment”, which means that the construction of the building has not caused damage to the parties, neighbors and society, and should not be “rectified” or even “forcibly demolished”. Lu Hao also stressed that “for procedural violations, it should be classified according to the approval procedures obtained and the actual situation. ” If a building brings good results, it is in line with the natural law. The so-called “legal procedure” that does not conform to the natural law is only a kind of artificial law, which is inevitably lower than the natural law. At this time, in order to maintain the current legal system, we should warn and criticize procedural violations, and instruct them to complete legal procedures, but there is no reason to “rectify” or “forcibly dismantle”. In a longer period of time, unreasonable “legal procedures” can also be reformed. As in the whole period of reform and opening up, reform measures often do not conform to the legal procedures at that time. However, due to the good results of reform and opening up, the “procedural violations” during the reform will not be investigated, but the Constitution and laws may be gradually changed in the process of legislation and amendment in the future.

Only when “substantive illegal” and “procedural illegal” exist at the same time, can “illegal construction” be identified and “rectification” be considered, but it is not necessary to “forcibly demolish”. Because the house is a valuable property, and constitutes an important condition for the survival of residents, it should not be demolished if it cannot be demolished. Even if it is necessary to demolish, the original residents should be settled before demolition. In addition to forced demolitions, there are many punitive measures and remedial measures. On this basis, using Han Zheng’s definition, that is, the villas after the “State Council notice” in 2004, the number of illegal villas that need to be renovated is less than 1 / 10000, and only a few cases should be forced to demolish.

The second place that can be used for reference in the record of “national call conference on rectifying illegal villas” is that Lu Hao emphasizes “protecting their litigation rights.” “They” are the owners threatened to demolish. Therefore, even if some local governments improperly expand the scope of the so-called “illegal villas” for the sake of political performance competition and profit seeking, there are also legal constraints to reduce or even completely eliminate forced demolition. The owners of Shanshui drunk were only told to be forced to demolish on April 21. According to the administrative compulsory law, they have the right to carry out administrative reconsideration and administrative litigation, and the effective period of administrative litigation is six months, that is, before October 20, if they file an administrative lawsuit, they can not forcibly demolish. Obviously, the Laishui county government of Hebei Province invaded Shanshuizui community on June 28, far from reaching the validity period of administrative litigation, so it should not demolish by force. In 2012, the Changping court found that the Wayao villa was illegal and was to be demolished. It was only issued to the building seller of the villa, Wayao Village, without notifying the owners with significant interests. As a result, they had no way or difficulty in effective legal response and could also be regarded as incomplete legal process. Therefore, on June 29, Changping District dispatched police and demolition personnel to attack Wayao Village It’s illegal.

Lu Hao also pointed out that “the responsibility of the government should not be simply shifted to market entities and individuals, and the compensation should be reasonable.” If we follow this principle, even if the local government has broken through the identification of “illegal villas” and bypassed the due process of legal relief of the parties concerned, they should compensate the bona fide third party before forcibly demolishing. The so-called “bona fide third party” means that there is no fault in the transaction process, and only believes in good faith that the products sold by the seller are legal. However, if there are legal problems with the other party’s products, such as a stolen car, when the original owner recovers it, it should not damage the bona fide third party, the cash buyer. However, in almost all cases of illegal demolition, the result is to damage the buyer of the house. If it is really a “illegal villa”, the builder is usually the cooperation between the local village and the developer, and the owner is only the buyer. If the government declares the building “illegal”, it is illegal for the builder and the seller to obtain or use the land. When selling, there are many local government officials to help promotion, and the owners of the houses could not know those houses are illegal when purchasing, so they are absolutely bona fide third party.

Therefore, even if it is “illegal construction”, according to the legal principle, after the third party in good faith “obtains the ownership of the movable or real estate, the original owner shall not ask the transferee to return the property, but can only ask the transferor (the possessor) to compensate for the loss.” Apart from various legal constraints, the legal power of a government agency to demolish a house can be broken down into three steps. The first is to declare the ownership of the house illegal; the second is to transfer the property right to its own name; the third is to demolish it. This is equivalent to government agencies becoming “original owners”. However, according to the protection of the bona fide third party, the original owner can only ask the transferor (seller) to compensate for the loss. Since “return” is not required, the property right of the owner’s house is still legal. Only by placing the building under its own property rights can the government demolish the building itself, that is, the government can not demolish the house owned by others. It can only be demolished after the original builder and the seller “compensate for the loss” to a bona fide third party and transfer the property right of the house to its own name.

The so-called “compensation for losses” does not only mean “compensation according to market value”, because the market price of a commodity is formed on the margin, that is, the person who offers the lowest price within the balanced quantity of supply and demand. Therefore, anyone who does not want to sell his house under the existing market price will definitely value his house higher than the market price. In particular, the residences that have lived and operated for many years have condensed family affection, cherished good memories, precipitated courtyard ingenuity, and cultivated community culture. Therefore, it is several times, dozens of times higher than the market price. As US Judge Posner said, “due to the cost of demolition and the emotional or special needs for his property, the value given to his property by the owner is often greater than the market price If the government expropriates their property and only gives them market price compensation, these people will feel hurt. ” Therefore, “fair market price is fair compensation” only when it is for “public use” (quoted from Zhang Libin, 2007) if not, the compensation should be higher than the market price.

However, in reality, the seller of Wayao villas, Changping District, is unable or unwilling to compensate. The grass-roots government that declared the Wayao villas “illegal construction” was the government department that sold the villas at the time of the sale. Wayao villa district was identified as “cultural and creative industry cluster area” by Changping District in 2009. The district government provided supporting funds for the infrastructure of Liucun town government. Jin Shudong, the then district chief, personally helped to promote the villa district. Even if the seller and the government are not integrated body, they are inextricably linked. Therefore, even if we assume that the Wayao villas are “illegal buildings”, the “original owner” (i.e. the government) claims compensation from the illegal “transferor” (i.e. the seller), that is, the Liucun town government itself “claims compensation” to itself, which has nothing to do with the owners of the Wayao villas. They are protected by law as bona fide third parties. If the government wants to demolish the Wayao villas, it must make full compensation in advance. It is illegal to make compensation even on the day after the demolition, because it damages a third party in good faith. However, in Changping District Court, the sellers and purchasers of villas are called “executed person” and “illegal construction user” respectively in the notice of demolition within the time limit, which deliberately obliterates the relationship between the “Transferor” and the “bona fide third party”. Is it not using the control of judicial power to get rid of the compensation liability of Changping Liucun town (transferor) to the owner (bona fide third party) ?

The problem is that since according to Lu Hao’s definition of “illegal villas”, the “litigation rights” of the parties are “protected” and their legitimate rights and interests are protected, and “reasonable compensation should be made for them”, and then the final decision on whether to forcibly demolish the villas should be made according to the actual situation, few villas could be demolished. Recently, Hanbi building in Qingdao, Aoshan international in Changping, Yunju in Banshan, Fairy Tale Hill House, wooden house in Oubei, Laishui Shanshuizui, Wayao villa district, etc., which have been illegally demolished recently, will hardly be regarded as “illegal construction”, and would not be forced to demolish before the judicial process is completed, nor before the owner as a goodwill third party has not been fully compensated. But in fact, they were illegally demolished. Why? Let’s note that in the record of the “national call conference on illegal building of villas”, Lu Hao said, “we should leave policy space for the local government” and “we can’t allow one-size-fits-all kind.” This seems to be a good principle. This is that the local government has the discretion in “rectifying illegal villas” and can have a lot of space to tradeoff. This is a good thing. We can start from the long-term interests of the region, ease the impact of the above instructions, protect the interests of local people and stabilize the development of the local economy in the context of the bleak economy and epidemic situation. However, the results we see are quite different. Why is this?

This is because a matter, good or bad, as long as it is a task of the government, it must be regarded as a political achievement of the local government. Even if it is not publicly assessed, it is also a factor to be taken into consideration when officials are promoted. Therefore, local governments will try their best to achieve “political achievements”, and what they are good at is to make use of the government’s advantageous functions and resources, which is mainly the advantage in violence. The most extreme violence is forced demolition. Although it does not show direct violence in many cases, either persuasion or threat will more or less borrow violence as a backing to have an impact. When the party is coerced by the government, the result will be worse than the voluntary behavior. For example, Wang Anshi of the Northern Song Dynasty carried out the Young Crops Law, which was intended to help the poor when they have no money. However, once this was regarded as a political achievement of local officials, they forced the poor to borrow money by any means, and the rich guaranteed them. In the end, the poor couldn’t pay back the money, and the rich people guaranteeing went bankrupt. If local officials consider not only “political achievements”, but also “politics”, the word “worse” should be added because it not only means to gain recognition with “achievements”, but also to “show loyalty” with “excessive implementation” to gain additional opportunities.

In today’s Shandong Province, the situation of farmers under “merging villages and Living together” movement is getting worse and the people are in dire straits. Some people even say that it is “good intention to do bad things”. As mentioned above, even “good intentions” are bound to “do bad things. “Because the urbanization of the countryside should be carried out in the form of market, that is, the individual can calculate according to their cost and income, and decide whether to transfer their family residence to other places. As long as the houses in the countryside can be freely traded, as long as the people can move and settle freely, the process will show the result if the time is long enough, just as the urbanization in Chinese mainland has been in the forty years since the reform and opening up. Just as the government has no ability to formulate a production plan better than the market allocation, it also has no ability to find the optimal allocation of land in space. Therefore, it is a kind of “Fatal Conceit” for government officials to promote merging villages and living together. What’s more, Shandong officials are not so pure. Some analysts say that their purpose is to obtain the income from the sale of construction land quota (He Xuefeng, 2020). In fact, if the land released can sell the construction land quota, the beneficiaries should not be the government, but the land owner farmers. In fact, it is illegal for the government to do so, and it is a snatch of farmers’ land interests.

“Performance competition” is obviously an important motivation. In the “policy space” of the local government, there may be a great impetus to lean towards the direction of evil rather than the direction of good. Taking 1 / 10000 as a reasonable ratio, the Beijing municipal government publicly declared that “more than 4000 hectares of land is planned to be demolished and vacated” (Beijing Development and Reform Commission, 2020), that is, 40 square kilometers, about 2.8% of Beijing’s built-up area of 1485 square kilometers. It should be noted that this is only a one-year forced demolition plan. From 2013 to 2019, about 190 square kilometers have been demolished (Geng Nuo, 2017; Beijing Evening News, 2018; Zhang Nan, Zhang Ao, 2019). Therefore, on the whole, the planned area of demolishing illegal buildings in Beijing is about 15.5% of the total area of the built-up area. Making a “plan” of the demolished building area in advance violates the definition of “illegal villas” by Lu and Han, which is 1550 times of the estimated value of 1 / 10000. Moreover, Professor Sun Liping pointed out that the mayor of a district in Beijing complained to him that his task in one year was to demolish a million square meters of houses. “No matter where it is demolished, as long as one million square meters are demolished, the district chief will continue to be in his office, otherwise, let another person who will be able to demolish the one million square meters to be the district chief.” This clearly shows that the “policy space” given by the central government to the local government has become a vicious space for the “performance competition” with the “demolition area” as the quantitative index.

Of course, there are more direct and explicit interest motives than the Shandong government wants to sell construction land indicators for self-interest. For example, in 2017, a large number of houses were forcibly demolished in Xihongmen Town, Daxing, Beijing, which caused a shocking event of “driving out foreign residents” at home and abroad. The direct reason is the urban consolidation and the “reduced development” of Beijing. In fact, the town government takes advantage of this to directly seize the land of rural collective. At that time, Xihongmen Town was the only pilot project of “rural collective land entering the market” in Beijing, and “rural collective” was mainly the concept of collective organization with village or natural village as the unit. However, because Xihongmen Town was close to the urban area of Beijing, the land market value was extremely high, which caused the salivation of the town government. In the northern suburbs of Beijing, there is also a clear motive for land grabbing. For example, the market value of land in Beiqijia area, Changping District, Beijing is very high, but in 2020, the government will only pay compensation for land acquisition at 200000 yuan per mu. In the same town, the price of a piece of land listed for sale in 2018 is as high as 37.77 million yuan per mu (Beijing natural resources and Planning Commission, 2018), with a price difference of more than 100 times. Changping District has a special position in Beijing, because it is close to Chaoyang District and Haidian District. It is the tradition of Beijing that the upper wind and upper water are the good direction. The suburbanization extends naturally to Changping District. As a result, Changping’s population more than doubled from 2000 to 2017, and land prices also increased rapidly. Therefore, the land price of many residential areas built 10-20 years ago is not what it used to be. This may be one of the reasons why Changping District has the most illegal demolition and the worst means in Beijing.

The question is, according to the principles of “protecting litigation rights” and “protecting legitimate rights and interests”, there should be few forced evictions. Why are illegal evictions so rampant in places like Beijing? As long as we take a look at the tone of these administrative superiors, we can see that such a statement is a kind of unilateral self-discipline without compulsory requirements, which can only be found in the minds of local officials. If they do not have this “heart”, there will be no punishment, and the legitimate rights and interests of owners and litigation rights can not be protected. So the legal protection is greatly discounted. The reason why they say this is because, first, they should be politically correct on the surface. If there is a problem, they can use this as a shield to evade their responsibilities; second, as administrative officials, they do not want to be restricted by the Constitution and laws. If they punish local governments for breaking the law, they will recognize that the Constitution and the laws also constrains them. Third, administrative officials may also want to expand the scope of forced demolition, but they do not want to bear direct responsibility. Therefore, they connive at local officials’ violation of the law, but will not really punish their illegal acts.

Of course, since “policy space” is the discretionary space of local governments, it means that different local governments are more friendly or malicious because of their different personalities, and there will be different results. We also see that there are some places where illegal demolition is more prominent. Generally speaking, in addition to moral considerations, forced demolition is inversely proportional to wisdom. The more stupid and prone to illegal demolition, the larger the scope of forced demolition, and the worse the means of forced demolition. This is because violence is the simplest way. If happening to have public violence in hand, even a fool can use it. Because he doesn’t know how to work without violence. It takes wisdom to reconcile conflicting interests in public governance and political structures and to propose peaceful solutions. Second, the more knowledge is lacking, the more we will only see the immediate interests and ignore the long-term interests. Those local officials who try their best to demolish houses only see that catering to the current “leader’s intention” may be promoted, but they can’t see that this only highlights their tool value and will not be respected. Once there is a problem, they are more likely to be taken as scapegoats. Thirdly, such people also lack vision. They don’t know that it will be his lifetime nightmare, if he seriously damages civil rights in order to flatter leaders.

Therefore, on the one hand, we are sure that there are still some places worthy of borrowing in the “national video and telephone conference on illegal building villas” in order to curb illegal demolition. On the other hand, we should also point out that none of these places worthy of affirmation has played a role in practice. Fundamentally speaking, a government should not regard the demolition of the so-called “illegal villas” as its task, let alone hold such a meeting. If there is a “illegal villa”, only as a judicial case, the relevant local natural resources management department may file a lawsuit. As long as the government carries out a campaign on one thing, it will inevitably lead to bad results. This is because in a society, the scale and energy of the government are too large. Once it is started, it will inevitably break the equilibrium formed by the market, and the result will be bad. According to the TV series “Qingpingyue”, Emperor Renzong of Song once patronized a candied fruit shop with good intentions. As a result, the raw materials of the candied fruit shop became expensive due to other people’s competing to follow suit, leading to bankruptcy. In spite of the fact that in the campaign launched by the government, it has often been stressed that “attention should not be overdone” and that “voluntariness” should be emphasized, but it doesn’t work. At that time, there were some problems in Wang Anshi’s Young Crops Law, and the Song Dynasty repeatedly stressed that people could not be forced to borrow money, but this tendency still could not be stopped. Su Shi criticizes that “it is just an empty paper that the loan cannot be borrowed forcibly.”

The same is true in recent decades of history. In the process of agricultural collectivization in the 1950s, farmers were “voluntary” in principle, but in fact they were forced. Mo Yan’s novel “Life and Death Fatigue” vividly describes the scene. If local officials saw Mao Zedong waiting for the establishment of one million cooperatives by 1955, would they wait for farmers to “volunteer”? Therefore, if the government takes an issue as its task and says that it allows the people to “volunteer”, it is actually self-deception. After media exposure and criticism by scholars, the leaders of Shandong Province quickly came out to stop the movement and reiterated “respect for the wishes of farmers”. In fact, this is another “voluntary”. According to an entrepreneur who knows Shandong very well, he was very happy with the suspension of “merging villages and living together”. Later, “after asking other friends in Shandong, he realized that he did not stop the” dismantling the village and living together. ” (Lu, 2020) therefore, if we really want to stop this kind of government behavior of forcibly demolishing under the banner of “merging villages and living together”, the only way to stop this kind of government behavior is to completely stop the combination of villages. The government should return to its very duty to provide a safe, just and orderly institutional environment for the market to play its role.

Of course, to say “give local government policy space” also allows us to see clearly one thing, that is, the illegal demolition of specific areas is directly caused by the local government, which should bear the main legal responsibility. In fact, I only emphasized theoretically that the local government, especially the top leaders of the party and government at the district and county level, should bear legal responsibility for illegal demolition. I once stressed to Dai Binbin, Secretary of the Huairou District Committee of the Communist Party of China, “In Huairou District, if a brick is illegally demolished, and a resident is knocked off a hair by the demolisher, it must be your legal responsibility.” Now this assumption is more practical. Since the “national call conference on the illegal villas” on the one hand proposed that “in accordance with the law and regulations”, to “protect their litigation rights”, “to protect their legitimate rights and interests”, “to make reasonable compensation for those should be compensated”, on the other hand, “to give policy space to the local government”, this means that all acts of forced demolition that seriously deviate from the above-mentioned principles are committed by the local government In the “policy space”, these acts not only violate the Constitution and law, but also violate the requirements of higher administrative departments. Therefore, the top leaders in these areas should bear the legal responsibility of illegal demolition.

So, how to solve this problem? The central government puts forward an improper government goal, but it is used to putting forward unilateral constraints, suggesting that its subordinates respect the Constitution and law, while the local government ignores the Constitution and laws for the sake of political performance competition and land finance, and the central government does not punish them. The problem seems to be unsolved. Because there is no solution, there is a solution. The so-called “no solution” is the illegal forced demolition of Laishui county government and Changping District government. Now it seems that there is no institutional constraint. The so-called “solution” is that they will eventually encounter constraints, which is the resistance of the people forced to demolish. When Laishui County forced demolition team to attack Shanshuizui community, they met resistance. Some owners were injured in the resistance, some people were illegally kidnapped, and the police and other demolition teams finally rushed in. When the demolition team of Changping District attacked Wayao Village, they met with stronger resistance. The police and the employed demolitions took out chili water to spray the resisters, threw tear gas shells, the defenders used shit packs to fight back, and some sprayed into the invaders with sprayers. After a period of stalemate between the two sides, Wayao villa area was finally captured. Although the demolishers have achieved “victory” in both attacks, they not only encounter the obstruction of the owners with their bodies on the road they invade, but also the people behind the demolishers also receive a strong signal from the home defenders: This is my legal residence, this is my home, please leave!

The “victory” of the demolishers only relies on temporary advantages, that is, stealing the name of the government, abusing police force and administrative resources, 10 times the number than that of resistance, and more powerful “weapons”. But this is a team that has no fighting spirit, is too shy to show up and dare not face up to it. Through the video, we can see that at the intersection, the resisters shout “get back” to the police. A person in the shape of an official turned his back when he was scolded by the house owners, and deliberately did not let others take pictures of her face. And those who demolish people, most of them are cheated, only know how much money to give a day. Among them, a number of minors were temporarily employed by the security company, and their ID cards were withheld and no wages were paid for two months. It is said that 800 temporary personnel were recruited during the invasion of Wayao, and more than 300 people ran away after knowing the truth. All the time, the person with the greatest legal responsibility has been hiding behind the scenes.

This shows that, even with intuition, we can feel the illegality of this demolition. If we can sort it out, the illegality of these two acts of forced demolition lies in the following aspects:

1. On the identification of “illegal construction”, the two local governments have not given evidence of “great damage to the ecological environment”, even if there is, it has not been publicized on the Internet;

2. The governments of the two places have not pointed out where the owners of Shanshuizui community and Wayao villa area violate legal  procedure; punishing the citizens who are just in the procedure is equal to violating the legal procedures themselves;

3. The owners of Shanshuizui and Wayao villas, as the third party in good faith, did not get reasonable compensation;

4. Before putting up the notice of demolition within a time limit, the parties concerned were not given the “right of statement” and “the right of defense” (Article 8 of the Administrative Compulsory Law); in some villa areas of Wayao, even the “Notice of demolition within a time limit” was not posted, some houses were demolished forcibly;

5. After the parties file administrative reconsideration or administrative litigation, or before the expiration of the administrative litigation period, violate Article 44 of the Administrative Compulsory Law to forcibly demolish Shanshuizui community and Wayao villa area;

6. The use of police in forced demolition violates the provisions of the police law of the people’s Republic of China to “uphold the constitution” (Article 26), and shall not “illegally deprive or restrict the personal freedom of others, illegally search other people’s bodies, articles, residences or places” and “beat others or instigate others to beat others” (Article 22); it also violates the State Council’s “police shall not intervene in forced demolition” Prohibition;

7. Employing demolishing personnel to participate in the demolition violates the provisions of the Budget Law on the scope of financial expenditure (articles 27 and 93);

8. In the conflict with the owners, the employees of forced demolition take away some owners and deprive them of their personal freedom, which is an illegal kidnapping Act (article 239 of the criminal law);

9. The use of steel forks, hot pepper water, tear gas and other utensils by the police and the employed demolition personnel in the conflict with the owner is a serious violation of the owner and violates the “intentional injury crime” (Article 234) of the criminal law;

10. Before and during the forced demolition, the demolisher violated the administrative compulsory law and cut off water and electricity in Wayao villa area and Shanshuizui community (Article 43, paragraph 2);

11. The demolisher blocked the mobile phone and partially cut off the network, which violated the crime of damaging public telecommunication facilities (Article 124) of the Criminal Law;

12. The demolisher of Shanshuizui community also destroyed the adjacent dam, thus violating the “crime of breaking water” (Article 114) of the criminal law;

13. The demolisher blocked the residential area and restricted access, which violated the “crime of illegal detention” (article 238) of the criminal law.

14. The most important thing is that the two evictions have seriously violated the owners’ constitutional rights of personal freedom, housing rights and property rights.

