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Archives of Business Research – Vol. 9, No. 12

Publication Date: December 25, 2021

DOI:10.14738/abr.912.11324. Feng, H., & Squires, V. R. (2021). Urbanization in China and the Role of Social And Natural Capital in Land Acquisition and Transfer

Arrangements. Archives of Business Research, 9(12). 104-114.

Services for Science and Education – United Kingdom

Urbanization in China and the Role of Social And Natural Capital

in Land Acquisition and Transfer Arrangements

Haying Feng

ORCID 0000-0003-0594-1187

Qinzhou Development Institute, BeiBu Gulf University, Guangxi, China

Victor R. Squires

ORCID 0000-0002-6684-2927

Formerly, University of Adelaide

ABSTRACT

The paper is in several parts. We explain the context of the study area that is

characterized by land acquisition and transfer (LAT) by local government (often

against the wishes of the local villagers). We report on a methodology that is simple,

yet robust, that enables local land users and other interested parties to quantify the

social capital of local people in rural and peri-urban areas of Guangxi Zhuang

Autonomous Region (GZAR) and assess the extent to which social capital influences

the bargaining power of land users when faced with acquisition of their cropland,

grazing land, woodlands, water and other environmental goods and services.

Finally, we explore the notion that social capital can be a force to create a more even

playing field and influence the outcomes of land grab for industrial, infrastructure

and urban development. Interest in the concept of social capital and its application

has increased rapidly over the past few years with the realization that social bonds

and norms are important for achieving sustainability. Ferdinand Tönnies identified

the value of the ideas surrounding social capital as early as 1887, but later scholars

gave it a theoretical framework. Social capital implies that there are aspects of

social structure and organization that act as resources for individuals, allowing

them to realize their personal aims and interests. Often, social capital is defined as

trust, norms of reciprocity, and networks among individuals that can be drawn

upon for individual or collective benefit. Social capital is different between

urbanites and rural dwellers, especially farmers. In this paper, we focus on how

social capital serves the interests of individuals or collectives. Social capital based

on kinship and geopolitical position plays an important role in affecting rural land

transfer. Rural land transfer (also called LAT) is becoming a highly contested matter

as China moves to implement its plan to increase the proportion of urban dwellers

to 70% by 2030(Ma et al., 2018). Natural capital (a sub-set of social capital) should

always be maintained as it is critical to sustainable economic development

representing, as it does, a multidimensional concept that mirrors the different

frameworks of various scientific disciplines and social groups used in valuing

nature. Widespread and rampant LAT that accompanies accelerated economic

development in peri-urban and rural areas (Ma et al., 2018) needs to take critical

natural capital into account.

Key words: urban growth, land grab, rural land, economic development, labor, migration

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Feng, H., & Squires, V. R. (2021). Urbanization in China and the Role of Social And Natural Capital in Land Acquisition and Transfer Arrangements.

Archives of Business Research, 9(12). 104-114.

URL: http://dx.doi.org/10.14738/abr.912.11324

CONTEXT AND SETTING

Guangxi Zhuang Autonomous Region (GZAR) is in the south of China and is bordered by the

South China Sea (Gulf of Tonkin) to the east and Vietnam to the south (Fig. 1a.) GZAZR is a

relatively poor but scenic region of 237,600 km2 with a population in 2018 of over 50 million

people. In Guangxi the coastal region is being developed for port facilities and for transport

corridors because the port at Qinzhou is the nearest one to most ASEAN countries (Fig.1b). In

the recent past, artisanal fishing, by people who lived on their boats, was a common form of

livelihood. More recently, large scale commercial marine aquaculture has flourished and many

fisher families have been re-housed on land. Crop agriculture in terraced fields is still widely

practiced (Feng, Squires and Wu, 2020) as well as sugarcane plantations and fruit orchards

(citrus, bananas and mangoes). Land-based industries are springing up with large-scale green- field developments for Smart manufacturing and Smart agriculture as well as large investments

in major high-speed rail and highway infrastructure.

Figure 1 (a) Map showing location of Guangxi Autonomous Region in south China and (b) the

location relative to ASEAN countries

Figure 2 Guangxi has an abundance of scenic spots from karst landscapes to waterfalls and

terraced croplands

URBANIZATION AND ECONOMIC GROWTH

China's economic transformation since 1978 has been remarkable, including incredibly rapid

growth of China’s cities. Over the last several decades, employment opportunities generated by

industrialization and the expansion of the urban construction and service sectors, along with

the gradual relaxation of controls on population movements have stimulated rural-urban

migration on a massive scale. Urban growth in China has expanded and the dynamics of the

rural-urban interface has changed dramatically (Feng and Squires, 2018, Ma et al., 2018).

