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Informal Rules, Transaction Costs, And The Failure Of The “Takings” Law In China, Chenglin Liu

Faculty Articles

The enforcement of China’s new takings law has failed. In the unbalanced tug-of-war between individual homeowners and deep pocketed developers, the government sided with the latter by changing zoning plans to fit commercial development, authorizing forced evictions, deploying judicial police to execute eviction orders, lowering compensation standards, instructing courts not to hear cases involving demolitions, blocking class actions, and more. Many Chinese scholars argue that lackluster enforcement can be remedied by a well-drafted property code. However, applying the New Institutional Economics’ (NIE) theory on institutions to the enforcement failure associated with the takings law draws attention to informal complaints, which …