In general and in a narrow sense, the forced demolition of Shanshuizui community in Laishui County and the demolition of Wayao villa area in Changping District are “abusing public power and seriously violating property rights on a large scale”. In my letter to Dai Binbin on April 3, I explained that “the abuse of public power” refers to the use of the administrative power of the government, including the resources of public violence, for acts and purposes that violate the Constitution and the laws and violate citizens’ constitutional rights.” Judging from the above-mentioned 14 articles, the two cases of forced demolition, from the determination of “illegal construction”, administrative action procedures to forced demolition, were unconstitutional and illegal, so they must be criminal acts of “abusing public power”. These behaviors obviously do not meet the requirements of “national call conference on illegal villas”, “protect their legitimate rights and interests”, “protect their litigation rights” and “make reasonable compensation for the compensation”. According to common sense, Changping District and Laishui County of the people who have legal responsibility for forced demolition should be subject to administrative punishment before legal punishment. Even if I have different opinions on the above-mentioned 14 articles, we should at least stop the demolition action, investigate these two illegal demolition incidents, and punish them according to the investigation results. Otherwise, the central government will lose its authorities and the lawlessness of local governments will not be stopped.

Since the government does not protect property rights but infringes upon them, the anti-demolition action of owners of Shanshuizui and Wayao is just, that is, self-defense. It is an act taken to stop illegal infringement in order to protect the personal, property and other rights of oneself or others from the ongoing illegal infringement (Article 20 of the criminal law). Above this is the natural law, which is everyone’s instinct and natural right to defend his own freedom, property and life. However, we can see in the video that Changping court claimed with a high pitched loudspeaker that the owners’ resistance against them was “obstructing public affairs”. Later, it was heard that the owners who were kidnapped in Wayao will be punished as “obstructing public affairs”. If the police force is used for the purpose of violating the Constitution and the law, it is obviously not “public affairs”, and to call the abuse of public power as “public affairs” is an insult to “public affairs”. In doing so, they are violating another one of the citizens’ rights for their having violated one, in an attempt to stop the victim from speaking. The reason why the two local governments can do this does not mean that they are legal, but only that they have the technical and financial ability to abuse public rights to infringe on citizens’ constitutional rights without being punished immediately, which was originally entrusted by citizens for their temporary use. It’s used against citizens, which is illegal use. This judgment will not be temporary. As long as the environment is suitable, the Constitution and laws will work.

According to the record of “national call conference on illegal villas”, this result is not expected by the central government. If it adheres to the road of legalization proposed by the Fourth Plenary Session of the 18th CPC Central Committee, and if it really wants to protect the “legitimate rights and interests” of owners and “protect their litigation rights” as they said, but there is no way to restrict them for a while, I would suggest that we should start with protecting the “litigation rights” of Shanshuizui and Wayao owners. This is not only the administrative reconsideration and administrative litigation that they refuse to accept the “illegal construction” cognizance, punishing the administrative officials and departments who interfere with the court’s acceptance; but also includes the owners’ lawsuit against any local government’s illegal behavior in the process of the two illegal demolition incidents, including those violating the Criminal Law, such as destroying public communication facilities crime, crime of illegal detention, crime of breaking dam, etc., while the object of action is the actual legal responsible person, that is, the top leaders of the party and government of these local governments, the realization of the requirements of “teleconference” will be effective soon. Because they’re tearing down houses as well as the rule of law in this country.

The real effective system is the balance between the groups of people with conflict of interest, which ultimately depends on the fight against the infringement of rights. The property right system has existed in the world for thousands of years. It is the result of the interaction between generations and generations of the people. The reform and opening-up started under the background of planned economy. It refers to the systems of the United States and other western countries, the experience of Taiwan and Hong Kong in China, and the heritage of traditional China’s property rights institution. These property rights institutions themselves are the institutional equilibrium formed by the long-term interaction of various interests. At the beginning of the reform and opening up, the rulers accepted the market system based on the property right system and regarded it as the decisive mechanism of resource allocation. In the period of planned economy, people’s original inherent rights were deprived completely, so the process of reform and opening up is characterized by “opening up” and “allowing”, which is shown as the return of civil rights. But this situation will be misunderstood as a gift from the government to citizens in the short term. Today’s officials do not remember the government’s respect for the property rights system at the beginning of the reform and opening up. They believe that the rights of unilateral “opening” and “allowing” can also be “withdrawn” and “restricted”. This actually creates a state of “no property rights”.

There are similar misunderstandings among citizens. Some people attribute the improvement of their situation under the market system to the “good policy of the party”, without thinking about what it will be like once their rights are “withdrawn” and “restricted”. When illegal evictions happen to them, they suddenly realize that the rights that are not guaranteed by the rule of law will disappear as soon as possible. And the rule of law is not only a set of constitutional and legal provisions, but also requires citizens to practice, that is, when their rights are violated, they should come forward, activate the Constitution and laws, and protect their rights. The recent action of Wayao and Shanshui Zui owners to defend their homes under the banner of the constitution will be an important time node, which marks people’s awareness that rights are not given unilaterally, but are protected. The action of the owners of Wayao and Shanshui Zui is a great action to form a more solid property right system and implement the rule of law. The sacrifices they have made for this should be praised and tear. I also hope that the people in power can realize this. If the slogan of “building a country ruled of law, a government ruled of law and a society ruled of law” is sincere, we should see that the strength of citizens to defend their rights is the necessary strength for the rule of law, and to jump out of the narrow vision of administrative officials’ interest groups. To impose fair punishment on those who violate the Constitution and illegally demolish houses will make the promise be fulfilled possible.


Beijing Evening News, “in 2018, 40 million square meters of illegal construction will be demolished in Beijing. What are the identification standards?” , February 26, 2018.

Shanshui Speaking, “SOS: emergency call for help the owners of Shanshui Zui community are still losing contact “, June 28, 2020.

Shanshui Speaking, “Green mountains and green waters”, June 27, 2020.

Beijing Development and Reform Commission, “Beijing plans to demolish and vacate more than 4000 hectares of land this year”, January 15, 2020.

Beijing natural resources and Planning Commission, “Land transfer results”: “North Yandan village, Beiqijia Town, Changping District”, December 17, 2018.

Geng Nuo, “The city’s five-year cumulative demolition of illegal buildings will exceed 100 million square meters,” Beijing Daily, February 15, 2017.

General Office of the State Council, “Emergency notice on further strict management of land acquisition and demolition, and earnestly safeguard the legitimate rights and interests of the masses” (gbdcd [2010] No. 15), May 15, 2010.

He Xuefeng, “Why is Shandong possessed to spend a huge amount of money to merge villages, demolish farmers’ houses and build communities?” China real estate strategist, May 16, 2020.

Lu Jiankun, “My investment experience in Shandong”, wechat official name “Shangdong people in Shanghai”, June 27, 2020.

“A letter to leaders of Beijing Municipal Party committee and municipal government on the governance and improvement of Wayao cultural and creative industry cluster zone in Changping District”, December 18, 2018.

Zhang Libin, “expropriation and compensation of private property by the government in American Law”, Chinese lawyer, August 2007.

Zhang Nan, Zhang Ao, “interpretation of the report of the two sessions of the people’s Congress of Beijing in 2019: breaking down the annual target of 4000 hectares of land for demolishing and vacating”, Beijing Evening News, January 14, 2019.

July 8, 2020, Forget-talk Hill Study

Worship the Rule of Constitution, Invincible in the World / Sheng Hong

Recently, I read several articles on Sino US relation and found that the authors use the word “China” in different senses. “China” refers to a historical organic whole composed of generations of Chinese, or refers to the present China, or to the Chinese government, or even to some special interest groups in China. The term “Chinese culture” is related to China as a “historical organic whole”, but it is often used to refer to the cultural characteristics of current China, even the political characteristics of China. When it comes to the game between China and the United States, some people often can’t tell what is win or loss. In fact, ” game” has two levels, one is within a rule, and the other is between rules. People often fail to see that the victory of a game within a rule may be a failure in the game between rules. From the perspective of time, it can also be divided into one game and long-term multiple games. The victory of one game may lead to the failure of multiple repeated games. If these kinds of confusion overlap, some people will regard the current benefits obtained by an interest group violating the rules of just conduct as the victory of Chinese culture. In this paper, we discuss China as a historical organic whole, take the basic value of Chinese cultural tradition as China’s cultural characteristics, and look at the win and loss from the perspective of game between rules and multiple games.

Mencius said that benevolence is invincible (仁者无敌). “Benevolence” is kindness. Its bottom line is the balance of rights among people, and it is also a peaceful way to solve conflicts. “Benevolent” refers to those who implement benevolent governance. The benevolent governance is the rule of benevolence or the institutions of good, which can also be referred to as “rule of constitution” in this paper. Following the word “rule of law,” “rule of constitution” is a more fundamental part of the rule of law. The “invincible” has two meanings. One is “no rival”, which is the opponent in the competition, invincible means “fighting all over the world without rival; the other is” no enemy “, the antonym of friend, that is, the persons whom cannot exist on the earth same time. The rival is the competitor, both sides may have the enhancement in the competition; between the enemies is this ebb and that flow, the enemy’s development is our threat. In the language of the Communist Party of China, “rival” means “contradiction among the people”; and “enemy” means “contradiction between the enemy and ourselves”. Mencius said “invincible” contains these two meanings, more importantly, “no enemy”. But sometimes, “no rival” and “no enemy” are complementary and interdependent. Benevolence is invincible, that is, those who practice benevolent governance have no enemies; for the rule of benevolence is only to solve conflicts peacefully, not to create enemies. Peaceful solutions will also minimize coercion, resulting in a society that is prosperous and creative because of a high degree of freedom, then may have no rival.

The highest level of a country’s development is not to dominate the world, but there is no rival nor enemy. This is not achieved by making concessions to the conflicting parties, but by following the rule of constitution, which can be simply summarized as market system, rule of law and freedom of expression. Market system can be condensed into competition on property rights. Under the premise of protecting property rights, the result of competition may be to create new wealth; only when property rights are safe can we make long-term investment and focus on innovation. Under the rule of property rights, resources can be allocated effectively, production enthusiasm can be stimulated, and innovation ability can be fully stimulated. Personal income increases, wealth pours out, and the country becomes prosperous. To ensure the market rule is implementation of the rule of law. The essence of the rule of law is to restrict the abuse of power by institutions or individuals who hold public power. Otherwise, they will seize property rights, monopolize the market and destroy the rule of the competition on property rights. Among the various constitutional rights to be protected by the rule of law, the most important one is freedom of expression, because other constitutional rights can not be protected and implemented without it. If it is not freely expressed, even if the constitutional rights are violated, they will not be known by the society, and there will be no way to protect them. Therefore, freedom of expression is a simple way to judge whether there is the rule of constitution or not.

The above point of view has been proved by the facts of the Chinese mainland in the past seventy years. According to the world bank, the per capita GDP of the Chinese mainland fell to the second in the world during the planned economy period, and it was 307 US dollars in 1978 (unchanged price in 2010), while in the more than 30 years after the reform and opening up, it returned to second in the world and 9.52 trillion US dollars in 2016 (unchanged price in 2010). The institutional meaning of reform and opening up is marketization and legalization. The concentrated embodiment of the interaction between the two is property rights. Property rights are the basis of market competition and protected by rule of law. After reform and opening up, a competitive market with property rights has taken shape; the Constitution and legal texts have been improved to protect citizens’ constitutional rights; and there is more and more space for freedom of expression. Only in this way has China’s miracle been created. As a giant country, China, based on its huge economic aggregate, devotes a certain proportion of its national wealth to national defense, and gradually approaches the state of “no rival”.

In addition to efficiency and justice, an important difference between planned economy and market economy lies in its degree of compulsion. The plan will inevitably deviate from the allocation of resources determined by the market, so it can only force people to obey. The market economy allows people to freely decide their production and consumption behaviors. Freedom means equal rights and peaceful settlement of differences, while coercion means inequality among people, which is actually the settlement of disputes by violence. The Chinese mainland’s planned economy was built on the basis of cracking down market behavior in the criminal name, “illegal transactions”. According to records, in 1964, Hu Yaobang, then Secretary of the Shaanxi provincial Party committee, reviewed more than 9500 “speculators” (Yan Ruping, 2003), and the overall number is conceivable. Even in 1982, more than 30000 people were convicted of “speculation and profiteering” (Han Yong, 2009); it was not until 2009 that the crime name was finally abolished. Therefore, in the market economy, there is competition between people, while in the planned economy, people are actually hostile. To push this logic of planned economy abroad is to export coercion and hostility. For example, in order to maintain the monopoly of oil interest groups, the government must control the import and export of petroleum products. Behind this is coercion. It is also equivalent to regarding those  in the world who want to break the monopoly as enemies.

The rule of law, in addition to providing fair adjudication and encouraging people to comply with the rules of due conduct, can also eliminate hostility. Before the establishment of the rule of law, conflicts between people are more likely to use private violence, and there will be revenges generations of generations. Before the reform and opening up, the law was regarded as a tool of class rule. In the extreme period of the Cultural Revolution, the apparent judicial procedures were not observed, and thousands of people were convicted or even shot without due process of law. According to the statistics of the CPC Central Committee, there were about 1.728 million abnormal deaths during the Cultural Revolution, of which 135000 were sentenced to death (quoted from Yang Jisheng, 2013). The rule of law not only emphasizes the imitation of Dao and natural law by legal principles, but also emphasizes the due process of law, not for threat, revenge or emotional vent. This will make people recognize that justice is a fair mechanism in the settlement of conflicts. Therefore, although the parties to the conflict may disagree with the ruling, they will not continue to be enemies of each other. Although judicial decisions may sometimes have to be enforced by force, they are not to be resorted to violence. The closer a court ruling is to justice and the more it can be accepted by both parties, the less coercive force it needs to use in its implementation. The rule of law has ended the mutual retribution of resentment, which has made all people in society no longer enemies to each other. Therefore, to follow the rule of law is to follow the “non-hostile” rule, otherwise the “hostile” rule will apply.

Freedom of expression is to express one’s ideas or opinions in a nonviolent way, instead of violence or other coercive means, or to suppress others’ expression. The government is an organization authorized to use public violence. The government suppresses the freedom of expression through legislation, policy-making or direct action, which is to use violence to suppress the freedom of expression. Therefore, the first amendment of the constitution of the United States stipulates that Congress shall make law “……abridging the freedom of speech, or of the press… “. That is the restriction on this tendency of the government. Therefore, the principle of freedom of expression is a peaceful and non-hostile rule. If this rule is violated, it is tantamount to indulging the government to use public violence to suppress the expression of different opinions, which is a non-peaceful rule. In extreme times, it means bloody killing. For example, during the Cultural Revolution, countless people were punished for their words, Zhang Zhixin even was executed for her speech. Isn’t it hostile to put people with different opinions to death? If we push the violation of freedom of expression abroad, we can’t tolerate other people’s different opinions, or even criticize the suppression of free expression, and threaten to impose “sanctions” on the products of the critics to enter the domestic market, which is equivalent to suppressing the freedom of expression with public violence. Because the restriction of market entry depends on the coercive power of government departments.

To respect the rule of constitution means to follow the rules of the market, the rule of law and the principle of freedom of expression, that is, to follow the rules of the game between rivals; otherwise, it is not to follow the rules of the game between rivals, which means that the rules between enemies are applied. The application of the rules between the enemies is to carry out class struggle at home, infringe property rights and human rights with public violence, safeguard monopoly and the direct control of national resources by the government; export violent revolution internationally, restrict free trade with government power, infringe on the property rights of other countries, and even use government resources to interfere in the freedom of expression of other countries. The successful opening of the Chinese mainland after 1978, in fact, depends on the end of the planned economy in the domestic reform, and no longer the use of law as a tool for class struggle, the gradual establishment of the rule of law system, and the freedom of expression to a certain extent. Since the market economy is based on voluntary transactions between people, the rule of law ends private retaliation, and settle down disputes by peaceful means, and free expression means replacing fists with tongue, there will be no enemy. As long as we apply the constitutional rule upheld at home to the international community, we will find that there will be no enemy in the world. Market rules, the rule of law and the principle of freedom of expression can be combined with similar rules in other countries, and the rules between competitors rather than those between enemies can be applied.

Conversely, without enemies, constitutional rule can pass unimpeded. This is because the rules of competition on property rights are originally peaceful rules, and they are also rules that minimize coercion, and those of freedom. The rule of law is an effective guarantee for competition on property rights, and the only coercion it must use is the punishment for violations of rules. Freedom of expression is the main principle of maintaining the rule of law. If all countries follow the rules of competition on property rights, the rule of law and the principles of freedom of expression, they will jointly constitute a worldwide commodity market and idea market due to the nature of peace and compatibility, thereby enhancing the interests of all countries. Therefore China can enjoy a broad international trade platform and obtain huge trade dividends. That being the case, why be an enemy? For example, between China and the United States, the requirements of the United States—opening the market, removing subsidies from state-owned enterprises, protecting patents, and opening up the Internet—are consistent with China’s rule of constitution, that is, the direction of marketization and rule of law since the reform and opening up. China’s implementation of the rules of competition on property rights will benefit China and grow into a strong and peaceful country, and therefore at least a country with “few rivals in the world”; at the same time, this rule does not conflict with the rules of other countries such as the United States. How can China and the United States be enemies?

With no rivals and also no enemies, this is the way that China as a whole develops in future. Isn’t this a good thing? Why is there still a situation that undermines the rule of constitution? This is because, from the perspective of the long-term benefits of the “historical organic whole”, this is a good thing; but from a time period or a part, it may not be a good thing. From the perspective of special interest groups, such as state-owned enterprise monopoly groups or administrative abuse groups, it is not a good thing. If enjoying monopoly power in a huge market where wealth is constantly flowing out, it is obviously beneficial to monopolize interest groups; if administrative coercive means can be used to increase tax rates and infringe the property rights of citizens or enterprises, it will also be beneficial to administrative abuse groups. Therefore, we can see that as China’s reform and opening up was ending, the monopoly over oil, power, telecommunications, railway and other industries has not been broken, but has been strengthened; the macro tax rate has increased 12.9 percentage points in the 20 years from 1997 to 2017; more and more vicious cases of infringement of property rights by administrative departments through confiscation and forced demolition. When property rights are threatened and competition cannot be fair, more and more entrepreneurs are unwilling to increase investment or even continue production, and economic development will suffer serious setbacks.

The infringement of property rights by the government is an important sign, which not only shows that the market system has been subverted, but also that the rule of law is not in place, or even retrogressed. Although the Constitution and laws protect citizens’ constitutional rights in texts, the most important problem is that these texts cannot be effectively implemented. First of all, we can’t stop the illegal behavior of the administrative department in advance. For example, in recent months, the homes of tens of thousands of citizens in Beijing, Shandong and Hebei have been illegally destroyed. The Pingyao government in Shanxi has illegally confiscated more than 200 ancestral houses (Liu Jingyu, 2020), and Shantou Chaoyang Natural Resources Bureau has illegally confiscated the “Yingzhiyuan” (Xiaohui, 2020) with an investment of 1 billion yuan. What is more shocking than these bad consequences is that these local governments violate the due process of law without obstacle. The illegal demolition of Changping District and Huairou District of Beijing directly violates more than 20 legal provisions (Shenghong, 2020). The confiscation of Pingyao government in Shanxi Province is based on the invalid provincial Party Committee document issued in 1958. The confiscation procedure of Shantou Chaoyang natural resources bureau is to use a piece of A4 paper without official seal or specific provisions of the Land Management Law (see figure below). What is more heinous is that the Public Security Bureau of Cili County, Hunan Province, openly blackmailed Wuhan Yuancheng Company. After being refused, it arrested the personnel of the company and handed it to Cili procuratorate for prosecution (Lin Feng, October 3, 2020); it openly turned law enforcement and judicial institutions into tools for plundering property.

What’s worse, after the administrative department of the government violates the due process of law and infringes on the civil rights, it further violates the law and prevents citizens from using judicial services to safeguard their rights. For example, when the injured party carries out administrative reconsideration, administrative litigation or judicial action for compensation, in most cases, it encounters the situation of “not accepting”, delaying to respond, and even returning the application for reconsideration unopened (Sheng Hong, 2020); in many cases, the lawyers of the parties are threatened by the administrative department to withdraw from their contracts with parties. The administrative department also ignored the provisions of the administrative enforcement law and took illegal actions to confiscate or forcibly demolish citizens’ houses before the judicial process was completed. When some citizens are accused and their personal freedom is restricted, the law enforcement agencies can not abide by the due process of law, inform their families in time, allow lawyers to be present in time, and allow the parties to obtain bail pending trial. They are often detained for a long time and cannot avoid extorting confessions by torture and torture before trial. For example, Chu Jian, vice president of Zhejiang University, did not obtain bail in the first nine months of his detention and did not see his family members or any lawyers (quark shows, 2016). Another example is Dr. Tan Qindong, who was arrested across provinces by the company’s local police after criticizing Hongmao’s liquor on the Internet, and was tortured beyond recognition in the detention center for three months (Shi Aihua, 2018).

The most serious act of violating the rule of law and abusing public power is the violation of Article 35 – freedom of expression of the Constitution. This also creates conditions for the administrative sector to violate property rights and human rights. For example, the administrative departments strictly restrict the flow of information on the Internet, and fight against intimidating Internet users to cover up corruption and abuse of power and suppress criticism. In this way, a large number of abuse of rights cannot be disclosed, cannot cause the attention of the society and the public, and get indulgence. This kind of public opinion control is effective, from top to bottom, from official to ordinary people. Even one person who complained on the Internet that the food in the canteen of county hospital is not good was detained by the administration; the Goubuli general store in Wangfujing threatened to call the police for the poor evaluation on the Internet. This suppression of freedom of expression has contributed to the massive violations of citizens’ housing and property rights. For example, after the illegal capture of Wayao villa area in Changping, Beijing on June 28, several dozen residents were illegally detained and have not been released so far. Some people said that one of the charges was being interviewed by the media. Even the words of the residents of Wayao miss their homes have been deleted quickly online. As a result of this severe repression of freedom of expression, residents fear to speak out, and the administration is more reckless. About 1800 homes in the villa area of Wayao have been destroyed in less than two months. In recent years, many property rights of private enterprises have been violated and entrepreneurs have suffered from the injustice. But as far as I know, the seminars on private enterprises have been intervened and stopped several times.

