A deadline is drawing near in a case of illegal land use involving BYD, the fast-growing compact automaker in which American investor Warren Buffett has a 10% stake, and which is being widely watched for a potential shift in policy.
In July, the Ministry of Land and Resources said it would rule by Sept. 30 on what to do about the company building seven factories on 49 hectares of land bought from an economic development agency in Shaanxi, 45 hectares of which was zoned for agriculture.
It is not unknown for local officials to turn a blind eye to such zoning violations in the drive for economic growth. Companies want to bring new production capacity on stream without waiting for all the red tape to be dealt with, while officials themselves are judged on their promotion of local economic growth and local governments have become hooked on land sales for their revenue.
The ministry has said that 7,800 hectares of land had been used illegally in the first half of this year, a 14% increase over the same period last year. That reversed the trend of the figures of the past three years. They had shown the issue was shrinking, but that may just have reflected lax enforcement and reporting. The country’s farmland has continued to be eaten up by industrialization and urbanization. It has shrunk by 6% over the past decade to 122 million hectares, barely above the minimum arable land the ministry reckons China needs to be self-sufficient in food. The summer’s floods and the drought earlier in the year in some parts of the country have reduced that margin further.
The ministry has hit five companies so far this year for illegal land use, following a tougher inspection regime launched in February that found examples of illegal land use in more than half the 13 cities examined in an initial spot check and officials cooking the books in four. In those cases buildings were ordered to be demolished, land taken back, executives imprisoned and officials reprimanded.
None of the companies sanctioned were as high profile as BYD. How tough will the ministry be this time? And what sort of signal will it want its ruling to send?