Chinas New Civil Code – Part 2: Property Law

The second part of the Civil Code contains in particular the regulations which were previously regulated in the Property Law. The Property Law will be repealed and become ineffective when the Civil Code enters into force. The second part of the Civil Code consists of 20 chapters divided into five subsections: General provisions, property, usufruct, securities and possession.

Immovable property is subject to a compulsory registration. Persons obliged to register, but also interested parties, such as prospective buyers, may have access to the registers and request copies of the registered information. Registration authorities are obliged to provide such information.

Most resources are the exclusive property of the State and cannot be acquired by private individuals. State ownership is administered by the State Council. Resources owned by the State include, but are not limited to:

Besides resources owned by the state, there are also resources, especially in rural areas, which are collectively owned, for example by a village community. Resources that are legally owned by a collective are the collective property of the members of that collective. This includes, for example:

Every natural person is entitled to hold the ownership of real estate such as houses and apartments and movable goods such as their legal income, vehicles, commodities of daily use, manufacturing equipment, raw and semi-finished products.

The State, the collectives and every individual may make investments under the law to establish limited liability companies, joint stock companies or other enterprises.

All owners of immovable or movable property are entitled to own, use, benefit from and dispose of it in accordance with the law. The owner has the right to establish usufructs and security interests in his own real estate or movable property.

Usufruct according to the Civil Code refers to the right of an entitled person to own, use and benefit from immovable or movable property owned by others. However, the beneficiary has no power of disposal over such immovable or movable property. Organizations as well as individuals can be beneficiaries of usufruct rights. These rights include in particular land use rights. This means, for example, that a farmer, as a member of a collective, can obtain the sole right of use of arable land owned by the collective, or that organizations and individuals can obtain the right of use of state-owned building land, i.e. the right to erect buildings on land, with the building being owned by the organization or individual. The duration of land use rights may vary according to the different types of use of the land, but is generally limited in time. However, an extension is possible.

In particular by means of land use rights, China is trying to solve the "land contradiction": The land is owned by the state or collectives, while the individual needs the land. This means that although the beneficiary of the land use right has no claim to property in the land, he can use the land to a certain extent as a landowner.

The incorporation of the provisions from the Property Law into the Civil Code does not entail any significant changes compared to the legal situation still in force. In particular, it remains impossible for (private) organizations and individuals to acquire land as property, so that companies and investors are still forced to acquire land use rights for their production facilities etc.

The next article in this series will deal with some aspects of the 3rd part of the Civil Code – Contractual Law.