Deviating from rule of constitution has weakened the economic strength of the Chinese mainland. For instance, the actual economic growth rates in 2018 and 2019 were below zero (flood, 2019a, 2019b); according to the data of Dacheng Enterprise Research Institute, private investment in Chinese mainland decreased by 19% in 2019 compared with that in last year, while in August 2020 it dropped by 9.9% compared with the same period last year, and the total investment volume in the whole country was reduced by 113 billion 700 million yuan (2020). This makes future economic growth lose momentum. At the same time, the application of the rules to protect monopoly and infringement of property rights to the international community increases the nature of hostility. For example, state-owned enterprises monopolize interest groups not only do not open their markets to other domestic enterprises, but also to foreign enterprises. And “not opening the market” needs to control the customs and the Internet, which needs to be realized by the government’s coercive force, which violates the competition rules of property rights. If this practice is extended to foreign countries, the relationship between countries can not be maintained on the basis of peaceful and competitive relations. Another example is that when disputes with foreigners are involved, if due process of law is not followed, it is impossible to guarantee a fair judgment on them. The threat and retaliation motive are highlighted, which also increases the hostile nature. For another example, when there are different opinions and verbal conflicts with other countries, applying pressure by means of trade restriction is actually the use of government means to solve idea problems. If the rule of constitution is broken, then there will be “rival” also “enemy”.

If we say that China’s foreign relations since the reform and opening up are based on the competition rules with property rights, special interest groups break these rules at home and treat similar foreign affairs with the same attitude, they will destroy the international competition rules on property rights. In this way, it will destroy the rule basis of China’s international relations. Since not following the rules of fair competition, China and other countries, Chinese enterprises and enterprises in other countries are not competitors, but hostile relations. It is impossible for counterpart country to apply the competition rules on property rights to China and Chinese enterprises. Because hostile relations involve coercion, military means may be used to resolve disputes internationally. At this time, military technology cannot be used as a commodity in the market and shared with adversaries; some strategic resources, such as chips or oil, cannot be traded as general commodities. Further, it is necessary to stop scientific research cooperation and exchanges on potential military uses. In fact, any basic theory, though seemingly far away from practical application, may at any time become a practical military technology, just as quantum theory was quickly used to make atomic bombs in World War II. Therefore, decoupling in scientific research is an inevitable logic between hostile countries.

In the past three decades, China’s rapid catching up in technology really depends on the sharing of international science and technology platforms and the division of labor in the world market. Only for many years, this kind of international institutional environment is a kind of non-compulsory market or academic environment, “the Supreme Master is too good to be known”. Many special interest groups believe that they can enjoy such an environment unconditionally without following its rules. This is not for China’s overall interests, but for the interests of the group. They want to bring the unfair rules formed at home to the international community. On the one hand, special interest groups hold public power, on the other hand, they refuse to withdraw from the market, so they can enjoy the efficiency and wealth flow brought by the market system, on the other hand, they can use public power to directly divide the larger share of market cake and even directly cut the property of private enterprises. The government is maintained by levying taxes on the market. To establish monopoly and infringe property rights by compulsory means is to infringe the market with resources from the market. In the world, if someone wants to get the benefits of market trading and academic exchanges, but does not follow its rules, and finally uses the benefits to break the rules, this will not be tolerated. Therefore, the restrictions imposed by the United States on foreign students and visiting scholars involved in military sensitive technology are predictable.

Once China’s sharing of international academic exchange platforms and the trading of strategic materials are restricted, China’s weakness in military science and technology will immediately be highlighted. This is because although the patent system in Chinese mainland has made great progress, the existing research system is mainly the national fund plus patent system. Patent system is mainly the technological innovation system that private enterprises rely on. Naturally, it is mainly applied technology, especially non core technology patents. State funds are mainly allocated to state-owned scientific research institutions and state-owned enterprises. But more than 90% of them are used in applied technology research, and only about 10% are used in basic theoretical research. This is the opposite of the United States. Moreover, state-owned institutions are neither fair nor efficient in allocating funds, so it is difficult to allocate funds to truly innovative people. Some data show that in 2016, only 7.4% and 2.6% of the total human resources and funds invested in R & D were invested by state-owned institutions, and only 3% of all valid patents were obtained (Sheng Hong, 2019c). Therefore, national research funds can not effectively promote the scientific research in Chinese mainland. It is a very wrong idea that the government often claims to “overtake on a curve”. Because real innovation is unpredictable, we don’t know where the “curve” is, let alone “overtaking”. The allocation of funds to a certain field in advance will often miss target. Therefore, this scientific research system is bound to lack of innovation.

While an academic platform that can constantly emerge scientific talents and theoretical innovation needs various material conditions, but the most important condition is the rule of freedom of expression. This is because any theoretical innovation may lurk in any possible direction, and any unintentional expression may inspire people’s brain. If the freedom of expression is limited, the freedom of thought is also restricted. If you don’t have free thinking, you will lose a lot of opportunities for innovation. The emergence of a new subversive theory is not one which can be planned out, but stands out from countless random reveries. Therefore, a society, which has more than 6000 sensitive words on the Internet to be limited, requires university professors to learn political reports and believes that scientific research can be developed in the form of military decrees, is doomed to be unable to take a comprehensive lead in scientific research. Therefore, under the background of reform and opening up, following the same rules of competition with other countries, China is able to share the knowledge of international academic platform, and acquire sophisticated technology products through international trade. It is impossible to surpass the leading countries by violating this rule. Becoming an enemy by suppressing the freedom of expression, one can’t be the rival of others. If we want to be a society of theoretical innovation, we must start from the freedom of expression.

What’s worse, because special interest groups disguise their own interests as national interests, they form hostile relations with other countries in the name of the country. At the same time, they regard this situation as hostility of other countries to China and shift the responsibility to others, which will further deteriorate the relations between countries and let the whole country and its people bear the consequences. For example, to regard other people’s criticism of the violation of market rules and the rule of law by special interest groups as criticism or even insult to China. Not only in words, but also using the purchasing power of the domestic market to coerce criticism. This is to push the practice of suppressing and expressing freedom at home to the international community. They can neither calmly think about the positive meaning of these criticisms, but also further more serious mistakes are revealed. In covering up the violation of market rules by restricting the freedom of expression, in general, the former is a more serious mistake than the latter. In order to cover up a mistake, a bigger one is exposed. If a human society cannot have multiple voices and criticize each other, the society cannot function effectively. To impose this mistake on the world is the deepest infringement on the world. Therefore, the practice of special interest groups to suppress international criticism can only further deteriorate the international image of the Chinese mainland and become more hostile to relations with other countries.

At this point, if there is no reflecting on how to get to this point, situation may move towards the direction of real hostility. In fact, there are already people clamoring for war, even nuclear war, at home. For example, Mr. Hu Xijin and Mr. Zhao Shengye. In fact, the mistake in their formulation is not how crazy their ideas are, but that they fail to explain “why we should fight a nuclear war”. From the previous analysis, if China follows the rule of benevolence, is it necessary for China to become the enemy of other countries? Should other countries regard Chinese mainland as an enemy? Isn’t it the saddest thing for mankind that they still don’t know what they fight for after a bloody war? For territory? There is no territorial dispute between China and the United States. For the benefit of trade? China and the United States have reached a phased agreement. For ideology? China’s constitutional texts and the official documents of the Communist Party of China on marketization and legalization affirm market rules, rule of law and freedom of expression, which are not very different from the mainstream culture of the United States. For the criticism of the Chinese government by the US government and the public? These are all criticisms to those deviate from the market rules, the rule of law rules or the principle of freedom of expression. If we think that it is long-term interests of China as a historic whole to respect rule of constitution, should these criticisms not be regarded as external criticisms to safeguard the long-term interests of China as a whole?

Now many people are thinking about what to do after the Sino US decoupling or the outbreak of war. This is the wrong place to put their energy. A pressing matter of the moment is the return of the Chinese mainland to the rule of constitution. To be specific, it is to return to the track of reform and opening up for more than 30 years, which is the way forward towards the urle of constitution. Only by following the rules of the game between the rivals can we avoid hostility. In 2013 and 2014, the third and fourth plenary sessions of the 18th CPC Central Committee emphasized marketization and legalization respectively. Although there are still many problems, the general direction is right. The problem in recent years is that, in practice, the administrative departments of the government do not respect the rule of the constitution, but on the contrary, abuse public power to safeguard monopoly, infringe on property rights and human rights, and suppress freedom of expression. However, in term of the text,  it is not only violated of the Constitution and laws, betrayed of reform and opening up, but also abandoned the promise of the rule of law and market opening by the Chinese Communist Party. Returning to the road of reform and opening up, it can not only be declare orally, nor can deceive the world with some seemingly reform forms. The touchstone of whether to return to reform and opening up is to infringe or protect property rights. As mentioned above, property right is a comprehensive symbol of marketization and legalization, and also the institutional heritage of more than 30 years of reform and opening up. If property rights cannot be protected, the declaration of “reform” is false. Only by protecting property rights can the Authorities really return to the rules of the game between the rivals, but not the enemy; there will be no need to discuss decoupling or war.

Of course, there is competition between rivals. Competitors will not only compete according to the rules of the market, but also compete by means outside the market. For example, by legal means. However, as long as the rule of law is applied, it can be an rival in the judicial process. The law is judged by a neutral third party and implemented by authorized public violence, so as to avoid direct violent conflict between the two sides. The two sides can also express their dissatisfaction and criticism to the other party through language, so as to win the support of public opinion and finally have a substantial impact. However, government resources must not be used to monopolize and manipulate public opinion and distort information. Under this constitutional framework, disputes between peoples and between countries can be resolved peacefully. Of course, competitors may not abide by the rules and attack each other by hostile means. This requires not only verbal criticism, but also the principle of reciprocity, that is, to prevent and punish it by the same means, so as to bring it back to the rule of constitution. At this time, no rival can guarantee no enemy. In the long run, the rule of benevolence can maintain that there are neither enemies nor rivals. Therefore, the competition between rivals is ultimately manifested in the competition on rules, that is, to see who is closer to the rule of constitution, more able to maintain the competition on property rights, fair justice and freedom of expression. If China wants to surpass the United States, it cannot deviate from the rule of constitution, but be closer to the rule of constitution than the United States.

To win the game by violating the rule of constitution, in a larger context, is a failure, because the violation of constitutional law fundamentally damages the overall interests of a country. For example, if using the method of detaining the other party’s personnel to “exchange” Meng Wanzhou, even if succeeded, it is also the biggest failure, which is the failure of the game between rules. The detained Canadians have neither obtained bail nor been allowed to meet their families and lawyers for a long time, which is obviously in violation of China’s own legal due process. The biggest obstacle to the implementation of the rule of law in Chinese mainland is not following the due process of law. As mentioned above, Chu Jian of Zhejiang University was detained for a long time without seeing a lawyer. Dr. Tan Qindong was tortured in the detention center because the due process of law could not be followed. If law enforcement agencies do not implement due process of law, they will inevitably use judicial and law enforcement forces for their own purposes by threatening, retaliating and emotional venting, which are not the purpose and form of law. In fact, whether to follow the due process of law is the watershed of whether to implement the rule of law or not, and also the watershed between rival or enemy. An authority that does not follow its own due process of law is not a legitimate government. If this situation is shown to other countries, it can not be regarded as a country that practices the rule of law, and therefore can not eliminate hostility. Therefore, the attempt to obtain the current convenience by violating the due process of law, even if it seems to win for a while, it also loses in the game between rules.

The rule of constitution is also a long-term stable equilibrium, so it can not be achieved by one game. For example, in international relations, an attempt to gain the current advantage by violating international agreements, or to obtain benefits that cannot be obtained by peaceful negotiations through military means is to win a one-off game, but to lose multiple games and lose the opportunity to form a stable equilibrium result. In modern society, the final settlement of disputes between countries must be reached with the consent of all countries concerned, and it cannot be achieved through war. Some people think that China can win in a war in a certain place. Even if winning, what will it do afterwards? It can only increase the hatred between countries and open up new confrontation, but cannot solve the fundamental problems. Therefore, insisting on peaceful negotiation instead of using force is an important form to win multiple games for a long time. If we firmly believe that our rights “since ancient times” are true, and if we use our wisdom to resolve conflicts, the outcome of peace negotiations may be beneficial us while both sides are happy. Even if there is no result for the time being, the continuation of the negotiation will not hinder normal exchanges with other countries and the mainstream trend of domestic development. The most important thing is that peace negotiations avoid winning a game with war and losing the chance to settle disputes by peaceful means for a long time.

We should also see clearly that the interests of monopoly interest groups, the behavior of administrative abusive groups, and even the violation of international agreements or general norms by the administrative departments are not the requirements of “China” as a historical organic whole; the criticism of them is not an offence to Chinese culture. The rule of constitution is not only a common rule in the world, but also highly compatible with Chinese culture. “Benevolent governance must start from delimiting property rights”, “benefit people for their benefiting themselves” and “the way of Yao and Shun” of taxation” is the expression of economic liberalism. Propriety is the foundation of politics, and propriety is the foundation of administration”, which emphasizes the use of etiquette as a customary law to govern the society; and the common law is also developed from the customary law; etiquette and law are the same social rules, the difference is only voluntary or compulsory implementation. The ancient maxim of “Heaven listens through the people’s ears” and “the speaker is innocent, the hearer is enough to abstain”, the admonishment spirit and the spirit of scholar bureaucrats of “Any error of the Emperor should be criticized” and “Sound to die rather than silence to live” are the principles of freedom of expression in the sensitive field of political criticism. China’s cultural tradition of international relations is not nationalism, but cosmopolitanism. This includes the mind of “one family in the world”, the pursuit of “persuading people with virtue”, the practice of “people near is happy and those far away come”, the expectation of “one who does not love killing can unify the world” and the ideal of “world civilization”. How can the Chinese cultural tradition justify the act of violating the rule of constitution and leading to hostility with other countries?

In terms of cultural form, traditional China is a state of etiquette. The first sentence of the book of rites is “don’t disrespect, think deliberately, and speak calmly.” Respect is the core of Chinese culture. Even if there is a major conflict with other countries, we should think carefully and speak stably. He Huaihong said that even if the Zhou people were worthless, there was one thing worth affirming: they were elegant. Even before wars two countries should also use the Book of Songs to fight against each other. In today’s diplomatic situation, we are puzzled about what “diplomatic language” is, and we can’t see the elegance of the state of etiquette. But we saw that their speech was vulgar but complacent, they used threats to refute criticism, used unconstitutional and unreasonable words to argue, made personal attacks from time to time. “Filial Piety” said, “respect one person to make thousands of people happy.”. In particular, disrespect and even personal attacks on the leaders of other countries will not only lose the demeanor of a great power, but also lose the wisdom of China, causing tens of millions of people to be angry. This form of “diplomacy”, which deviates from the traditional Chinese culture, pursues the external face, tries to be quick at the moment, violates the rules of benevolence, and does not hesitate to lose important diplomatic relations and friendship. Is this “Chinese”? Diplomacy originally means “non-hostile” relations, but this kind of “diplomacy” often confuses the enemy and the enemy, and takes the initiative to push the rival to the enemy. When the negotiation is frustrated or the competition fails, the other party will be regarded as the enemy; and this kind of hostility will also prompt the other party to regard itself as the enemy.

Now the administration also realizes that it cannot be decoupled from the United States. It’s not hard. As long as we return to the road of reform and opening up, this is the road to the rule of constitution. Constitutional governance has existed in the text of Constitution and laws in Chinese mainland. The Constitution stipulates that China implements a “market economy”; the Constitution says that in order to build a “country ruled by law”, that “all acts violating the Constitution and laws must be investigated”; Article 35 of the Constitution stipulates freedom of expression; and the Constitution also emphasizes that “the state protects the ownership of citizens’ legitimate income, savings, houses and other legitimate property.” The Chinese mainland has the rules of property rights, the rule of law and the principle of freedom of expression, and has been in this direction for more than thirty years since the reform and opening up. It is only in recent years that the above-mentioned phenomenon of violating the constitution has appeared. What the rulers have to do is to restrain themselves from violating the rules of benevolence, they also should no longer pretend that they have not seen the above-mentioned serious violations of the Constitution and laws, resolutely stop such acts and punish the administrative departments and local governments that carry out these acts, otherwise they will have to bear legal responsibility. One of the key points of this is to strictly abide by the due process of law, to ensure citizens’ right to boycott and resist the violation of due process of law, and to punish the administrative organs or officials who violate the due process of law.

Respecting the rule of constitution in China is the strongest “non-hostile” signal released by the Chinese mainland. It is natural that China’s rule of constitution has a smooth connection with that of the United States and other countries, and exchanges in the rules of freedom and peace. Even among competitors of other countries, some people want to call China “enemy” in order to gain advantages in competition. However, if China really implements free trade with tariff equivalence, follows due process of law when treating foreign parties, and follows the principle of freedom of expression internationally, it will break the illusion of “enemy” with practical consequences. At this time, China will not be the enemy of other countries, including the United States, but also enjoy the benefits of the world’s commodity market and ideological market, so as to approach the situation of no rival with its huge scale. However, the tradition of Chinese cosmopolitanism and the world’s pursuit of permanent peace make the ability of the invincible not to invade other countries or win in hegemony, but to maintain the realm without enemies. This is to fight against attempts to violate the Constitution by force. When market rules, rule of law rules and the principle of freedom of expression can be effectively maintained, the situation without enemies can last forever. Further improvement requires competition among countries on the basis of constitutional rule, that is, to see who can find and implement better constitutional governance and better resolve conflicts between countries by peaceful means. A constitutional China may win the competition: invincible in the world.


Dacheng Enterprise Research Institute, “the national total investment from January to August is 37883.4 billion yuan, accounting for 56.6% of the total amount of private investment”, All China Unicom of China Industrial and commercial times, September 22, 2020.

Han Yong, “A man was sentenced to 9 years for speculation, and nearly 6000 kg of agarwood was confiscated”, China News Weekly, adapted from China News Network on November 12, 2009.

Quark Show, “China’s first science and technology case: he was arrested for corruption, 800 people pleaded, hero prisoner”, Sohu, September 30, 2016.

Lin Feng, “The real version of let the bullets fly: The original intention of this case is to make some money “, Xiangjiang Rule of Law, October 3, 2020.

Liu Jingyu, “who moved my ancestral house?” Finance and Economics, August 15, 2020.

Sheng Hong, “Rule of law is the core technology”, FT Chinese, March 29, 2019 (2019c).

Sheng Hong, “How to reverse the economic downturn?” FT Chinese, January 22, 2019 (2019a).

Sheng Hong, “Why the rule of law is a ‘first-order macro policy'”, FT Chinese, December 23, 2019 (2019b).

Sheng Hong, “All of ways to evil is illegal”, Professor Sheng Hong, September 8, 2020.

Shi Aihua, “After the disaster, Tan Qindong: that place, I will not enter this life”, Beiqing Shenyi, September 27, 2018.

Yan Ruping, “Ye Shuai helps Hu Yaobang in adversity”, Yanhuang Chunqiu, 2003, issue 11.

Yang Jisheng, “Road, theory, system – my thinking on the Cultural Revolution”, memory, No. 104, November 30, 2013.

(October 17, 2020 in Fivewoods Studio)

All of Ways to Evil is Illegal / Sheng Hong

Note: Today, I saw a “notice” from the Haidian District Procuratorate of Beijing, saying that Zhang Wenshan, who led Xiangtang village to build the Cultural New Village, had carried out “illegal construction” and called on all sectors of the society to report his crimes. Not to mention how it goes against the law of heaven to return kindness with ingratitude, and to frame the star of the reform and opening up and the hero of Xiangtang as criminal, from a technical point of view, the hard mistakes are also terroble. In contrast to Article 29 of the administrative punishment law quoted by me in this article, “if an illegal act is not discovered within two years, it shall not be given any administrative punishment.” And Article 62 stipulates that “law enforcement officers neglect their duties and refuse to stop or punish illegal acts that should be stopped and punished, resulting in citizens If damage is suffered, the person in charge and other persons directly responsible shall be given administrative sanctions according to law; if the circumstances are serious enough to constitute a crime, criminal responsibility shall be investigated according to law. ” Obviously, in order to cooperate with the illegal forced demolition to Xiangtang Cultural New Village, Zhang Wenshan is charged criminal in order to show that such forced demolition would be “legal”. As long as the purpose is evil, there will be many flaws. It was 20 years ago that Xiangtang Cultural New Village was developed. Even if it was “illegal construction”, it has passed two years of the validity to sue. However, if it was “illegal construction”, the relevant government departments could not escape the fate of being punished, and there was no limitation on the validity period. The way of heaven or natural law can’t be distorted because someone abuses power temporarily. Power is short and the way of heaven is eternal.

In order to complete the “task” of illegal demolition, the illegal activities have gone beyond all the previous illegal demolition, and are constantly renovated in the current Xiangtang demolition. For example, when the artist Xi Yin’s home was illegally demolished on December 21, several police like people lied that someone had reported dangerous goods in her home, but they led hundreds of illegal demolition elements to break through the door or break through the wall without showing a search warrant or a police officer’s certificate. After they came in, they didn’t find the so-called “dangerous goods”, but they broke the glass of the window, broke the door of the roof balcony, kidnapped the father and daughter, and then moved the furniture out of the house, and illegally demolished it the next day. The first condition for the police is to “obey the constitution”, that is, to protect the constitutional rights of citizens; the Police Law stipulates that the police should stop the violation of citizens’ property or life in time; the State Council prohibits the police from participating in illegal demolition. These Changping district police seem to have completely ignored any law. Issue this article again. (December 25, 2020)

On July 31, Friday, this is our usual climbing day. For the past four days, I have spent every day in a bad environment. During the day, I still read as usual, but outside the yard are surrounded by people in black. Although most of them were cheated and treated badly, they eventually constituted a threat to me and my family and made noises around my yard. Police cars repeatedly threatened in the community, once again proving that they were involved in the illegal demolition. Originally quiet country house, become noisy. I had to hide in the house to write. I mostly write articles in the morning, deal with some more relaxed affairs in the afternoon, and improve articles in the evening. In recent days, in addition to writing a letter, “To Dai Binbin on the wall breaking invasion”, and “The legality of forgery”, I also finalized the “Suburbanization is an irresistible trend” which has been basically completed and put it on my blog. After their reading it, some friends said that I was “very calm”. In fact, I was not calm. In the evening, there were always voices of people in black outside the wall. Even in the latter half of the night, there are the voices of the team training, shouting the command, and pulling the iron fence. They didn’t care at all that this is the home where others sleep. I lay in bed and couldn’t sleep for a while, and suddenly thought, this is my home, we have the right to go in and out freely.

On Friday afternoon, we called the demolition party and asked to go out. They discussed and agreed to let us go out. But because of their guilty conscience, they’ve locked our car and they drove it over. As a matter of fact, we have already moved the important things. We collected some books and small articles which contain information or think they have some value, and put them into the car. We gave our key to a neighbor for in case of accident. We’re not moving out, we’re going out for the weekend. When I was about to get on the bus, I suddenly found that more than a dozen people from the demolition party were watching around. Some even said, “Teacher Sheng, are you leaving?” As if to say goodbye to me. I didn’t pay attention to her. This kind of person who broke into the wall has no moral basis for politeness. Legally, I didn’t think I’m moving. I was just leaving my home for a while. But I also knew that physically, I was afraid I couldn’t come back. Legally, this is my legal home; but technically, someone has the ability to tear it down without being punished for the time being.

That evening, I finalized and sent out the “Legality Forged”; a few days later, on August 4, I completed another article, “Triple False of ‘Judgement'”. So far, I basically completed my preliminary comments and analysis of this incident. The conclusion is that the court “administrative ruling” based on which the demolisher of Huairou district is based does not exist at all. The behavior of the demolisher on July 28 is “illegal from the beginning to the end”. I wrote a letter to Mr. Li Keqiang. I also accused about this case, forging official documents of state organs and illegally demolishing them, to the Supreme People’s Procuratorate. Soon, the Huairou District procuratorate called and said that I had to report to the public security organ first. If the public security organ did not accept it, I could file a complaint with the procuratorial organ. I then reported the police to the “director’s mailbox” on the website of Beijing Public Security Bureau. At the same time, I also reported to the website of the CPC Central Commission for Discipline Inspection and the Supreme Court. I wrote another letter to Dai Binbin, telling him that I was only leaving temporarily, not moving away; if he intruded or demolished, it would be a crime; and told him that I knew that his “court administrative ruling is false”. His website responded to me with some words like saying “this is over.”. But I know, in his heart, it won’t end until the rest of his life.

The day after we left my yard, we were climbing the mountain behind Dajue temple and found that my yard had been invaded. After that, the information was interrupted. Later, on August 5, my neighbor sent me videos and photos of the yard of my house being demolished. My courtyard is very easy to recognize. This is the original model room. It is the yard you can see at the first sight when you enter the community gate. The walls of yard and the house collapsed, only three trees could be seen. Two of them are ginkgo trees, which I planted as soon as I lived in the yard; the other one is Begonia, which was planted earlier by the developer. There is a pavilion outside the courtyard. When it was built, it blocked my view of the Great Wall from the house. Although this has been expected, but my heart is still dull pain. As I have said, the house is the outer body of human beings, and demolition is to hurt life. I can feel more about the feelings of my neighbors, especially those who live here only. Most of the neighbors cherish this place more than we do. We may be one of residents who took care here more extensively. When I visited to my neighbor’s house, found that their house structure, appearance, interior decoration, furniture and furnishings, courtyard layout, plant and vegetable gardening were all more exquisite than ours. Here, it is a kind of life that enjoys nature and can play its own aesthetic imagination. In order to resist demolition, neighbors put up banners of “I love the courtyard” in the community. And one of the greatest evils in the world is to purposefully destroy what others cherish most.

I have published some articles before, from various perspectives to the illegality of demolition. I also wrote three essays about the illegal demolition of  Old Beijing Courtyard in Water Great Wall, to prove that the forcible had forged the “administrative ruling of the court” even according to the existing law. I recently found that one of the parties to the administrative penalty decision of the “administrative ruling” and “administrative penalty decision” of Beijing Municipal Planning and Natural Resources Commission (hereinafter referred to as “BPNC”) has been shut down a long time ago, which furthers to prove their forgery nature. But at the philosophical level, it doesn’t need to be proved. Because an action that leads to the result of sin must be against natural law. Specifically, the rule of law achievements made by the Chinese mainland over the past thirty years of reform and opening up have formed a constitutional and legal system to protect civil rights. Any violation of civil rights will be prohibited by this or that law. An action aimed at destroying the good life of citizens cannot be done without breaking the law. Whether these laws can play a protective role lies in whether they can be observed and implemented. Therefore, even according to the “ideas” and steps that the plotter wants others to believe, it is impossible to “succeed” if they do not violate the law. For example, assuming that the Huairou district government does have what they call “administrative ruling of the court”, everything is as they said, still doomed to be illegal.

Even if the “administrative ruling of the court” they call is true, and the” decision on administrative penalty “of BPNC is also true, the” decision on administrative penalty “is also illegal. First of all, we should pay attention to that if it wants to make this administrative penalty, it must follow the legal due process stipulated in the Administrative Penalty Law. This includes prior notification to the parties (Article 31). And generally, it is understood that “the parties to administrative proceedings It includes the plaintiff, the defendant, the co-litigant and the third party. ” (Baidu Encyclopedia) and in this particular case, the actual “executed person” is not the party who is “illegal”, but the owners who buy the houses of the “illegal party”. The purpose of law is to seek a fair solution among different stakeholders. Therefore, whether the owner of the Old Beijing Courtyard in Water Great Wall is regarded as “party” or “executed person”, it is necessary to take the owners of the Courtyard as “party” or “executed person” to be informed directly, and only if their rights are exercised can this just solution be found. According to Article 32, “the parties have the right to make statements and plead. The administrative organ must fully listen to the opinions of the parties and review the facts, reasons and evidences put forward by the parties.” According to Article 42, the parties have the right to propose a hearing. However, the owners were not informed in advance, and there was no opportunity to make statements and arguments. According to Article 41, “the decision on administrative penalty” by BPNC cannot be established”.

If the owners have the opportunity to make statements, plead, and hold a hearing, if the cross examination is conducted before the administrative penalty for such a serious matter as the demolition of the house, and the hearing is fair, the so-called “administrative penalty” may be prevented. According to the so-called “administrative ruling”, the BPNC said, “according to the 2005 land use map of Huairou District, the land occupied is vegetable land, orchards and river water surface. According to the overall land use planning of Huairou district (2006-2020), the planned use is for forestry. “Therefore, it is concluded that this is “illegal construction”. However, since there are controversies, it is not only based on the drawings, but also on-the-spot investigation. In fact, the land occupied by the Old Beijing Courtyard in Water Great Wall is a river beach. Photos of the construction process show that the surface layer is a layer of river beach stones. The reason why it is reported as “vegetable land, orchard” is due to the government’s subsidy policy for agricultural land, and many rural collectives falsely report of farmland. As for the planning after 2006, there is no practical basis; of course, it can not compete with the right to housing protected by the constitution. However, in fact, the BPNC did not go through this due process when making the “decision on administrative penalty”. The “decision on administrative penalty” (Jingguizi (Huai) Fazi (2019) No. 053) is illegal and has no legal effect.

Even if the BPNC breaks through the above provisions of the administrative punishment law, even if it is assumed that the old Beijing courtyard of the great wall of water is an illegal building, there are still laws to restrict it. This is Article 29 of the administrative punishment law, which states that if an illegal act is not found within two years, no administrative penalty shall be imposed. The Old Beijing Courtyard was built in 2006, 13 years ago, long beyond the two-year limit. Of course, they may quote the article that “if the illegal act has a continuous state, it shall be calculated from the date of the end of the act”, and quibble that the illegal act of “illegal construction” has continued until the “illegal construction” is identified, but this is obviously confusing the concepts of “act” and “result of act”. The construction behavior ended 13 years ago. The existence of the Old Beijing Courtyard is the result of this act, not the act itself. This difference can also be distinguished by the simple past tense (constructed) and past perfect continuous tense (have been constructing) in English. This is basic common sense. If this is denied, this article 29 has no meaning. Because almost all the consequences of “illegal acts” that have not been found will continue to this day. For example, if someone cut down a tree, the consequence of its continuation is that the tree is gone, but it cannot be said that the behavior continues to this day.

The problem is, after 13 years, it is found that a certain community is “illegal construction”, and what kind of due process of law should be. Although according to Article 29 of the administrative penalty law, administrative penalty cannot be imposed again, but the relevant administrative organs should be punished for not finding out in time. Article 62 of the law stipulates that “law enforcement officers neglect their duties and do not stop or punish illegal acts that should be stopped and punished, thus causing citizens to In case of damage, the person in charge directly responsible and other persons directly responsible shall be given administrative sanctions according to law; if the circumstances are serious enough to constitute a crime, criminal responsibility shall be investigated according to law.” That is to say, if the BPNC thinks that the Old Beijing Courtyard is “illegal construction”, it means that it did not “stop” and “punish” in the process of implementing the “illegal construction” 13 years ago, and indulged the parties to sell their houses to a bona fide third party who did not know, and because of the forced demolition, they “suffered damage” and their homes worth more than one million yuan were illegally demolished. According to Article 62, it is obvious that the person in charge of the Commission should be punished by law. However, in fact, on the contrary, the BPNC has not been punished. Instead, it has punished the citizens whom they have done harm on, totally reversing the injuring and victim.

According to their story, the organization, which should have been punished, has taken an obviously malicious approach, putting the blame on the most innocent person in the story, the owners of the houses. It is assumed that BPNC made the so-called “decision on administrative penalty” on December 23, 2019 as it said, it also concealed this fact from the owners of the Old Beijing Courtyard in February, even when answering the letter from the owners of the Old Beijing Courtyard in Water Great Wall, it did not mention that it had ever done such an administrative punishment involving the important rights of the petitioner (Sheng Hong, 2020). However, this malice was revealed in the “Administrative ruling” of Huairou District Court on July 27. It said that within six months after the “decision on administrative penalty” was issued to Zhongtian Hengchi Co., Ltd. and Xitai village Co., Ltd. , the parties did not file an administrative reconsideration or administrative lawsuit, so the punishment has come into effect. Everyone knows that these two so-called “parties” have sold their houses and made profits, and the property rights have been transferred to the owners. It is impossible to punish the “illegal construction” parties by forcibly demolishing the houses, but it will damage the innocent third party in good faith. What’s more, one of them, Beijing Zhongtian Hengchi Company has long ceased to exist, how can it “file an administrative reconsideration or administrative lawsuit”?

As we have discussed earlier, the “parties” of administrative punishment should include the owners who actually bear the major punishment. What the BPNC said that the “parties had been informed” is incomplete or even maliciously concealed. However, both the Administrative Reconsideration Law and the Administrative Litigation Law stipulate that the stakeholders should participate in the administrative reconsideration and administrative litigation, and the premise is that they should be informed. With regard to the third party involved in the subject matter of administrative penalty, Article 39 of the administrative compulsory law clearly stipulates that “if the third party claims rights to the subject matter of execution, the execution of administrative penalty shall be suspended.”. This also shows that the third party must be informed before they can “claim their rights”. Therefore, the act of concealing administrative penalty information by BPNC from the third person, the owners of the Old Beijing Courtyard in Water Great Wall, is not only an act of dereliction of duty by the administrative department to damage citizens, but also an act of deliberately injuring specific persons, which hinders the owner from enjoying the above “claim of execution object”. The purpose is to demolish the houses of these citizens, which is completely contrary to the positioning of government.

Finally, although the BPNC has continuously broken through the legal restrictions, there is still a basic restriction on “administrative penalty”, which is determined by the nature of “administrative penalty”. “Administrative punishment” is a way to maintain social order, which is different from “criminal punishment”. The difference is that the object of “administrative penalty” is “administrative illegal act”, which has low ethical accountability and social harmfulness, and is a kind of lighter illegal act, so its punishment is also lighter; while the heavier crime and punishment belong to the scope of “criminal punishment” (Chen Xingliang, 1992). Administrative punishment should not cross the border and stipulate the measures that only criminal punishment can take. In the administrative punishment law, the most serious administrative punishment is “confiscation of illegal property”, which generally refers to the property obtained by illegal means. Of course, it can not be interpreted as “confiscation of real estate”, because real estate is not only a property right, but also a residential right. Although the latter covers the former, it is far greater than the former. Not to mention “forced demolition”. Generally speaking, “confiscation of real estate” only applies to the property of enemy countries or war criminals; or people who have serious economic crimes or treason and other serious crimes. In theory, forced demolition is a more severe punishment than confiscation.

Therefore, “confiscation of real estate” or “forced demolition” can only be a kind of criminal punishment, which should be prosecuted by the procuratorate and made by the court through due process of law. The administrative order does not contain such severe punishment, so an administrative agency is not qualified to make decisions. Moreover, in the current large-scale illegal demolition movement, the owners whose houses have been demolished are people who have no fault or serious crime. If the “illegal construction” accused by BPNC does exist, the actual culprits are also builders and sellers. And even for them, their fault is not serious enough to confiscate the property or even demolish it. The legislative law stipulates that “the constitution has the highest legal effect, and all laws, administrative regulations, local regulations, autonomous regulations, special regulations and rules shall not conflict with the constitution.” (Article 87) also stipulates that “without the basis of laws, administrative regulations and local regulations, local government rules and regulations shall not set norms that impair the rights of citizens, legal persons and other organizations or increase their obligations.” BPNC has no power to violate the constitution. It directly impairs or even denies citizens’ property rights and housing rights. It takes “confiscation” and “demolition” as punishment means for “illegal construction”, which breaks through its upper limit of power.

We have noticed that a few years ago, the Ministry of land and resources at that time still had some discretion. For example, from 2014 to 2016, the punishment of “illegal construction” by Beijing Bureau of land and resources was almost “fine”, and only one was “confiscation of illegal gains” (Beijing Municipal Commission of planning and natural resources, 2018). This is still roughly appropriate. Because the so-called “illegal construction” mainly takes up agricultural land and rarely damages the ecology. Even if there are negative results, we can take other methods to punish, and even make up for the consequences of the so-called “illegal construction”. For example, the occupation of agricultural land can be solved by the balance of occupation and compensation. It is more economical and efficient for the occupier to open up new agricultural land on similar land by means of fine or other means, even if it is to spend money to transport the soil from other places. As for the ecological environment, I have discussed some of them in the “Suburbanization is an irresistible trend”. Villa owners will not destroy the environment, but will plant plants and improve the environment due to their worship of nature and beauty. Even if some places need more investment, it can be achieved by imposing fines on builders and sellers. More importantly, the principle of proportionality is an important principle of the rule of law. Even if the builders and sellers of houses have been accused of wrongdoing, the homes of owners who are as the third party with goodwill cannot be forcibly demolished and their aesthetic lifestyle destroyed as punishment means. This is extremely asymmetric.

Look at Huairou district government again. We note that the so-called “administrative ruling” of Huairou District Court was settled on July 27, while the illegal invasion of the Old Beijing Courtyard in Water Great Wall by Huairou district government was about 2:30 a.m. on July 28, which was equivalent to that night. This shows that the so-called “court administrative ruling” is manipulated by the district government even if it is not forged. Because a just court decision should be a suspense, it is impossible to know in advance that there is a definite ruling, and therefore it is impossible to prepare carefully in advance. If they wanted to organize 2700 people, multiple forklifts and hook machines and dozens of moving vehicles on July 27, it would take at least a few days. If they wanted to raise funds for this, it would take a longer time. It was impossible to stealthily attack in the early hours of July 28. This also reflects the government of Huairou district is in a state of impatience to do evil. Now, investment in a bank or large amount of funds transfer needs a “calm period” of two or three days. Such a destruction involving hundreds of innocent owners’ billions of yuan of assets is so urgent. It is also obvious that it doesn’t want to give the goodwill third party the time to claim their rights. We have to say that the goodwill and loyalty of government officials are the last defense line to protect constitutional rights.

What’s more strange is that even if we believe in the stories made up by the Huairou district government, the practices of the BPNC and Huairou District fully demonstrate the existence of a “conspiracy” against the Old Beijing Courtyard in Water Great Wall. The purpose is to demolish this community, and the form is unscrupulous. As I have mentioned in “Let illegal demolition fear the rule of law” and “An important lesson of property rights theory”, Jiuduhe town government of Huairou District once went to the Old Beijing Courtyard in Water Great Wall on March 23, March 26, and March 30 to paste “Notice of demolition within a time limit”, “Notice of urging” and “Decision on demolition within a time limit”, all in the name of the town government, without mentioning the “decision on administrative penalty” made by the BPNC in December 2019. There can only be two cases. On one hand, there is no such “decision on administrative punishment” issued by BPNC; on the other hand, the government of Jiuduhe town is aware of the administrative penalty proposed by BPNC to Xitai village under its jurisdiction, involving more than 100 families living in the town. However, it did not mention it in the above-mentioned three announcements. In connection with words getting dizzy with success in the so-called “administrative ruling” of Huairou District Court, it can only be said that it is a deliberate concealment.

In either case, although the town government does not have the qualification to judge “illegal construction” and the power to demolish it, it is also responsible for the legal documents it issued, whether positive or negative. After the owners of the Courtyard filed administrative reconsideration or administrative litigation against the administrative decision of the town government, according to Article 44 of the administrative compulsory law, Huairou district government can not forcibly demolish it. No matter whether there is a “decision on administrative penalty” issued by BPNC, the administrative reconsideration or administrative litigation filed by the owners of the Courtyard are all against the administrative penalty of the same subject matter. Therefore, even if other administrative counterparts have not filed administrative reconsideration or administrative litigation, the owners, as one of the administrative counterparts of this administrative penalty, have met the Article 44 “cannot be forcibly removed”. That is to say, if there are really two overlapping “administrative penalties” of the same subject matter, as long as the parties have conducted administrative reconsideration or administrative litigation against any one of them, their houses cannot be forcibly demolished. According to Article 39 of the administrative compulsory law, the owner’s administrative reconsideration is equivalent to “the third party’s claim on the subject matter of execution”, and the execution shall be suspended because of “definite reasons”. The Huairou district government pretended that its Jiuduhe town government had not posted a notice threatening forced demolition, and had not received any administrative reconsideration or litigation from the owners. It was an act of concealing one’s ears and stealing the bell.

Neither the BPNC nor the Huairou district government can avoid the most important problem, that is, to the suburban community construction projects they agreed to or even encouraged 10-20 years ago, without denying and punishing their original decisions, nor promising to protect the consequences caused by them, they made a new decision to deny their original decision and destroy the result agreed and encouraged by their original decision. And this consequence has been added input of others. This violates the basic principles of the rule of law and the market. If a subject in a market finds that his past decisions are wrong, he can only admit that the current situation of others caused by his past decisions cannot be denied and can only modify his own decisions. In other words, under what circumstances can an administrative body deny its previous decisions? Due process of law should be: firstly, it should negate its original decision in words according to the original decision-making procedure and make it known to the public; at the same time, it should punish the person who is responsible for the wrong decision. Second, it must protect the rights of others who pay costs because of its erroneous decisions. It must also make full compensation for the possible damages caused by rectify the errors, and whether the compensation is “sufficient” has the final say of the injured party.

As we all know, the Old Beijing Courtyard was built in 2006 with the encouragement of Huairou district government, and the Land Resources Bureau at that time at least acquiesced in land use. This is similar to the situation of many suburban communities in Beijing, such as Changping, Huairou, Miyun and so on, which have obtained support and encouragement from at least district level governments. However, from 2019 to 2020, without any public denial of their original decisions and without taking responsibility for the consequences of their wrong decisions, they turned to say that the Old Beijing Courtyard in Water Great Wall is “illegal” and should be “demolished”. They are not the government to provide public goods, but an organization that infringes on civil rights to cause public bads. In law, if a natural person or legal person changes his decision and does not make a public statement, and does not bear the consequences of his own behavior, he will deny his natural person or legal person status. If a society tolerates that the administrative departments of the government can deny its commitment without constraint, and do not bear the legal responsibility for their wrong decision-making, and do not bear the material and spiritual losses caused to its citizens, and say that it is “right today, not wrong yesterday”, it will bring terrible disasters to the society and its citizens. This is not tolerated by a country ruled by law.

Now the Old Beijing Courtyard in Water Great Wall has been razed to the ground, which shows that the laws listed above have been destroyed by the BPNC and the Huairou district government. Based on the discussion of this article and my previous articles, the relevant administrative departments have violated at least 20 legal provisions (see the appendix for details). This is equivalent to the fact that there are 20 checkpoints on a road. As long as one of the 20 checkpoints fails to pass, there will be no way to go through this road. As long as one of these 20 laws worked, the Old Beijing Courtyard in Water Great Wall would not be demolished. Now that the Huairou district government has proved that it has completed the illegal demolition of the Old Beijing Courtyard in Water Great Wall, it shows that it has the ability to ignore these 20 legal barriers and has broken through without exception. The destruction of the legal system seems less intuitive than the images of the demolition impact and the rubble of the Courtyard, but it is more fatal than the destruction of homes. The destruction of the rule of law and property rights system is not only the demolition of the Old Beijing Courtyard in Water Great Wall, but also the illegal demolition of large villas in Changping, Huairou, Miyun, Shandong, Hebei and other places in Beijing. It also demonstrates to the society that an administrative department of a government can violate any law and can demolish any building. This kind of damage to the principle of rule of law and the spirit of the constitution will not only be manifested in the field of property rights and housing rights, but also can be generalized to any field, and the constitutional rights of citizens and other organizations will not be guaranteed by law.

Why can they be so unscrupulous? My lawyer told me that the administrative reconsideration application I sent to Huairou District was sent back intact. What does that mean? This shows that the agency wants to eliminate the fact that I have applied for administrative reconsideration. According to the administrative reconsideration law, if the administrative organ that receives the application does not accept it, it shall inform the applicant in writing within 5 days. It has never been stipulated that the applicant’s application can be returned. This is another violation by Huairou District Government in order to cover up its illegal activities. On August 31, I also received a “decision on not accepting administrative reconsideration” from the Beijing municipal government, which said that there was no legal interest between the applicant and the “decision on administrative penalty” issued by the BPNC. This has gone beyond the absurdity of “calling a stag a horse”. This is not only to say that it confounds black and white, but also refers to its abuse of public power and domineering. Assuming that the “decision on administrative punishment” issued by the BPNC is true, the Huairou district government has forcibly demolished my home, causing me more than 1 million yuan of property loss and countless spiritual loss. It says that it has no interest with me, which is a lie that can be proved by simple common sense. The reason why the Beijing municipal government dare to say this is because it despises the legal system of our country. It need not to prove or confront because it is able to abuse public power. This means that it is speaking with violence.

In fact, as early as the end of March, I filed an administrative lawsuit with the Huairou District Court, but I haven’t received any response. This shows that Huairou district government is directly interfering with the court. This is also in violation of the constitution, which states that “the people’s courts shall exercise judicial power independently in accordance with the law and shall not be interfered by administrative organs, social organizations and individuals.” (art. 126) the reason for the lawless conduct of the executive branch of the government is that it can block the channels for citizens to obtain legal relief when their rights are harmed, which is illegal in itself. However, the harmfulness of this kind of “illegal” is much higher than that of direct infringement, which destroys the judicial system as a “social epidemic prevention system”. In a society ruled by law, the legal system is used to protect the constitution, and its most important binding object is the administrative department of the government. Because only they have the ability to abuse civil rights and cause social disaster on a large scale. This legal system is designed to restrain the government. Once the legal system is destroyed, no one can restrict the administrative departments of the government and let their wills run rampant in the society. Its existence is a kind of anti-constitution existence.

We can see that after the Old Beijing Courtyard was captured and destroyed by Huairou district government by unprecedented illegal means, the demolition movement in various districts of Beijing has become more and more unscrupulous. For example, the government of Qiaozi town in Huairou District cheated out the residents of Yushuishanju community in the name of flood control on August 13, and blocked the gate of the community when they returned. Another source said that Huairou District simply gave Sihe Shangcheng community an ultimatum, which only allowed three days to move. On the third day, it directly came to demolish the house, and in two days the demolition was finished. Since the fall of Wayao villa zone at the end of June, nearly 1800 villas have been illegally demolished. The request of the household with sole residence to keep the house is ignored. Recently, I heard that someone said that “after dismantling the tile kiln, the incense hall will be demolished.”. Xiangtang has 3800 households and 10000 people, which is equivalent to a town. This evil wind of illegal demolition has blown into the urban area of Beijing. Regardless of the fact that the residential area is already used for construction, and the land dispute within the community is within the scope of community autonomy, the government administrative department forcibly enters the community and demolishes the fences and sunshine houses of the owners. If the residents have any conflict, they will send police or people in black to intimidate them, and the beautiful community has become messy. Illegal evictions are expanding and accelerating. In such a system environment, the government administrators have become unreasonable, arrogant and rude, which makes people feel that “if they succeed, they will be rampant”.

This arrogance is the result of an illusion. I once reminded Dai Binbin not to think that he is “legal” if he illegally forcibly demolishes “successfully”. As long as we are a little sober, we can see that this is just an illusion caused by his misuse of our resources. How long can this paradox last? In the specific situation of human society, sometimes there will be the phenomenon that illegal acts cannot be stopped and punished because of the unrestricted power. But the history of the Cultural Revolution tells us that although Jiang Qing did what she wanted when she was powerful, she could not escape the severe punishment of the law ten years later. Now this kind of violation of more than 20 laws and regulations, will people forget it? Do not go forward with great strength and vigor in the rule of law and democracy? Even in China’s mainland, which one supports this lawless act in the principles the ruling party declared? The Fourth Plenary Session of the 18th CPC Central Committee stressed the rule of law, and “decided” to “resolutely investigate and deal with law enforcement violations, illegal use of power and other acts.” If this principle is not used now, it will be used eventually. A violation of one law is an offence, while a violation of twenty is a breach of the legal system and a much more serious crime. The more legal provisions a illegal act violates, the more intolerable the citizens and society will be, and the earlier and more severe it will be corrected.

As a result of large-scale illegal demolition, in Beijing Changping and Huairou and other places, there have been many pieces of rubbles with a few dozens of acres, or more than thousands of acres. If we rebuild our former homes on these ruins, we must restore and consolidate the legal environment and property rights system. The premise is that those who destroy the legal system by illegal demolition are severely punished, and those citizens who are illegally infringed by the administrative department are fairly and fully compensated. An effective environment of rule of law is not realized by paper regulations, but by a series of long-term rewards and punishments. The gradual formation of property rights institution is also along the struggle against the people who destroy the property rights, the justice of those whose property rights damaged is realized, those who violate the property rights are punished. Here, the efforts of all victims of illegal demolition to restore their homes are consistent with the efforts of China under the rule of law. After such a process, government officials began to revere and respect the constitutional rights of citizens. All those who dare to challenge these rights will stay in prison. The power resources from citizens can only be used to protect citizens’ personal freedom, property rights, housing rights and freedom of expression. This history of illegal demolition will be remembered as a painful lesson for future generations. At this time, all homes can be truly safe. If one day we can see the Old Beijing Courtyard reappear on the original site of Jiudu River, it will not only be a victory for its owners, but also a festival for China’s rule of law and property rights institution.


Chen Xingliang, “on the difference between administrative punishment and penalty punishment”, China law, No.4, 1992.

Beijing Municipal Commission of planning and natural resources, “administrative punishment for illegal construction”, website of Beijing Municipal Commission of planning and natural resources, May 20, 2018.

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Sheng Hong, “Legality Forged”, July 31, 2020.

Appendix: illegal acts of Beijing municipal government departments and their subordinate organizations on the Old Beijing Courtyard in Water Great Wall

1. On March 23, 2020, the government of Jiuduhe Town, Huairou District, Beijing, posted a “notice on demolition within a time limit” at the gate of the Old Beijing Courtyard in Water Great Wall. The town government has no legal basis, has no qualification and power to determine “illegal construction”, which is a transgression of authority and an illegal threat to demolish;

2. On March 26, the government of Jiuduhe town posted a “letter of urging” to the Old Beijing Courtyard in Water Great Wall, which is a transgression of authority and an illegal threat to demolish;

3. On March 30, the government of Jiuduhe town posted a “decision on demolition within a time limit” at the Old Beijing Courtyard in Water Great Wall, which is a transgression of authority and an illegal threat to demolish;

4. At about 2:30 a.m. on July 28, the Jiuduhe town government, without the authorization of the court, raided the Old Beijing Courtyard in Water Great Wall, violating Article 53 of the Administrative Enforcement Law. The “administrative organs without administrative enforcement power” should “apply to the people’s court for compulsory execution.”

5. Before the administrative reconsideration and administrative litigation procedures of the owners of the residential area have not been completed, the act of sneaking attack and forcibly demolishing is a violation of the Administrative Compulsory Law, which says “If it is necessary to demolish houses compulsorily, the administrative organ shall make a public announcement and order the parties concerned to demolish them by themselves within a time limit. If the party concerned does not apply for administrative reconsideration or bring an administrative lawsuit within the statutory time limit, and does not dismantle it, the administrative organ may force the demolition according to law. “(Article 44)

6. The wall breaking invasion was at night, which violated the administrative compulsory law, and “administrative organs shall not implement administrative enforcement at night or on statutory holidays.” (Article 43).

7. The town government sent up to 2700 people to encircle the community. Without the consent of the residents of the community, they rushed into the community from the broken wall, and sternly threatened the residents of the community, thus committing the “crime of illegal invasion”.

8. In the attack, the demolition personnel used hook machines to destroy the walls, and later demolished all the houses and yards of the whole residential area of the Old Beijing Courtyard in Water Great Wall into ruins, which was a crime of abusing public power and violating citizens’ property rights on a large scale.

9. In the sneak attack, the demolition personnel were armed with iron bars and shields, seriously injuring three residents of the community, thus violating the “crime of illegal injury”.

10. After the forced demolition personnel entered the community, blocked the community and forbidden residents to go in and out, thus committing the “crime of illegal detention”.

11. The forced demolition personnel obstructed the entry and exit of postmen and couriers, which violated the “freedom of communication” rights of residents in the community.

12. The forced demolition personnel made water and power cut accidents in the community, which violated the Administrative Compulsory Law that “administrative organs shall not stop water supply, power supply, heat supply, gas supply and other means to force the parties to implement relevant administrative decisions.” (Article 43)

13. The Huairou district government abused the police force and directly or indirectly participated in the illegal demolition operations on and after July 28, and did not send the policemen when the owners of the residential area 110 called the police. This violated the second paragraph of Article 26 of the Police Law, which supports the Constitution of the People’s Republic of China, Article 21 of the Police Law, which states that the cases reported by citizens should be investigated and dealt with in a timely manner “. In addition, it has violated the ban of the State Council that “public security police should not be used at will to participate in compulsory land acquisition and demolition” (State Council emergency notice (GBF [2010] No. 15)).

14. Huairou district government staff threatened the owners of the community not to record videos and take pictures of forced demolition by abusing police force, forcing the owners to close three WeChat groups, which violated the owners’ constitutional right of free expression (Article 35).

15. After the invasion on July 28, the “Notice of the people’s Government of Jiuduhe Town, Huairou District, Beijing” pasted by the government of Jiuduhe town at each door was invalid, because the town government had no right to enforce the demolition, and it was an illegal threat of forced demolition.

16. The “notification” did not produce the “administrative ruling” of Huairou court cited by it, so it could not prove the existence of the “administrative ruling” to the residents; nor did it produce the “decision on administrative punishment” issued by BPNC, so it could not prove the existence of the “decision of administrative penalty”; Jiuduhe town government was suspected of “forging the document of the state organ” Crime of writing “.

17. The “notification” is based on the “administrative ruling” of the court of Huairou District in Beijing, which is made before the administrative reconsideration and administrative litigation procedures of the owners of the residential area have not been completed, which violates the legal procedures and is invalid.

18. The above ruling of Huairou District Court was made in response to the “decision on administrative punishment” issued by BPNC, which in the case of concealing the actual major stakeholders—the owners of the residential area, only informed Beijing Zhongtian Hengshi Investment Co., Ltd. (actually no longer exists) and Xitai village Cooperative, Jiuduhe Town, Huairou District, Beijing, is major violations of the due procedure of law.

19. The owners of the residential area purchased the real estate from the cooperative of Xitai village, Jiuduhe Town, Huairou District, Beijing. They are  bona fide third party. Even if the residential area is really “illegal”, it must be fully compensated by the seller before he can withdraw from the house. However, in the case of no compensation for the owner as a bona fide third party, the broken wall invasion did not punish the real fault party (seller), but imposed the fault loss on the owner, which violated the basic principle of the Civil Law to protect the bona fide third party.

20. The Huairou district government has spent taxpayers’ money to employ illegal demolished personnel and equipment, which violates the reasonable scope of financial funds in the Budget Law (Article 27, Article 93).

21. Before making the decision on administrative punishment (jinggzi (Huai) no.053) on December 23, 2019, the BPNC did not inform the owners of the Old Beijing Courtyard in Water Great Wall, violating the Administrative Punishment Law which requires the party concerned to be informed in advance (Article 31);

22. They did not listen to the statement and defense of the owners of the Old Beijing Courtyard in Water Great Wall, in violation of Article 32 of the Administrative Punishment Law, “the parties have the right to make statements and pleadings. The administrative organ must fully listen to the opinions of the parties and review the facts, reasons and evidence put forward by the parties. “

23. As a result, the owner has not been given the opportunity to hold a hearing, which violates Article 42 of the Administrative Punishment Law, which says the party concerned has the right to propose to hold a hearing;

24. Due to the failure to perform the above procedures of the administrative penalty law, the above written “decision on administrative penalty” issued by BPNC is invalid, but it is still regarded as valid, which violates Article 41 of the Administrative Penalty Law that “the decision on administrative penalty cannot be established” if it fails to fulfill the procedures mentioned above.

25. The above-mentioned “decision on administrative penalty” issued by BPNC was made 13 years after its so-called “illegal construction” act, which violates Article 29 of the Administrative Punishment Law. “If an illegal act is not found within two years, no administrative penalty shall be imposed.”

26. If the BPNC finds that the Old Beijing Courtyard in Water Great Wall is “illegal construction” and leads to the illegal demolition of the Old Beijing Courtyard in Water Great Wall, it has not been found and punished 13 years ago. Article 62 of the “Administrative Punishment Law” stipulates that “law enforcement officers neglect their duties and do not stop or punish illegal acts that should be stopped and punished, thus causing citizens to In case of damage, the person in charge directly responsible and other persons directly responsible shall be given administrative sanctions according to law; if the circumstances are serious enough to constitute a crime, criminal responsibility shall be investigated according to law.”

27. BPNC directly took “confiscation” and “demolition” as punishment means for “illegal construction”, which seriously breaks through its upper limit of power and violates the upper limit of administrative punishment stipulated in the Constitution, the Legislative Law and the Administrative Punishment Law.

28. If the “administrative ruling” of Huairou District Court on July 27, 2020 is true,the first clause of article 43 of the Land Management Law of  on July 28, 2020 it cited is an outdated law, and has been deleted in the new Land Management Law of 2020.The first clause of Article 76 cited by it, namely Article 78 of the new Land Management Law, stipulates that “the newly-built buildings and other facilities on the illegally transferred land shall be demolished within a time limit”. Neither of them can draw the conclusion of forced demolition. This is suspected of “judgement of perverting the law”.

29. The Huairou district government’s return of my application for administrative reconsideration violates the provisions of the Administrative Reconsideration Law, “if the administrative organ accepting the application does not accept it, it shall inform the applicant in writing within 5 days”.

30. The above-mentioned acts of BPNC, Huairou District and Jiuduhe town government infringed on the constitutional rights of personal freedom, property rights, housing rights, freedom of expression and freedom of communication.

September 8, 2020 at Fivewoods Studio

Suburbanization is an Irresistible Trend / Sheng Hong

If urbanization is regarded as a market process, the town is an organism. This organic body grows and changes over time. Suburbanization is a new stage in the process of urban growth and change. Urban population transfers and spreads from the center to the suburbs. This phenomenon has already appeared in many countries with leading economic development. In the United States, for example, suburbanization began in 1880. The indicator is that the proportion of people living in urban centers continues to decline. According to Mills, the proportion of people living within three miles of downtown in the four major urban areas of the United States (Baltimore, Milwaukee, Philadelphia, and Rochester) fell from 88 percent in 1880 to 24 percent in 1963 (O’Sullivan, P. 251). Throughout the United States, the number of residents and employed people in downtown areas decreased from 57 and 70 percentage points in the 1950s to 37 and 45 percentage points in the 1990s (Peter Mieszkowski and Edwin S. Mills, 1993).

From the distribution of urban population density, suburbanization makes the population density gradient of metropolitan area gentler. The so-called “population density gradient” refers to the percentage of population density change per mile from the city center to the outside. The larger the population density gradient is, the steeper the population density distribution is, and the smaller it is, the gentler it is. According to O’Sullivan’s Urban Economics, from 1801 to 1961, London’s density gradient decreased from 126% to 34%; Paris’s density gradient decreased from 235% in 1817 to 34% in 1946; and the gradient density of the four major urban areas in the United States decreased from 122% in 1880 to 31% in 1963 (O’Sullivan, P. 251). The smaller the gradient of population density means that the spatial scope of metropolis becomes larger. The population density gradient is slowed down by Suburbanization as shown in the figure below.

Figure 1 Variation of suburbanization gradient

So, why is there suburbanization? This is due to changes in technical factors and utility functions. Due to the improvement of means of transportation, especially the invention and popularization of automobiles, the transportation cost has been greatly reduced, and the corresponding efficiency, that is, the moving speed has been greatly improved. In the early modern times, urbanization was mainly driven by industrialization. Because modern industry needs large-scale production, it needs large-scale transportation. The factory should be located in a place with convenient transportation, that is, close to the city center; it also needs the concentration of production workers, and because of the high transportation cost, workers need to live close to the factory. Later, due to the popularity of trucks, the cost of industrial transportation decreased. According to O’Sullivan, around 1920, trucks in the United States were half cheaper than wagons, but at least twice as fast as wagons (247). Businesses don’t need to be positioned close to the city center. The popularity of private cars allows people to choose to live far away from their work place. Furthermore, the development of expressways and light rail trains has expanded the scope of suburban areas. Finally, the development of the Internet and the change of communication technology have further reduced the cost of people’s communication, made people do not have to talk face to face, and also reduced the need to work in the city center. When the cost of transportation and communication is greatly reduced, people are obviously willing to live in farer places, which will inevitably lead to suburbanization.

The suburbanization of residence in turn drives the suburbanization of enterprises. In the suburbs, businesses can get labor and land at a lower cost. The suburbanization of industrial enterprises and their employees and residents has brought about the suburbanization of service industry. It turns out that due to the concentration of industrial enterprises and residents in the city center, the urban service industry is also concentrated in the city center. First, commerce, then finance, information services and entertainment industries need to cover as many people as possible, so they are concentrated in the city center. Because of the suburbanization of enterprises and residents, the retail industry following the crowd moves to suburb. The popularity of private cars has also changed the location of large supermarkets or shopping malls to the suburbs. Then come the suburbanization of office buildings. For example, the proportion of office buildings in the central business district in Houston, USA, dropped from 52% in 1969 to 23% in 1989 (O’Sullivan, 2003, P. 264). On the whole, suburbanization is characterized by the transfer of population, manufacturing, wholesale and retail services from the city center to the suburbs. The suburbanization of the United States is shown in the figure below.

Figure 2  The proportion of the population in the suburbs of the United States in 1948-1990

Source: O’Sullivan, 2003, P. 246.

We naturally wonder whether the process of suburbanization has also appeared in Chinese mainland. The answer is yes. In fact, shortly after the reform and opening up, China began the suburbanization of industrial enterprises. We still remember that in the 1980s, there were industrial enterprises within the current second ring road of Beijing. When I was preparing my master’s thesis in 1985, I went to Beijing internal combustion engine factory to investigate and study it. It is located within the current second ring road. Going out the second ring road is farmland. Later, Beijing, like many other cities, experienced a process of “retreat from two to three” or “retreat from three to four” in the 1980s and 1990s. In other words, in the central area of the city, the secondary industry should be reduced and the tertiary industry should be increased. Industrial enterprises should retreat from the second ring road to the Third Ring Road and beyond the Fourth Ring Road. Today, there are few industrial enterprises within or outside the Fifth Ring Road. In addition, due to the restrictions on land use during the period of planned economy, the housing supply was too small, and a large number of residents lived in crowded and difficult conditions. After the reform and opening up, many cities developed up residential areas, which is another major factor of suburbanization. According to data provided by Zhang Wenxin, during the 1980s and 1990s, the population in the central areas of many large cities in China continued to decline, while the population in the suburbs almost doubled. See the table below.

Table 1  Suburbanization of some cities in China (1982-2000)             units:%


With the suburbanization of industrial enterprises, it is the suburbanization of the employed population. In Chinese mainland, the process is not obvious to local residents. Because in the process of industrialization of reform and opening up, a large number of foreign workers are mainly employed in cities. In Beijing, in addition to migrant workers, there are also a large number of university graduates who want to develop in Beijing, which is called “Beipiao”. Most of them live in places that are regarded as suburbs, such as Chaoyang District, the edge of Haidian District, Changping District, Tongzhou District and Daxing District. The famous Tangjialing is a village in the city of Haidian District. Until it was demolished, many young people working in Zhongguancun High-tech Park in Haidian District lived there. From the big concept of urban development, these areas are part of the metropolis, namely “suburbs”. For example, in Shenzhen, about half of the people live in the so-called “villages in the city” or “houses with small property rights”. In most Chinese mainland cities, the population of “city village” accounts for about 30%~50% of the total population. Due to the suburbanization of employment, the population in the central urban area of Shanghai decreased by 1.9% and the population density decreased by 5% from 1993 to 2006, while those of the suburbs increased by 6% and 6.2% respectively. In the 10 years since 2005, the number of migrants in Beijing has more than doubled, from 3.57 million to 8.23 million.

Figure 3 Population and population density changes in central and suburban areas of Shanghai (1993~2006)

Another wave of suburbanization is the suburbanization of residents of the city. It was in the early twenty-first Century that private cars began to spread in mainland China. The number of  cars per 100 households in Beijing increased from 3 in 2001 to 50 in 2017. As private cars expand the residents’ activity radius and vision, people turn their eyes to the suburbs and start to buy houses in the suburbs. There are also several groups of people in this wave of suburbanization. One is the young people who have just started their career. They can’t afford the houses in the city, but they can afford the houses with small property rights in the suburbs; the other is the middle-aged people who still have jobs in the city. They choose to pay attentions to both the distance and the spacious space. They can afford to buy (rent), while  generally, the distance is within one-hour drive or 40 kilometers, such as Xiaotangshan in Beijing. Another group is retired people, there are also some freelancers or non shift professionals, who can live farther away, such as the famous Xiangtang cultural village in Beijing is 50 kilometers away from the city center, has been built and sold since 2000. There are also some people who come to Beijing from other places. They may have relatives in Beijing. If they want to live in Beijing for a long time, they will buy cheaper houses in the suburbs. The more recent wave of suburbanization is a response to the Internet revolution. Some people choose to live in villages or small towns far away from the city, but with pleasant environment. In the north of Changping District, Huairou District, Miyun District, Yanqing County of Beijing and Laishui County of Hebei Province, there are also suburban communities appearing and developing.

Figure 4 Number of cars per 100 households in Beijing (2001-2017)

Data source: website of Beijing Municipal Bureau of statistics.

Like other countries, suburbanization in Chinese mainland is also an adjustment made by the market and the layout of enterprises and settlements after the revolution of transportation and communication tools. Beijing is basically a huge city with a single center, and its population density will decrease with the distance from the city center. The figure below shows the population density of each district in Beijing in 2000 from large to small. From Xicheng District to Huairou District, the population density gradually decreased from 30367 people / km2 to 184 people / km2. By 2017, due to the suburbanization, some changes have taken place, and the population density in some areas is significantly higher than that in 2000. In the figure below, the red line is higher than the blue line. Such as Haidian, Chaoyang, Fengtai and other districts, which can be seen as the expansion of central cities in the process of urbanization. Moreover, the population density of Changping and Daxing increased to 1238 and 1485 per square kilometer respectively. If the standard of urbanization is more than 1000 people per square kilometer, Changping and Daxing can be regarded as cities. Taking the average distance between Changping and the city center as the city radius, the population density gradient of Beijing decreased from 119% in 2000 to 113% in 2017. This is suburbanization. However, compared with the 34% gradient already achieved by Western metropolises such as London and Paris, Beijing has great potential for suburbanization.

Figure 5  Population density of each district (2000,2017)

Data source: website of Beijing Municipal Bureau of statistics.

As the land price changes with the per capita land (the reciprocal of population density), and the closer it is to the city center, the more it will benefit from the higher market demand brought by the higher population density. Therefore, the land price will decrease with the increase of the distance from the city center and the decrease of population density. The figure below shows the land price of each district from high to low in 2007 and the land price of each district in 2018 on this basis. On the whole, land prices have declined from the city center to the outer suburbs. When the automobile began to popularize and the transportation cost dropped sharply, many residents or enterprises had the power to transfer from the city center to the suburbs. In the case of low population density and obviously low land price in the suburbs, it is worth working and living in a far away place due to the reduced travel cost of cars. After more than ten years of suburbanization, although the price of land in the suburbs has risen rapidly, the price of land in the city has risen faster, as shown in the figure below. From 2007 to 2014, the land price of Dongcheng or Xicheng increased 35 times, while that of Haidian, Chaoyang and Changping increased only 10, 12 and 13 times from 2007 to 2018. This is determined by the particularity of Beijing, so the process of suburbanization has not been completed, but there is still a long way to go.

Figure 6  Land price in Beijing (2007, 2018)

Data source: the land price in 2007 was from the land auction transaction price on the website of the then land and Resources Bureau; the land price in 2018 was from the district average value of land listing transaction price on the website of Beijing natural resources and Planning Commission. Among them, due to the lack of data in 2018, the land price in Xicheng District was in 2014, while that in Haidian District was in 2017.

When people choose the place to live, the transportation cost and the house price are two factors that need to be weighed. For places close to the city center, the living place is close to the work place, and the travel cost is low, but the population density is high, the land price is correspondingly high, and the house price is naturally high; if you choose to buy a house in the suburbs, the house price will be much cheaper, but it is far away from the work place. People can choose between a longer distance to work and a cheaper house price (and larger area), and a shorter distance to work and a more expensive house price (and smaller area). Urban economics has a simple formula for Suburbanization (O’Sullivan, 2003, P. 200). That is to say, if someone is living in point a and wants to buy a house at point B, which is farther away from the city center, he calculates as follows:

Unit price of transportation cost (per kilometer) × the number of kilometers increased from point B relative from point A to the city center =

The unit price (yuan / m2) reduced of point B relative to point A × the residential area (point B)

In a word, the increase in transportation costs due to relocation is equal to the saving of housing costs. Under the same conditions, this formula reaches an equilibrium, but when the “unit price of transportation cost” becomes cheaper, some people are willing to choose suburbanization. According to my experience, in Beijing, from the urban residence to the suburban residence, the driving time is about 1 / 3 of that of taking the bus, and it is more comfortable. After the popularity of private cars, the transportation cost will be reduced by 2 / 3, so you can live farther away from the city center without changing the total transportation cost. As the house price is also cheaper, you can choose a larger house.

Therefore, in the early years of the 21st century, with the popularity of private cars, the trend of suburbanization continued to strengthen. In Beijing’s core urban area, the population proportion of Dongcheng District and Xicheng District (including Chongwen District and Xuanwu District in the past) decreased from 20.8 percentage points in 2000 to 13.3 percentage points in 2017; the proportion of population in Chaoyang District, formerly a suburb and now an urban area, increased from 14.8 percentage points in 2000 to 17.6 percentage in 2017, Haidian District increased from 15.3 percentage points to 16.9 percentage points, Changping District increased from 3.9 percentage points to 7.8 percentage points, and Daxing district increased from 4.6 percentage points to 7.1 percentage points. In absolute terms, the population of Changping District increased from 495000 in 2000 to 1670000 in 2017, and Daxing district increased from 589000 to 1530000. This is an obvious trend of suburbanization. Among them, the suburbanization of Chaoyang District and Haidian District is mainly the suburbanization of the employed population, mainly by a large number of foreign workers; the suburbanization of Changping District and Daxing District is mainly the suburbanization of local residents, especially Changping, which is the most significant, and Daxing is also mixed with two kinds of suburbanization.

Figure 7 Changes in the proportion of population in different districts of Beijing (2000-2017)

Data source: website of Beijing Municipal Bureau of statistics.

As the trend of suburbanization is under the guidance of market mechanism, it is the optimization process of land resource allocation, which will inevitably bring economic development. From 2005 to 2017, Beijing’s GDP increased by 292%, while Chaoyang District, Haidian District, Changping District and Daxing district all grew by more than 300%, which were 315%, 312%, 318% and 309% respectively, with an average annual growth of more than 12.5%. Shunyi District and Tongzhou District are the two areas where the growth rate exceeds them, for there are other factors at work. For example, Shunyi district is in the capital airport economic circle, while Tongzhou District is the relocation site of Beijing municipal government.

Figure 8 Economic growth in Beijing (2005-2017)

Data source: website of Beijing Municipal Bureau of statistics.

From the micro perspective, we can better understand the benefits of suburbanization. In Beijing, the popularity of cars first increases the number of city residents who spend their holidays in the suburbs on weekends. Since the middle and late 2010’s, the traffic to and from the suburbs of Beijing every weekend will cause congestion and even traffic paralysis. As people’s wealth continues to increase, some of them not only have a main house that is fully satisfied in size and quality, but also can buy so-called “second homes” in the suburbs for weekend holidays. People who used to drive to the suburbs on weekends and spend the night in resorts or farmhouses now want to spend weekend nights in their own houses in the suburbs. In 2006, I estimated that the unit price of a house (including courtyard) in Huairou District of Beijing  was 1 / 4 of that in the downtown (within the Fifth Ring Road); today, the difference seems to be even larger, even about 1 / 6. At that time, the middle class, who could afford to buy a car, could also afford to buy a cheaper country house. With the growth of people’s age, the continuous improvement of transportation, and the continuous improvement of suburban infrastructure, they will gradually increase the residence time in the suburbs, and finally mainly live in the suburbs. It is said that in the new village of Xiangtang culture, one third of the people are the only residence. Over time, this proportion will change, and the proportion of people living in the suburbs will increase.

In order to attract urban residents to buy, the developers cooperate with local villages to design beautiful houses and harmonious communities with the environment, which greatly changes the ugly situation of rural houses in China. Courtyard life gives people space to design and create their own living environment. People can plant trees, flowers or vegetables according to their own aesthetic taste, and design the appearance and structure of their houses and courtyards. Opening the door every day is a pleasant garden. They can do what they can and don’t need to do. For example, they want to cut branches and water, they can do it without any harm. This is a way of life that relaxes the body and mind, works moderately, and enjoys a good life. It is particularly attractive to the retired and the sick. The tradition of farming and reading and the culture of seclusion in China also bring poetic flavor to the courtyard life in the suburbs, and are favored by artists, cultural people or intellectuals. As each family has its own aesthetic personality, these suburban courtyards have their own unique styles, some exquisite, some extensive, some carved, some natural, forming a diversified aesthetic structure, which together constitute the natural beauty and cultural beauty of the community. Compared with the urban community, which is designed by developers without residents’ participation, it is much more beautiful and pleasant. This has improved the quality of life of urban residents who have moved to the suburbs.

Since ancient times, Chinese literati have advocated nature. Wen Zhenting, the author of Chang Wu Zhi, said, “To resident among mountains and rivers is the first choice, followed by the village and the suburb.” The closer the house is to nature, the better. We can often see the courtyard among mountains in the literati paintings. Artists, writers, scholars and professional intellectuals account for a large proportion of the people who buy houses in the suburbs of Beijing. The larger space of suburban houses can hold their books and put down larger desks and worktables. Rural environment, natural and quiet, can not only inspire inspiration, but also reduce interference. It is an ideal space for cultural and artistic creation and theoretical thinking. As a result, a large number of artists and writers gathered in the suburbs of Beijing. Such as Songzhuang painter village, Wayao writer village, Shangyuan Artist Village, suojiazhuang art camp, shuipo Art District, etc. This will also stimulate the interaction and innovation of the group. In time, there will be art schools, literary traditions, or theoretical schools that rewrite the world cultural history in the suburbs of Beijing. In fact, there have been two world-class writers in the mountainous suburbs of Beijing. One is Cao Xueqin, who created a dream of Red Mansions in Huangye village, Xishan. The other is French Saint-John Perse, who wrote a long poem “Anabase” in the Taoyuan temple of the Guanjialing in the west mountain. He later won the Nobel Prize for literature in 1960.

When city dwellers go to the suburbs to buy houses, they bring their accumulated wealth and daily needs to the suburbs, which increases the income and wealth of the local residents in the suburbs, and creates a permanent demand market for the service industry. For example, the investment amount of urban residents in Xiangtang cultural new village is about 8 billion yuan, and that in Wayao villa area is about 3 billion yuan. This is a huge investment for a village from 2000 to 2010. The annual property fee of Xiangtang is about 4000 yuan, and the annual property fee of 3800 households is about 15.2 million yuan; for Wayao, each household is about 4000 yuan, and 1800 households also pay about 7.2 million yuan per year. In my article “why Xiangtang can’t be dismantled”, I estimated that the service industry demand brought by Xiangtang residents alone is about 170 million yuan per year, creating 2680 jobs; according to the same parameters, if the number of Wayao residents is 5000, the demand for service industry is as high as 85 million yuan per year. In general, Beijing’s “new urban development zones”, including Changping, Shunyi, Tongzhou, Daxing and Fangshan, grew by 48%, 162%, 233%, 249% and 250%, respectively, of permanent population, GDP, retail sales, construction industry and fixed assets investment from 2008 to 2016 (Beijing Municipal Bureau of statistics, 2017). Due to the suburbanization of urban population, the economy grows at a faster speed.

Figure 9 Population growth and economic development of “new urban development zone” in Beijing (2008-2016)

Data source: website of Beijing Municipal Bureau of statistics.

Suburbanization not only brings local economic benefits, but also improves the environment. Most of Beijing’s suburbs are mountainous areas, and many suburban communities are built on barren hills, ditches, and barren beaches. Most of these rural houses have courtyards or gardens. And this is the main reason for these owners to buy. They grow all kinds of plants in their courtyards or gardens. In order to achieve this goal, many people will make great efforts to transform the land. For example, I was in the Old Beijing Courtyard in Water Great Wall, I planed out the underground stones first and then put soil on land. In the first few years, every time I went hiking in the wild, I brought back a bag of soil. Some of my neighbors even buy soil for improving land. We also buy fertilizer to improve soil fertility. This is also true of many communities such as Wayao and Aoshan International. Some ecological experts, such as Professor Yang Xiaojin, carefully studied the local climate, environment, soil and water, and through improvement, turned the original barren mountain into a green garden. He said that he planted dozens of species of about 101 trees in his garden (yiwa library, 2020); I also counted about 50 plant species in my more-than-100-square-meter courtyard. Outside the courtyard or garden, there are also a lot of plants growing in the community. If in the mountains, even for the sake of beauty, people will plant trees in front of their houses and behind their houses; their homes will be shaded in green. Therefore, the suburbanization and the construction of villas or quadrangles in the countryside do not destroy, but improve the ecological environment of the suburbs.

The more important achievement of suburbanization is that it has attracted a lot of human resources, which are more valuable than funds. For example, in Songzhuang Art District, Xiangtang culture new village, Wayao writer village, Shangyuan Artist Village, Suojia Village Art Camp, and so on, in fact, there are many university professors, writers, poets, painters, calligraphers, actors, doctors, scientists, and humanities scholars in any residential area on the outskirts of the city. As creative people with rich knowledge structure, they themslves are worth tens or hundreds of times as their economic wealth. Every brain is a creative center. For the remote countryside, this was unimaginable in the past. Nowadays, people often complain about brain drain in rural areas, and suburbanization has brought them a lot of talents, even excellent talents. Many villages regard them as village sages. For example, Xiangtang cultural village once fully exploited the value of this group and developed its cultural industry; Wayao Village also held a summit with the help of writers’ village, with the participation of more than 20 famous writers such as Mo Yan. It is said that Wayao has attracted more than 1000 intellectuals. Even if some villages did not take the initiative to consult these cultural people, the community formed by their culture and knowledge has also brought local demonstration.

However, this suburbanization is not plain sailing. When we say that urban residents refer to the market price and make their own economic calculation to buy suburban houses, they will actually be affected by the institutional environment. This is the land system at that time. The land management law of 1986 allows urban residents to build houses in rural areas, and allows rural residents to sell or rent houses, but only restricts their application for new homestead. In this context, until the end of the 20th century, there were no serious institutional barriers to suburbanization. However, at that time, the Ministry of land and resources had a strong impulse to expand its power, naturally inclined to the planned economy model. To emphasize the so-called “land planning” is to emphasize its own power. It uses every opportunity to sell its theory. A specious theory is the “1.8 billion mu arable land red line”, that is, in order to ensure China’s food security, the government must restrict the transformation of rural land into urban land, so as to limit the use of rural collective land. However, since senior government officials have never had the overall vision of suburbanization, from the perspective of Beijing, urbanization seems to be a process of constantly using buildings to occupy farmland. This intuitive experience makes people feel that if the building of houses in rural areas is not artificially prevented, urban expansion will continue, and China’s cultivated land will be reduced to the extent that food can not be self-sufficient. This “theory” eventually misled the supreme leader at that time.

This led to the revision of the land management law in 1998. Two of the revised articles have caused serious obstacles to suburbanization. One is article 63, “the ownership of land collectively owned by farmers shall not be transferred or leased for non-agricultural construction”. This is tantamount to prohibiting urban residents from buying or renting houses on rural collective land. One is Article 43, which states that “construction land shall apply for the use of state-owned land”, which in principle prohibits the construction on rural collective land. Of course, these two amendments have obvious unconstitutional nature and jurisprudential problems. Although rural land has experienced collectivization and is described as rural collective land by the constitution, it belongs to rural residents and is stipulated as complete ownership by Article 10 of the constitution, including the right of possession, right of use, right of income and right of transfer. Therefore, rural residents have the right to decide what to do on their land. Restrictions on the right to use and transfer rural collective land obviously infringe on the ownership of rural collective land. However, the addition of a proviso to Article 43 alleviates such a mistake, saying that “township enterprises Exception “. Because township enterprises can also engage in “real estate”, this “exception” can be used to provide legal basis for rural collective development of real estate.

If you think about it carefully, there are serious logical problems in the “red line theory of 1.8 billion mu of cultivated land”. Because the main difference between “urban” and “rural” is that the population density of the former is much greater than that of the latter. When the city expands, it will absorb the rural population with its high density. From the overall point of view of a country, the population from low-density areas to high-density areas will save land. The market system will also automatically limit the size of cities. As the distance from the city center increases, the population density will decrease and the trade dividend will decrease until there is a point where the benefits of urban and agricultural uses are equal, which is the boundary between the city and the countryside. Beyond the borders of cities, there is no stronger incentive for people to turn farmland into towns. This will be an iron law, because the total population is limited; it is like the law of diminishing marginal utility in economics. Just as the owner of a buffet shop doesn’t have to worry about losing money, because people’s stomachs are limited. I used to calculate a simple account, assuming that the average population density of urban area is 5000 people, it only takes 2.9% of the land area to put the population of the whole country into the city. Later, the govenment also admitted that China actually has 2.03 billion mu of cultivated land, which greatly weakened the “1.8 billion mu theory”. However, although few people say “1.8 billion mu” today, the impulse of planned economy still exists.

In 2010, the Ministry of land and resources proposed “cleaning up and renovating the houses with small property rights”. The so-called “small property right house” refers to the house built on the collective land. This is not a legal concept, but a common name. Its intention is to negate “property rights” with the word “small”. It is based on Article 63 and Article 43 of the Land Management Law of 1998. In 2012, the Beijing Municipal Bureau of land and resources released a list of 108 “small property rights houses to be cleared up”, which is said to be supported by the court’s judgment. But I haven’t found a verdict like this. In this list, Changping District is the most, and the rest includes Fangshan District, Huairou District and other suburban areas. Last year and this year, some residential areas were forcibly demolished or threatened to be demolished, such as Banshan Yunju, Fairy Tale Hill House, Shanzuo Courtyard, Russian-style Garden, Aoshan International, Yayuan, etc., which are on the list. This is obviously an important step in preventing suburbanization. However, in the decision on administrative punishment of land and resources of Wayao Village in 2012, the reasons put forward are that the village has built houses on “conditional construction land”, which violates the first paragraph of Article 43 of the land management law, and construction land should “apply for the use of state-owned land”, but does not mention the “proviso”; and Article 44, that is, “If the conversion of agricultural land to construction land is involved, the examination and approval procedures for the conversion shall be handled,” it has pointed out that Wayao Village was building houses on “conditional construction land”, which is in contradiction with itself.

The Ministry of land and resources cannot resist the general trend of market economy. “Small property right houses” are blooming everywhere. By 2018, it was about 7.3 billion square meters, accounting for 24% of the total urban housing area (Zhu Zhenxin and Yang Qinqin, 2018), providing cheap housing for hundreds of millions of migrant workers, which is one of the important conditions for China’s economic miracle. In the same way, the construction and development of suburbanized communities also bring economic development benefits and are welcomed by suburban residents. Since 1999, Zhang Wenshan, Secretary of the Party branch of Xiangtang village, took the lead in exploring the use of collective land to develop suburban communities. Taking villages as the unit, flexible measures were taken to build and sell houses, which were widely followed. There is more support from the local government. Xiangtang model is not only supported by the town government, but also by Changping District government and Beijing municipal government. Changping District has also put forward “policies to promote the development of cultural industry”, supporting and forming “eight major cultural and creative gathering areas”, including Wayao writers’ village and Shangyuan Artist Village, which it later referred to as “illegal construction” (Beijing business daily, October 22, 2010). The Ministry of land appeared hard to stop the tendency. The process of reform and opening up has led many people to believe that the government’s control over land is only a remnant of the planned economy. With the further reform and opening up, it will gradually be abandoned, just like those abandoned systems in the past.

Therefore, although the “small property right house” is judged as “illegal” by the Ministry of land and resources, there are still disputes in the theoretical circle and the government. In addition to the obvious unconstitutional violation of the two articles, Article 63 of the Land Management Law of 1998 said that “farmers’ collective land” should not be used for non-agricultural construction, which seems to be a mistake of “rural collective agricultural land”, because there are still “rural collective construction land” There are also a large number of barren mountains, ditches and beaches. At that time, there were billions of square meters of “small property rights houses”, which were helpful to the economic development and housing conditions of residents. It was a malicious law that ignored the facts and turned a large number of “small property rights houses” into illegal, which were not sufficient reasons for forced demolition. Moreover, the administrative departments of then government still respect the Constitution and the law. Even if they want to demolish them, they must follow the due process of law, and reasonably compensate the owners who are bona fide third parties. Therefore, although there are some forced evictions, there was no demolishing movement. As a result, most of houses have survived without being forcibly demolished for seven or eight years. By 2020, the new “Land Management Law” comes into effect. The original 43 (1) “construction land should apply for state-owned land”, and the original 63 “rural collective land shall not be sold and leased for non-agricultural construction” are deleted, and Beijing land and Resources Bureau loses the legal basis for “rectifying small property rights houses”.

In 2019, the central administrative department proposed to “rectify the illegal villas”, although it also made strict restrictions on the “illegal villas”, that is, “great damage to the ecological environment”, and “procedural violations”, it is also the villas built after 2004; and it emphasizes that “in accordance with the law and regulations”, “protect the legitimate rights and interests of owners” and “protect their litigation rights”. However, due to some political factors, the local government, in order to carry out the instructions of the superior, ignored the protection of the Constitution and the law for citizens’ housing rights and property rights, did not follow the due process of law, and illegally used the means of forced demolition, which made the illegal demolition a vicious movement. With the so-called “rectification of illegal villas”, the local government of Beijing took out the list of “houses with small property rights” published in 2012 and decided by the court, and actually carried out illegal demolition. In fact, at this time, the new land management law, which was implemented in 2020, has deleted the legal basis of the ruling, and according to the legislative law, “if the new provisions are inconsistent with the old provisions, the new provisions shall apply.” (92 Article) The court’s ruling of 8 years ago is invalid. However, the court of Changping District seems to ignore the revision of the law. The above-mentioned communities, such as Banshan Yunju, Fairy tale Hill House and Aoshan International, were still demolished, and the villas in Wayao, such as Shanzuo Courtyard and Russian style Garden, are also doomed. However, due to the invalidity of the law on which the judgment is based, it is illegal for it to send judicial police to execute it.

In order to strengthen the so-called “rectification of illegal villas”, the Beijing municipal government has also proposed “Beijing special rectification of illegal land occupation and illegal construction of villas in shallow mountain areas” (China Youth Daily, 2020). But looking through the Internet, it seems that there is no theoretical support for the so-called “rectification of illegal villas” in “shallow mountain areas”. Take a look at the map, Beijing is a place surrounded by mountains in the East, North and West. This is what Beijing officials call “shallow mountain area”, with an altitude of 100-300 meters. This is the development direction of Beijing’s suburbanization, and it is also the suitable terrain for building villas. Some experts said, “Villas built on flat land are not as good as hillsides.” “Sloping fields are usually located in shallow mountain areas.” (Li Huabiao, 2014, P. 11) the slope between 3% and 10% is the most suitable for villa construction (P. 45). On the one hand, “sloping land is mostly” abandoned “land for urban construction or agricultural and forestry purposes (P. 11) for example, in the shallow mountain area of Beijing, a large amount of hillside land and river beach land are not suitable for farming, but can be used to build houses. Second, the construction of villas on the hillside has the characteristics of “surrounded by green mountains” and “the uniqueness of natural landform” (page 11), and the buildings are also uneven due to the slope. Thirdly, as a kind of low-density villa, it is a kind of residential form with harmonious coexistence of human settlements and nature, and compatible with the level of population density in suburban areas. It is a perfect choice to build a villa here. Therefore, the Beijing Municipal Government’s “rectification of villas in shallow mountain areas” has much less legal basis and economic rationality than the original “cleaning up and renovating houses with small property rights” proposed by the Ministry of land and resources.

The Beijing municipal government has repeatedly used various excuses to demolish villas in Changping and other places, which reflects the positive confrontation between planned economy and market economy in land resource allocation. In the logic of planned economy, “city” is the city, “rural” is the countryside; “city” can only build houses, “rural” can only farm. The boundaries between urban and rural areas cannot be changed without the permission of the planning authority. However, the logic of market economy holds that “city” and “countryside” are formed by people’s reaction to market prices. People tend to move to places more favorable to them. With economic development and technological changes, the boundary between “urban” and “rural” will change with time. In the view of those who emphasize the planning power of the administrative departments of the government, the change of the urban-rural boundary along with the market signal violates their departmental power. Therefore, it is necessary to emphasize that the planning power is superior to the market decision-making, and have the right to “correct” it compulsorily. Those in favor of the market economy believe that the improper elevation of the so-called “planning power” and the abuse of public power to forcibly demolish the suburban communities determined by the market are not only a serious violation of the constitutional principles of the “market economy”, but also the destruction of the wealth and prosperity generated by the market by their own ignorance.

Facts have proved that the “land planning” since the reform and opening up has lagged behind the actual development of cities and towns. The “planned” cities are usually only 2 / 3 or 1 / 2 of the actual development cities (such as in Shenzhen). In fact, the demand gap can only be made up by “small property right houses” and “villages in cities”, then the miracle of China can only be achieved. This fact not only does not let the stubborn adherents of “land planning” reflect on what is wrong, nor is it punished. On the contrary, while enjoying the benefits of market-oriented urbanization, they insist that the market is wrong and should use its own wrong planning to “correct” the effective allocation of the market. Many years ago, I saw the chapter “suburbanization” in urban economics, and thought it was a common sense. But when I would like to write this research on “suburbanization”, I found that there was not a book in the name of “suburbanization” on the book sales platform, and some “suburban” articles could be found in “Baidu academic”, but most of them were researches more than ten years ago, almost none in recent years. When the administrative departments, because of their own motivation to fight for power, because of their lack of observation and understanding of the general trend of urbanization, and out of the artificial delimitation of the nature of land, they think that the rural land should be used for agriculture instead of residential construction. They not only do not have the concept of suburbanization, but also through the government’s control and policy orientation of scientific research funds, which makes the academic circles lack of the exploration of suburbanization. The lack of the concept of suburbanization makes the “planning” deviate from the optimal allocation of land resources determined by the market.

It is impossible for the administrative departments of the government to make effective planning for the allocation of land resources to material assets, and it is also impossible to understand the allocation of human resources, cultural resources and spiritual resources brought about by the suburbanization, let alone planning. The most valuable part of human beings is the brain. The magic of the brain is that it can give people unexpected surprise, that is, the innovation of thought and culture. Anything that can be foreseen in advance is not called “innovation”. Therefore, any “planning” for talent development, cultural development or even spiritual development, any government “project” to “create” artists, writers and scientists “masters” is a conceited idea. Remember Hayek said that people don’t know the loss caused by their losing liberty. This is because the creativity that freedom brings is immeasurable. Therefore, through the so-called “rectification of houses with small property rights”, “rectification of illegal villas” and “special rectification of villas in shallow mountain areas”, they subverted the foundation of freedom by infringing on citizens’ housing rights. How many are there potential Cao Xueqin and Saint-John Perse strangled, and how many are there future Cezanne, Van Gogh and Gauguin eliminated, we don’t know.

Compared with “merging villages”, another kind of “urbanization”, we can understand the advantages of “suburbanization”. The difference between the two is voluntary and compulsory; one is made by individuals or families, the other is made by the government; the other is gradual, and the other is limited by time for political achievements. According to economics, a transaction agreed by both parties voluntarily is the most efficient one, while forced buying and selling is not only a moral problem, but also inefficient because of breaking the principle of voluntariness. The decision-making of an individual or family according to the market signal is a decision-making that fully considers their own needs and financial situation, so it is not a decision-making that damages itself; and it will not harm others when trading in accordance with the property rights system and market rules. The government makes decisions on the basis of a single administrative region and request a group of people to take the same action. However, the needs and financial status of individuals are very different, which makes it impossible to make collective decisions that satisfy all of us. If we want to act in a unified way, we will inevitably damage some people and take mandatory measures. Gradualness means not taking urbanization as a government task, respecting the wishes of the parties concerned, not issuing policies or orders, and letting individual or family contracts work one by one. The suburbanization in Britain, France and the United States cited in the previous literature has experienced more than a century, revealing the gradual nature of suburbanization.

China’s gradual reform over 30 years has proved that gradual progress is the fastest. Compared with the “shock therapy” in the former Soviet Union and Eastern Europe, China’s economic development can be called a “miracle”. The rapid economic growth brought about by the suburbanization of residents in Beijing and other places through breaking through the interference of the Ministry of land and resources also proves this point. On the contrary, the attempt to “accelerate” the urbanization process through the government order is actually helping grow of the shoots by pulling them upward. The movement of “merging villages” in Shandong Province is to build houses at the supposed concentration points of the government. However, in the rural areas far away from big cities and with inconvenient transportation, there is no market support for the construction of these concentration points, so the farmers concentrate in vain and still operate agriculture, which brings inconvenience. In addition to wasting a lot of resources to build houses, it also destroyed the farmers’ existing wealth by means of forced demolition. Some government departments demolish the old houses before the new houses are built, resulting in the displacement of farmers and the serious decline in the quality of life. When farmers are forced to be merged, illegal measures are taken to stop water, power and bus, and to harass and threaten farmers’ homes, which causes great damage to their health, and some elderly and weak patients aggravate their conditions (Huang Yuxin, 2020).

If it is a market-oriented suburbanization, because the market rule is consent, people can avoid external interference and coercion through “disagreement”, so as to avoid losses. The process of urbanization is from rural towns to big cities, and then from big cities to form suburbs. It is natural and efficient for large cities with high population density to spill over into the neighboring suburbs. Because the neighboring suburbs are the closest to big cities and the shortest distance. City dwellers will first move to the suburbs near the city and then move farer place. In addition to allowing the city dwellers to enjoy rural life without giving up the advantages of big cities, they can often go to the city center to enjoy financial, artistic or cultural services. If the market signal is not interfered with, people can make decisions based on the market signals without too much deviation, which will bring about the improvement of their own welfare. Any family will make a smooth transition between the old and new houses by themselves or through the market intermediary before deciding to move a new house. There will not be the situation that the old houses were destroyed and there were no new houses when the villages merged together in Shandong Province. Suburbanization will also make suburban farmers get more income by selling assets and providing services.

On the whole, “merging villages” and “rectifying illegal villas” (or houses with small property rights) are two manifestations of a problem. They all place government “planning” improperly above market decisions. They also failed to see that suburbanization was a major trend in a new stage of economic development, and they all carried out illegal forced demolition because they could not let the parties concerned accept. The simultaneous occurrence of these two events further proves that the so-called “planning” improperly promoted by the administrative department, under the condition officials are ignorant of the specific complex situations, cling to the outdated concepts, and are obsessed with the struggle for power by the departments, will greatly deviate from the more effective allocation of land resources proved by the market. But on the contrary, they think that the allocation determined by the market is wrong and abuse the police power and administrative resources suppress and confront it. Therefore, our criticism of the so-called “planning” not only means that it has not found the trend of suburbanization and brought it into the planning, but also said that the rigid form of the so-called “planning” cannot find the trend of suburbanization or the trend caused by other market mechanisms. The first thing we should do is to emphasize that suburbanization is a new stage of urbanization and an important form of China’s economic development in the future. We should also carry out institutional and legal reforms to ensure that the market plays a fundamental role in the allocation of land resources, so as to ensure the smooth development of suburbanization, and put “planning” where it should be.

Nobel laureate Lewis said that modern economic development has two pillars: industrialization and urbanization. The industrialization of China’s mainland is coming to an end. The first stage of urbanization, namely, the stage of population centralization, has already ended. The new stage of urbanization, namely, suburbanization is just unfolding. There is still a century to go. It will be a major strategic mistake if the government is obsessed with “planning first” and adheres to the road of anti-suburbanization. In fact, “suburbanization” as a problem is unique to China. This is precisely because the existing land management system actually has the problem of violating the Constitution and the law, restricting the rural residents who have full property rights to exercise the property rights and changing the land use, which makes it a problem because of the obstruction of “suburbanization”. Therefore, what we need to do is to return to the constitution, promote the land system reform that has been part of the new land management law, return the land ownership of rural residents, including homestead ownership, and let them decide the land use according to market signals. The government should only formulate urban planning and define the nature of the planning as a supplementary and reference arrangement for market decisions. On a larger scale, except it really involves major ecological issues, national defense issues, and water resources issues, and is necessary to conduct in-depth discussions by the legislature and  to set up regulations, the right of land allocation should be handed over to the market, that is, to individuals or families.


Beijing Business Daily, “Eight major cultural and creative industry gathering areas in Changping”, October 22, 2010.

Yiwa Library, “A rural dream of an ecologist”, July 14, 2020.

China Youth Daily, “Beijing will rectify illegal villas in shallow mountain areas”, January 12, 2020.

O’Sullivan, Urban Economics, CITIC press, 2003.

Huang Yuxin, “Who is in charge of” living in the same village “, Caixin, July 27, 2020.

Li Huabiao, Value Theory of Hillside Villa, China Construction Industry Press, 2014.

Sun Huaizhong, “Shanghai suburbanization and the future absorption of the concept of ‘new urbanism’,” Journal of Shanghai Vocational and Technical College of urban management “, No. 2, 2009.

Zhang Wenxin, “the current situation, problems and Countermeasures of population suburbanization in China’s big cities”, Population Journal, No. 3, 2003.

Zhu Zhenxin, Yang Qinqin, “estimation of China’s total housing: do we have excess housing?” , Chinese Style Real Estate Investment Manual, Volume 2, Rushi Financial Research Institute, October 24, 2018.

July 30, 2020 in Forget-talk Hill Study

[Voision and Calculation] Chapter 6 Transactions and Cities / Sheng Hong

Abstract: The main objectives of this paper are to explain the origination, development, density, scale determination, and industry positioning of cities using the concept of transactions and to discuss the impacts of institutional changes and policy improvements on cities. Statistically, transactions can bring about transaction benefits. Pursuing transaction benefits leads people to congregate, which may yield congestion externalities and market-net externalities, and their differences form the congregation rent. Population density may reach the optimal equilibrium when the congregation rent corresponding to the population density is at its maximum, which determines the economic density and scale of the city. The time distribution of the city’s growth process is similar to the economic income change corresponding to the change in population density because the people’s incentive to swarm into cities is proportional to the benefits that they may receive from cities. A larger economic scale results in a stronger congregative effect. Different industries may position from the center of the city to the outside according to their congregative effects from higher to lower that depend on the different optimal economic scales of different industries. Finally, the decrease in nonmarket transaction costs brought about by institutional changes may affect the density and scale of cities through an impact on the volume of transactions; policy changes may also affect transaction costs and the density and scale of cities. However, such effects may not be as obvious and sustainable as institutional changes.

Key words: city, transaction, congregation, institutions
JEL Classification: C21, R12, R29

Vision and Calculation, published by Palgrave Macmillan, 2020.


The research on spatial economics led by Krugman primarily names economies of scale in production as the reason for spatial agglomeration (Fujita Masahisa, Paul Krugman and Venables, 2005). However, some gaps exist between this statement and the facts. In fact, most of today’s cities are mainly finance-, trade-, commerce-, education-, and entertainment-oriented, and they house government agencies. These functions can be summed up in one word, “transaction.” Industrial production is generally located in suburbs not far from the city. Explaining the origination of cities with economies of scale in production may apply to the industrial period of the 18th century but not to today.

The purpose of this article is simple: to explain the origination, development, and spatial layout of cities with “transactions.” The “transactions” to which this article refers is a broad term in institutional economics that means the interactions between people, including transactions in the market, management and collaboration within enterprises, and interactions between the government and citizens, the government and businesses, such as taxation and paying taxes, public goods provided by the government, and enjoyment by citizens and businesses.

In particular, transactions include remote transactions, often called “trade.” However, the “trade” referred to includes only local activities and impact; that is, regardless of where goods are bought and sold by a trader, we only count his results in local transactions—we only assume that all or part of the transaction benefits fall to local places. This understanding even includes offshore trading and online transactions; that is, both producers and consumers of that product are not local. This is similar to our understanding of the fact that trade creates wealth. The purpose is only to consider the impact of trade locally to simplify the problem.

We will find that once we make “transactions” the basic unit of the research on spatial economics, we associate this theory with institutional economics because “transactions” is also the basic unit of institutional analysis (Commons, 1983, p. 73). When we use “transactions” as the “common unit” for spatial and institutional economics, we can both spatialize the institutions and add institutional and policy variables into spatial economics, which significantly expands the dimensions of the analysis.

  1. The spatial nature of transactions

Economists believe that transactions create value, which refers to not only the dynamic results—the transaction price may guide the effective allocation of resources and promote the deepening of the division of labor and specialization—but also to a static value—the increase in the present welfare attributable to different resource endowments and comparative advantages. In this article, we discuss only the static value of transactions and assume that each transaction has benefits, as indicated in Figure 1.

Figure 1 Transaction benefits

Note: The triangle represents transaction benefits and consists of two parts: consumer surplus (the white part) and producer surplus (the gray part). The benefit of consumer surplus is expressed as lower prices, and producer surplus can be expressed as money or, approximately, as value added or GDP.

Because achieving a deal creates a benefit of transaction, people have an incentive for more transactions. To achieve this goal, they must overcome the obstacles posed by transaction costs. In the broadest sense, transaction costs contain much content, one of which is distance costs. A significant change is traders moving their place of residence closer to other traders, which significantly reduces the distance costs, even approaching zero.

The phenomenon of traders coming close to each other can be described as “space congregation,” and its popular name is “city.” Compared with “fragmentation,” “congregation” creates a permanent asset. If the distance costs for A’s round trip from his residence to B’s residence is a, and the benefits that he gains from transactions with B is greater than a, this is equivalent to permanently reducing the cost of a if A moves to B’s residence, and the value of the assets is as follows:

V = A/r

where V is the value of congregation assets, A is the total distance costs for one year, and r is the discount rate.

In addition to significantly reducing traders’ distance costs, congregation also brings about the unexpected benefit that the transactions achieved are disproportionately higher than the number of traders gathered. This benefit is also referred to as the “network externalities of the market.” This term borrows from the concept of “network externality”: as the number of nodes increases, the number of relationships between the nodes increases at a faster rate. The reason for “externality” is because the benefits from the increase in the number of transactions brought by congregation is not the result of traders’ efforts but of other traders’ congregation, whereas the latter is the external factor for this trader. If we use ME to represent the network externality of the market, it can be expressed as follows:

ME = n (n–1) / 2

where n is the population density or the number of people per unit area. This formula represents in certain areas the combinations of the one-to-one relationships among n people and represents the potential market transaction volume. In practice, within a certain period, not every person can engage in one-to-one transactions, but a certain percentage of people will. Therefore, the formula can be multiplied by a coefficient of less than 1 (such as 1/100), but the trend that the formula represents remains unchanged. See Figure 2.

Figure 2 Population Density and Market Network Externality

Note: The horizontal axis is population density (100 persons per square kilometer), and the vertical axis is market network externalities (number of transactions).

If congregation only has such features, then a higher population density and larger city are preferred. However, congregation also bring opposing forces that prevent cities from expanding indefinitely. For example, as more people congregate in a city, the economy becomes similar to a large economy from which the marginal utility of a product or service decreases and its marginal costs increase as the population density increases. That is, the marginal transaction benefits decrease with an increase in population density, as shown in Figure 3.

Figure 3 Marginal Transaction Benefit

Considering this factor as within the network externalities of the market, the formula can be revised as follows:

CE ≈ ∑(a – c) n – (b + d) * n2) (for a detailed derivative process, please see Annex 1)

where CE is the network externalities of marginal transaction benefits; a and b are the intercept and slope of the marginal utility function, respectively; and c and d are the intercept and slope of the marginal cost function, respectively. We draw the following trend, as illustrated in Figure 4.

Figure 4 Population Density and Network Externality of Marginal Transaction Benefit

Note: The horizontal axis is population density (100 persons per square kilometer), and the vertical axis is the network externalities of marginal transaction benefits (100 yuan per square kilometer).

In contrast, an increase in the population density also leads to pure cost increases, such as an increase in the costs of congestion externalities. Assume that the city is in the shape of a circle and that the commuting population lives outside the city and only enters the city when going to work or shopping. If we calculate according to the city’s highest population density within one square kilometer and consider the proportion of people living inside and outside the city, we can assume that there are Nin people (100 people) entering the city center. If the transport resource is the land that is covered by roads, we assume that the circumference of any radius of the circle from the center of the city is transport resources. When people move toward the city center, the radius distance from the city center decreases, and the circumference—the transport resources—also lessens, but the number of people has not decreased, which leads to congestion. The costs of congestion cannot be attributed to a single person but, rather, to the congregation of all traders who gather. Therefore, negative “externalities” exist that can be expressed as follows:

JE = Nin / [2(Nπ / n)0.5]*nh (for a detailed derivative process, please see Annex 2)

where JE is congestion externality, Nin is the number of people entering the city center daily (per square kilometer) and includes not only the employed but also external consumers; and H is the congestion coefficient, a number greater than 1. Congestion externalities change as the population density changes, as shown in Figure 5.

Figure 5 Population Density and Congestion Externality

Note: The horizontal axis is population density (100 persons per square kilometer), and the vertical axis is congestion externalities (100 yuan per square kilometer).

  1. Equilibrium Scale and Population Density Distribution of Cities

Clearly, the equilibrium level of the population density brought by congregation, or the equilibrium level of a city’s population density, is determined by both market-network externalities of marginal transaction benefits and the costs of congestion externalities. That is, at different population density levels, market-network externalities (congregation benefits) minus congestion externalities (congregation costs) are what we call “congregation rent” (see Appendix 3 for the formulas), as shown in Figure 6.

Figure 6 Relationship between Population Density and Economic Benefits, as well as Optimal Population Density

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Note: The horizontal axis is population density (100 persons per square kilometer), and the vertical axis unit is 100 Yuan/square kilometers. The light blue line is the congestion rent curve.

Figure 6 shows that congestion rent increases with an increase in population density and begins to decline when reaching the maximum point. This relationship indicates that this maximum point is the optimum scale of urban population density.

“Optimal population density” is emphasized as not referring to the overall size of the city or the population density in all areas of the city. Instead, optimal population density refers to the population density of the city center. This model can provide both the population density in the city center but also the urban population density in any area of the city. In reality, the population density varies in different parts of the city. Generally, in a single-centered city, the population density is higher in areas closer to the city center and lower in areas closer to the edge of the city. Transforming these coordinates, with the horizontal axis as distance to the city center and the vertical axis as population density, the specific circumstance is shown in Figure 7.

Figure 7 Population Density and Distance to City Center

Note: The horizontal axis is the distance to the city center, and the vertical axis is population density. Figures in brackets are negative values.

The three-dimensional figure is shown in Figure 8.

Figure 8 Population Density and Distance to City Center (three-dimensional)

Practically, we use a city’s geographic data and our model to simulate a population density map. See Figure 9.

Figure 9 Single Center City Area Diagram

Note: This diagram is generated using ARCGIS software with data from EXCEL. Each small square represents a space of 100 meters x 100 meters. Different colors represent different population densities, with darker colors indicating higher population densities.

Given that the distribution of the population density is related to the economic variables, such as transaction benefits or congregation rent, the density distribution of these economic variables is quite similar. See Figure 10.

Figure 10 Economic Density and Distance to City Center

Note: The horizontal axis is the distance from the city center (km), and the vertical axis is economic densities (100 persons per square kilometer, yuan per square kilometer). Among them, producers’ network externalities and congregation rent and congestion externalities are set according to the left axis, whereas population density is set according to the right axis. Figures in brackets are negative values.

The distribution of population density and other economic densities presents the equilibrium density of various parts of the city and provides a possible forecast for urban planning. Meanwhile, by integrating the population density or other economic densities in various parts of the city, we obtain the aggregate data, that is, total population, total congregation rent, or total GDP. We also obtain the per capita or per area economic magnitude by dividing these total data.

In the previous analysis, we assume that a sufficient number of people exists around the city, and the supply of resources such as water is also abundant. However, in reality, this is not always the case, and we have found that some cities are large and some are very small, implying that different needs and resource constraints exist on premises with the same theoretical scale.

The so-called “demand constraint” for urban development refers to the demand of the population congregation for urban space. This constraint depends on the amount of peri-urban population as well as the city’s geographical location. In a sparsely populated area, even if urban space can be formed theoretically, it is impossible to form large cities. The scale of the city simulated by the previous analysis can be compared to a bottle, and the demand for urban space is water. The real scale of the city is determined by the water inside the bottle. Of course, if the water is beyond the space of the bottle, it will flow out to another bottle—another city.

Similarly, the resource constraint compares the city’s maximum scale at which resources around the city would be able to sustain with its theoretical scale, and selects the smaller of the two as the real “space supply.”

Therefore, if we want to determine the scale of a city in reality, we need to compare its theoretical scale subject to resource constraints, that is, the actual “space supply,” and its actual “space demand” and choose the smaller one as the actual scale.

  1. Formation of the City

The power of the formation of urban congregation comes from the agents of the market economy, that is, individuals and institutions as economic agents. Figure 11 illustrates that the maximum value of per capita congregation rent is to the left of the maximum value of congregation rent as a whole. This comparison indicates that economic individuals have more motivation to gather in urban areas and, thus, become the main driving force for the development of a city congregation. In turn, the population density increases, especially before the maximum point, further encouraging people to gather in urban centers. This process is said to be of congregation and density increase as reciprocal causation.

Figure 11 Diagram of Congregation Rent and Per Capita Congregation Rent

Note: The horizontal axis is population density, and the vertical axis is congregation rent. The congregation rent is set according to the left axis, and the per capita congregation rent is set according to the right axis.

This diagram also shows that (1) when the per capita congregation rent passes the maximum value point, people still have the incentive to enter the city center because it is more competitive than other places despite the diminishing returns; and (2) when the per capita congregation rent is reduced to a certain level that is not enough to compete with other places, people lack the motivation to enter the city center and stop entering. At this time, the population density reached its maximum equilibrium levels.

From the derivative of congregation rent, we see more clearly that the increasing “speed” of the economic benefits is different as the population density increases. It starts slowly, then speeds up, and finally slows down. See Figure 12.

Figure 12 Congregation Rent and Derivative of Congregation Rent

Note: The horizontal axis represents population density, and the vertical axis represents congregation rent and its derivative. The congregation rent for producers is set according to the left axis, and the derivative of the congregation rent for producers is set according to the right axis.

If the amount of revenue directly corresponds to the intensity of the motives, this derivative curve for congregation rent is the time distribution of motives.

In general, the greater benefit an economic activity, the greater motives people have and the faster they move. We use this relationship to derive the speed of urban congregation—the development speed—to estimate the time distribution of urban development.

Assume that di/dn is the differential of economic benefits to population density and dn/dt is the differential of population density relative to time. Generally, the growth speed of population density and the change in economic benefits relative to population density is similar in terms of direction and speed. Therefore:

dn/dt = f(di/dn)

Simply put:

dn/dt = di/dn

We directly switch the coordinates of population density (n) with coordinates of time (t) as follows:

dn/dt = di/dt

The derivative of the congregation rent reflects changes in the population density relative to the changes in the congregation rent. Therefore, this derivative directly describes the density changes per unit time.

Figure 13 is the distribution of the population density in a new urban area of a city at different distances from the city center (including downtown) according to the time frame of 10 years.

Figure 13 Changes in Population Density in Different Locations over Time (unit: 100 persons per square kilometer)

Population Density

Note: The vertical axis represents economic density, and the horizontal axis represents time. Curves of different colors represent different locations from the city center in kilometers.

Figure 14 Annual Population Density across Center Point Unit: 100 persons per square kilometer

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Note: The horizontal axis is distance from the city center (kilometer), and the vertical axis is population density.

  1. Industrial Distribution of the City

The layout of industries in the city includes the location of a certain industry and the relative position between one industry and another industry.

Factors determining the location of industries in the city include economies of scale, frequency of transactions, the nature of the face-to-face transactions, distance to the enterprises directly served, and demand for special resources (such as water, green space, and cultural resources). Among them, one of the important factors is the industry’s economies of scale. Masahisa Fujita and Krugman pointed out that people are less sensitive to economies with increasing returns of scale because its advantages mainly manifest as congregation (2005, p. 70); they also indicated that when the industry’s “fixed cost increases, the distance between cities will also increase; this indirectly reflects the amount of the fixed costs, which can be used to roughly measure the importance of economies of scale.”(2005, p. 150) In other words, higher industry economies of scale result in a higher the degree of congregation and the closer the industry should be to the city center. It should be pointed out that Masahisa Fujita and Krugman and others mainly refer to economies of scale of industrial establishments, whereas we discuss economies of scale of the transaction industry.

Specifically, the larger the average size of the enterprises in an industry, the more people it will provide services for—theoretically—and the closer it should be to the center of town. This theory is generally reflected in the bidding of the rent; that is, enterprises with greater economies of scale generate higher revenue in the city center (given the high population density); however, with the increasing distance from the city center, their revenues decline rapidly.

Economic descriptions of different industries mainly reflect the differences in the scales of their economies, demand and supply functions, market structure, and market scale.

Because demand and supply functions are difficult to obtain, this paper only does a rough estimate of these functions mainly to describe different industries with different scales of economies. The market structure is used to adjust the transaction costs; that is, the monopoly market structure has higher transaction costs than the competitive market structure. Scale is used to estimate the total size of the market.

Because the object of our study is the service industry, the supply function mainly reflects transaction costs.

The cost function for a general industry is as follows:

C(q) = F + vq

where F is fixed costs, v is variable expenses, and q is output. We can also use n to replace p, which is the number of people being served. That is:

C(n) = F + vn

More simply, we only consider the fixed costs as follows:

C(n) ≈ F

Large-scale industries have a greater F value, and the corresponding maximum number (n) of people served is also greater. Conversely, smaller-scale industries have smaller F values, and the maximum number (n) of people served that corresponds is also smaller. Specifically:

C(n) ≈ n / ñ * F

That is, when the amount of people in need of services exceeds the technical limits that a fixed asset is able to offer regarding those services, we need to invest in more of the same fixed asset.

According to Krugman and Masahisa Fujita, industries with greater economies of scale will be much more congregated. Thus, we obtain the spatial locations of different industries.

Assume that three industries exist, and their costs functions are as follows:

C1(n) ≈ n / ñ1 * F1
C2(n) ≈ n / ñ2 * F2
C3(n) ≈ n / ñ3 * F3

F1 > F2 > F3, ñ1 > ñ2 > ñ3

The congregation rent (CR) corresponding to each population density or spatial location (in this case, we assume that congregation rent and fixed costs are measured with the same time unit) separately divides the fixed costs of the three industries representing the asset scale (depreciation plus the return on the opportunity assets). We can obtain the unit asset’s return per unit area, which we refer to as return on assets or, in short:

Return on Industrial Assets (Ii) = CR / (n / ñi * Fi)

where i = 1, 2, 3,… represents industries. The unit is unit currency per unit asset per kilosquare meter.

This determines their degree of congregation and location in the city, that is, at any point where the industry with the highest return on assets should be distributed. At a certain place:

MAX(I1, I2, I3, …, Ii, …) = Ij, then Industry J should be located at this place.

See Figure 15.

Figure 15 Economies of Scale, Degree of Congregation, and Positioning of Three Industries

Note: The horizontal axis is the distance from the city center (kilometer), and the vertical axis is the return on assets of the industries. Different colors represent three different industries. At any point, industries with a higher yield (monetary unit/per unit asset/per square kilometer) should be distributed at this place.

In contrast, the relative position between industries is determined by the supply and demand relationship and the degree between them. We use the logistics, information, finance, trade, and technology services industries as examples. These industries are both suppliers and markets to each other; they are mutual penetrating, complementing, and reinforcing. According to the 2007 Chinese input-output table (National Accounts Division of the National Statistics Bureau, 2009), adjusting with the added value of 1 results in the input-output relations of five industries (the “Direct Consumption Coefficient”), as shown in Table 1.

Table 1 Direct Consumption Coefficient between Five Industries (with added value of 1)

The input-output relation in Table 1 is better reflected using the diagram in Figure 16.

Figure 16 Supply and Demand Relationship between Five Industries

In the diagram, the larger the ring with colored lines, the higher degree of interdependence this industry has with other industries. The diagram also indicates the following points:

  1. Each industry has a high input-output relation with itself; for example, the input-output ratio of the finance industry with itself is up to 12.3%, that of the information industry is 10.2%, and that of the logistics industry is 6.6%. These percents describe the high input-output relationships with segments within industries. For example, in the finance sector, the securities industry and the banking industry have a close relationship, and information providers have more business relationships with the software industry.
  2. Relative to other industries, the finance industry has a higher input-output relationship with the other industries category. In addition to its high input-output ratio with itself, the input-output ratio of the finance industry to the trade industry is 8.4%, to the information industry is 4.2%; and to logistics industry is 4.1%. Although the technology services industry does not need many financial services, its major clients—science and technology enterprises—have a very high demand for finance industry services, such as venture capital, bank loans, and issuing stocks and bonds in the securities market. Therefore, the finance industry should be in the central position according to either the economic logic or the space.
  3. In second place is the information industry.
  4. In contrast, the trade industry’s output has a relatively lower dependence on other industries, indicating that it has the characteristics of initial incentives and sources.

These analyses further strengthen the previous judgments made on economies of scale. We can use the actual data of a certain place as an example and draw up the spatial distribution of these industries, as indicated in Figure 17.

Figure 17 Industrial Distribution of an Urban Area

Given the diversification of the economic and technological characteristics of enterprises within an industry, that we can only use the average date to estimate the reasonable layout of the industry should be stressed. This statement precisely proves that this layout structure has no rigid boundaries. In practice, the business space in which most enterprises engage is in the form of an office building, which is universal and interchangeable. Therefore, overemphasizing borders between industries is not needed. Instead, enterprises should be encouraged to find their own locations based on market signals, which is more efficient.

  1. Institutions and Policies that Promote Urban Development

Because cities form and develop through transactions, and the transaction is the basic unit of institutions (Commons, 1983, p. 73), institutions themselves determine the efficiency of transactions and, thus, affect the density and scale of a city. A combination point of institutional economics and spatial economics exists. In general, we can use transaction costs—strictly, unit transaction costs—to evaluate institutions. Under the same transaction utility, institutions with lower unit transaction costs have higher efficiency and vice versa (Sheng Hong, 1992, p. 152). Conversely, institutional innovation and technological innovation will, in turn, reduce transaction costs, which will also promote transactions and contribute to the formation and development of the city.

In this paper, we discuss institutional innovation. Institutional change or innovation includes many aspects, the most important of which is the protection of property rights, the safeguarding market order, and fair adjudication of disputes. Normal market order includes the freedom to access the market, fair competition, and the elimination of monopolies. Here, the market includes both the product market and the factor market.

From a market perspective, we can divide transaction costs into two types. One is transaction costs that are market-oriented, can be measured and traded by currency and are managed by professionals or businesses; these are expressed as the incomes of those professionals and enterprises’ revenues, including also government taxes. The other type of transaction costs is the nonmarket costs that, at least for the time being, cannot be measured in monetary terms, and no professionals or businesses exist to manage these costs. The main reflection is the time and trouble of dealing, which reduces transaction volume and, thereby, reduces the economic density and scale of the city. See Figure 18.

Figure 18 Two Types of Transaction Costs

Note: In the diagram, S is the supply curve excluding transaction costs, and TC2 is the supply curve of nonmarket transaction costs added to the supply curve. When counting nonmarket transaction costs, the price increases from P0 to P0+TC2, and transaction volumes are reduced from Q0 to Q (TC2). The TC1 curve is the curve of market transaction costs, which decrease as producer surplus decreases and, eventually, confluences with supply curve S at the equilibrium point. No negative impact occurs on the price and trading volumes. When nonmarket transaction costs (TC2) are replaced by market transaction costs, transaction volumes increase from Q (TC2) to Q0.

Market-oriented transaction services can replace the time loss and trouble of nonmarket services, the unit transaction costs of which are significantly lower than those of nonmarket transaction services. Moreover, only completed transactions are charged, such as commissions. If not completed, fees are not charged. In addition, ad valorem taxes or fees are only charged after the transaction is completed in proportion to their income, such as sales tax and income tax, and the income of services personnel can also form market demand without reducing average transaction volumes. Nonmarket transaction activities have the characteristics of time and trouble, which potentially affect the realization of the transaction, thereby reducing transaction volumes. An increase in aggregate market-oriented transaction costs indicates that market-oriented transaction services replace nonmarket transactions, increasing efficiency and transaction volumes. See Figure 18.

Overall, with the development of the market system, the ratio of aggregate market-oriented transaction costs to GDP probably increases and nonmarket transaction costs decline. See Figure 19. According to the estimate from North et al., total transaction costs in the United States are increasing in the long run (Wallis and North, 1986, pp. 95–162). This increase is occurring probably because, first, institutional and technological changes in modern times reduce unit transaction costs and increase the transaction volumes. Second, more nonmarket transaction activities are improved into services provided by the market and, thus, can be incorporated into the currency calculation. The estimate of North et al. in fact refers to market-oriented transaction costs. This estimate also indicates that the market system can promote the monetization and professionalization of transactions and, meanwhile, save time and reduce problems in transactions.

Figure 19 Aggregate Transaction Costs of China, Nonmarket Transaction Costs, and Transaction Costs of Transaction Sector

Source: Jin Yuguo, Dec 2006; Da Fengyuan, Zhang Weidong, 2009.

Note: TC is the aggregate amount of transaction costs, and NTC is nonmarket transaction costs.

Conversely, we can determine whether institutional efficiency has been improved simply by examining nonmarket transaction costs, which should decline if institutional reform was conducted. This relationship has been proven by numerous facts. Since the reform and opening up of China, the ratio of nonmarket transaction costs to GDP has been declining (Da Fengyuan and Zhang Weidong, 2009). Intuitively, large nonmarket transaction costs affect the amount of transaction benefits and further exert a stronger impact on transaction volume similar to a lever, which will ultimately hinder the increase in urban economic density and equilibrium scale. Therefore, the decline in nonmarket transaction costs indicates that market-oriented services and transaction volumes increase. As a result, urban density and scale will be increased.

In particular, when calculating the balanced urban economic density and scale, the congregation rent per unit of time minus the nonmarket transaction costs are used. Changes in the latter lead to changes in the urban equilibrium economic density and scale and eventually lead to changes in the aggregate economy. In our model, we could simply simulate the results of changes to the aggregate GDP by adjusting nonmarket transaction costs.

In 2007, China’s nonmarket (nonmonetary) transaction costs accounted for 24.8% of the GDP (Da Fengyuan, Zhang Weidong, 2009), or approximately 22% of the GDP after deducting the transaction costs associated with transportation. Taking these data into account, we use the estimated development of a specific urban area as an example. Assume that under the existing system, noncommercial transaction costs are approximately 22% of the GDP. If we continue to promote market-oriented reforms and reduce the institutional barriers for factors flow, the nonmonetary transaction costs are reduced by 8% in 15 years, reaching 14% (of the GDP). In addition, the speed of institutional change in 15 years has been even. The impact on GDP simulated by our model is shown in Table 2.

Table 2 Impact of Institutional Change on GDP
GDP under Current Institution GDP under Institutional Change Institutional Impact (%)

Figure 20 Impact of Institutional Change on GDP

Figure 20 illustrates that institutional changes can result in irreversible and sustained economic growth. Compared with policies, the impact of institutional change is longer term and more stable, and accumulates. The longer it takes, the more significant the impact of institutional change will be.

Under the premise that the market system is the basic system for urban development, market failures occur in urbanization and industrial development, including the following:

  1. Lack of forecast for the vision of urban development and the final equilibrium scale;
  2. Difficulty bearing the advanced financial costs of large-scale urban infrastructure investments;
  3. Unable to generate valid intellectual property rights and protect and enforce them effectively;
  4. The investments in science and technology innovation are smaller than the investments made when the government intervenes;
  5. The congregation speed is slow when it has not reached the tipping point; and,
  6. Lack of motivation and means of implementation for collaboration between enterprises within an industry.

For some of the market failures, governments can use corresponding policies as remedies, including the following:

  1. The favored policy at start-up;
  2. The house rent allowance policy;
  3. Policies on transaction cost allowances; and,
  4. Policies promoting industrial alliances and association development.

For the content and analysis of the impact of these policies, please see Annex 4.

These policies can be implemented simultaneously and have cumulative or even integrated effects. Table 7 presents our summary and cumulative effects of various policies.

Table 7 Summary and Cumulative Effects of Policies Unit: 100 million yuan
Original GDP Initial Promoting Polices GDP Transaction Costs Allowance GDP Housing Rent GDP Transaction Costs Saved by Coalition GDP Aggregate Effects of All Policies GDP Policy Impact (%)

Figure 21 Overall Effects of Policies Unit: 100 million yuan

Overall, compared with the urban development mechanism and institutional change, the role of policy is smaller. Policy has a larger role only in the early stage of development, which has gradually declined over time. Therefore, prudent and appropriate implementation of policies and putting more effort into improving the market system and promoting businesses and residents to participate in the market is the best way for the government to promote urbanization.

  1. Conclusion

Transactions can form cities, and an analysis of transactions can help improve urban economics and spatial economics theory. On the basis of the transaction analysis, we found that constructing a theory of cities is not difficult and can better explain their formation and development.

This finding is because the economic variables and their characteristics involved in transactions, such as market-net externalities, have a more congregation nature than economies of scale in production. Put another way, these variables lead to more pronounced congregating results.

The analyses of transactions (omitting the analysis of production costs) focus only on transaction costs. The basic methods of analysis compare transaction costs and transaction utility (or transaction benefits) and identify the dynamic characteristics of which transaction utility is higher than transaction costs, thus further identifying the dynamic characteristics of urban spatial congregation.

Analyzing only transaction costs is within the field of institutional economics because institutional economics believes that the transaction is the basic unit of an institution, and transaction costs and transaction utility are important concepts in the analysis of institutions. Here, spatial economics and institutional economics overlap and generate organic links.

The conclusions of this paper are as follows:

  1. The underlying cause of urban congregation is the growth in market network externality benefits, which is caused by the growth in population density but is faster than the latter.
  2. Two main factors counteract congregation. One is the diminishing marginal utility and increasing marginal costs resulting from the increase in the scale of the market, and the other is the increase in congestion externalities costs.
  3. Congregation rent is the difference in (by diminishing marginal transaction benefits) the market’s corrected network externalities and congestion externalities costs. When the congregation rent reaches the maximum point given an increase in population density, in theory, the city’s population density reaches its maximum balance.
  4. Other constraints on the scale of the city are the demand for urban space and resources.
  5. The subjects of urban congregation are individuals or enterprises; because the per capita congregation rent has a variation feature that it arrives sooner than the aggregate congregation rent to the maximum points, first, economic individuals have at least an early motivation to promote congregation, namely, to promote urbanization; second, the congregation rent of individuals declines after the maximum point, indicating that economic subjects represent the major force that brings the city automatically to the stable equilibrium points.
  6. Because the individual’s motivation is proportional to how much he earns, the speed of action is also proportional to the motivation. We can simply use a derivative of congregation rent to approximately estimate the congregation process and the economic density distribution.
  7. Industries with larger economies of scale have higher degrees of congregation; therefore, by comparing the return on assets of different industries at the same place, we will be able to identify the most suitable industry for the location.
  8. Urban development has a close relationship with transactions and transaction costs and a very close relationship with institutional innovation. Therefore, to promote institutional change, particularly centrally planned economies promoting market-oriented reform, market-oriented reform should be further promoted. Institutional change has an increasingly significant impact on urban development.
  9. Because market failures occur during the process of urbanization, policies implemented by the government to address these market failures will also promote urbanization. However, on the one hand, the influence is notable in the early stages but decrease later. On the other hand, compared with institutional change, the impact of policy is not very significant.

Appendix 1 Derivation of Market-Network Externalities Considering Diminishing Marginal Transaction Benefits

The aggregate demand function of the entire society relative to the population density: Marginal Utility = a – b * n

The aggregate supply function of the entire society relative to the population density: Marginal Costs = c + d * n

Marginal Transaction Dividends = Marginal Utility – Marginal Costs = (a – b *n) – (c + d * n) = (a – c) – (b + d) * n

Network Externalities of Marginal Transaction Benefits (CE) = ∑Marginal Transaction Benefits * (ME(n) – ME(n – 1))
= ∑((a – c) – (b + d) * n) * [n(n – 1) / 2 – (n – 1)(n – 2)/2]
=∑((a – c) – (b + d) * n) * (n – 1)
≈∑((a – c) – (b + d) * n) * n
=∑((a – c) n – (b + d) * n2)

n = 1, 2, 3, …

Appendix 2 Derivation of Congestion Externalities Formula

Assume that the city is a circle, and the commuting population lives outside the city and enters the city when going to work or shopping. According to the city’s highest population density per square kilometer and considering the proportion of people living in and outside the city, we assume that Nin (100 people) enter the city center from outside. The transport resources are the areas covered by roads, and transport resources are assumed to be the circumference of the circle of any radius from the center of the city. When people move from outside to the city center, the radius to the center is smaller, and the circumference (transport resources) is decreasing, but the number of people is not reduced, which leads to congestion. See the following figure.

Assume that the number of people entering the city to the total number of people in a square kilometer of the city center is a ratio (Nt); then, the number of commuting people entering the city is as follows:

Nin = Nt * N (per square kilometer)

Unit Transport Resources Capacity = Nin / [2π (N / πn)0.5] = Nin / [2(Nπ/n)0.5]

In fact, obtaining the population per square meter in a downtown area is very difficult because, in the absence of data for congestion externalities, we cannot determine the city center at equilibrium and its population density. Nonetheless, in the end, multiple iterations can achieve this information.

However, the congestion has not only linear proportional relations to the reduction in the number of transport resources per capita but also nonlinear reduction relations. Therefore, we need to add an index associated with population density, which we call the congestion coefficient, and it is represented by h:

Congestion Externalities = Nin / [2(Nπ / n)0.5] * nh

Appendix 3 Formula for Congregation Rent

Congregation Rent(CR) = CE – JE = [(a – c) – (b + d) * n / 2](n * (n – 1)/2) – Nin / [2(Nπ / n)0.5] * nh

Appendix 4 Analyses of Policy Effects

  1. Policy Promotion at Startup

As previously mentioned, when the economic density is low, the market-led congregation speed is slow; only when the density reaches a certain point will the effects of the market increase. Therefore, if during the startup stage the government promotes urban districts to cross the tipping point earlier through policy and other operations, such as utilizing its influence to attract direct investments and to move in public institutions, doing so would also develop the city. However, this governmental role should not be overestimated. Table 1 assumes that, through government policies and operations, an urban district reaches 3000 people per square kilometer at the outset of economic development, and the contrast situation is one without these promotional procedures.

Table 1 Policy Effects by the Government’s Initial Promotion Unit: 100 million yuan
Original GDP Initial Promoting Policies GDP Policy Impact (%)

Figure 1 Policy Effects by the Government’s Initial Promotion Unit: 100 million yuan

This chart shows that the government’s initial push has an obvious impact in the first years, reaching up to a maximum of 55% of the GDP (2013). However, it decreases later and has almost no effect after 10 years. Additionally, in this model, we do not count the cost of government promotion in industrial congregation policy.

  1. Housing Rent Subsidy Policy

To facilitate the industrial congregation planned, the government can adopt policies to subsidize housing rents or prices. Beijing Financial Street subsidies 1000 Yuan/square meter to attract financial firms.

We will consider a 10% subsidy of the housing rates, which is also equivalent to a permanent 10% rental subsidy. Table 2 and Figure 2 represent the effect of the housing rent subsidy policy.

Table 2 Effects of Housing Rent Subsidy Policy Unit: 100 million yuan
Original GDP Housing Rent Subsidy GDP Policy Impact (%)

Figure 2 Effects of Housing Rent Subsidy Policy Unit: 100 million yuan

Figure 2 shows that, although the impact of subsidizing rent is not very significant—usually at approximately 4%~5%—its effects last long and eventually bring a certain increase in total GDP.

  1. Policies Subsidizing Transaction Costs

Administrative departments may establish related funds to subsidize transaction costs, namely, by providing subsidies to each transaction procedures, including the following:
Applications for intellectual property rights;
Technical standards;
Venture capital investment;
Open of the laboratory;
Credit rating;
Mediation services;
Public offerings;
Purchasing information products;
Bringing up intellectual property litigation;
Establishment of information system; and

We assume that the policy on subsidizing transaction costs is implemented for 10 years. The government stops the policy’s implementation after the incubation of mature intermediary service institutions and intermediary service markets have grown up. The effect of the policy is as follows.

Table 3 Effects of Policy Subsidizing Transaction Costs Unit: 100 million yuan
Original GDP Subsidizing Transaction Costs GDP Policy Impact (%)

Figure 3 Effects of Policy Subsidizing Transaction Costs Unit: 100 million yuan

Figure 3 shows that, during the first few years, the effect of policies subsidizing transaction costs is significant, at up to 57% in 2013 and 30% in 2014. It then gradually decreases but still maintains a relatively significant influence. The effect is significantly higher than the government inputs of subsidies for transaction costs (2% of the GDP). Until 2021, the effect undergoes minor fluctuations after the subsidy policy is stopped.

  1. Policies Promoting Industrial Alliance and Association Development

The administrative departments may lead or support enterprises or civil organizations to establish industrial alliances or associations or to support these industries by purchasing their products. The supporting policy can be implemented for 10 years. After that, industry alliances and associations develop and operate by themselves. The assumption is that the results of this policy reduce transaction costs (1% of total value added).

The effects of policies are as follows.

Table 4 Effects of Policies Promoting Industrial Alliances Unit: 100 million yuan
Original GDP Transaction Costs Saved by Industrial Alliances GDP Policy Impact (%)

Figure 4 Effects of Policies Promoting Industrial Alliances Unit: 100 million

Figure 4 shows that this policy has played a role; however, relative to other policies, the effect is not significant but is very efficient compared with the input. Furthermore, this result is only a static analysis. From a dynamic perspective, if this policy develops relatively mature industry associations and industry alliances, it will bring long-term benefits.


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