China’s urbanization has consumed significant land resources as urban boundaries are

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continuously expanding outward and territorial jurisdictions of cities are increasing, primarily

through the expropriation of surrounding rural land and its integration into urban areas (Feng,

Squires, & Wu. 2021) As clearly indicated in the Figure 3, the demand for urban requisition of

land has increased year by year in China due to the urbanization policy that seeks to have 70%

of the entire population in urban centers by 2030 (Ma et al, 2018). This expansion has serious

implications for rural and peri-urban land especially for the stock of arable land and, ultimately,

for food security (Squires, Hua and Wang, 2015; Jacoby, Li and Rozelle, 2002). Rural LAT is

becoming a highly contested matter as China moves to implement its plan to increase the

proportion of urban dwellers to 70% by 2030. The expansion of construction land and

environmental protection are the main drivers of the decline in arable land in China (Zhao et al.

2014)

Figure 3 China’s population has stabilized but urban centers are expanding and the

urbanization is expected to be about 70% by 2030

For example, between 2001 and 2011, the amount of land in China classified as urban

construction land had increased by 17,600 km2, reaching a total area of 41,805 km2 in 2011, an

increase of 58 percent over a decade. About 90 percent of demand for urban construction land

was met through expropriation of rural land, while only 10 percent was supplied from the

existing stock of undeveloped urban construction land (Ma et al., 2018. Many government

officials in China have largely overlooked the implication of rapid urbanization for millions of

farmers or villagers who have been “legally or illegally” made landless over the years. According

to an official statistic, three million people become landless farmers every year in China. The

total number is expected to double in 2030 because of the current pace of urbanization. There

has been a huge influx of rural migrants to urban and peri-urban areas (Tao and Xu, 2007) due

to the pull factor of highly subsidized aid and investment in infrastructural development

(Squires et al., 2012). These migrants who are facing lack of unemployment in their home

region are attracted to jobs and the government-supported opportunity to start businesses.

The BeiBu Gulf region of Guangxi and other regions in eastern China (Squires, Feng and Wu

2021) are also targets for the newly urbanized labor force.

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Feng, H., & Squires, V. R. (2021). Urbanization in China and the Role of Social And Natural Capital in Land Acquisition and Transfer Arrangements.

Archives of Business Research, 9(12). 104-114.

URL: http://dx.doi.org/10.14738/abr.912.11324

Land which was meant for cultivation is increasingly being acquired for construction of vast

infrastructure, residential and commercial buildings projects. Rural land requisition and

conversion for industrial use have been particularly inefficient because it has been largely

driven by administrative decisions rather than market demand resulting in land being “locked

up” and no longer available for villagers and farmers to use.

Governance issues loom large throughout China

In GZAR, as in many other parts of China, the tension between economic growth and ecological

considerations, demonstrate the limitations of top-down approaches for managing natural

resources. A top-down and centralized approach often fails to address the socio-political

context in which it is embedded and therefore lacks a complete understanding of how power

manifests itself in the bureaucracy and how it articulates through economic imperatives set by

the Chinese state. The approach to major infrastructure developments like railways, highways,

ports and power plants has depended on infrastructure-heavy and technocratic solutions to

hasten economic development in Guangxi. This has worked to undermine the focus on

integration and public participation. But changes are being made to the complex governance

bureaucracy. These changes are embedded in and run parallel to transformation in

environmental policy reflected in a wide range of legislation addressing environmental policy

challenges since the 2000s, including pollution, wildlife protection, and nature conservation. As

well as highlighting institutional, governance and policy dysfunction, climate change underpins

issues concerning land-based resources.

Issues include the need for cross-sectoral integration associated with land and water

management, agricultural production, climate [variability, change, management and adaptation

to extreme events] as well as population growth and migration leading to urbanization (He et

al., 2016). In China, natural resource managers (NRM) policy makers and other NRM personnel

are attempting to find a balance between centralized infrastructure development and

management and decentralized management systems (Squires & Feng, 2018) to overcome their

current challenges. This often requires significant new cooperation to search for more mutually

beneficial management decisions and improve the situation in different parts of a region where

local people experience varied impacts (Fig. 4).

Figure 4 Under the New Urbanization policy there is a striving for better coordination across

sectors

Note: Hukou refers to the residential permit that, until recently, was not transferable from

rural to urban

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The complex nature of interlinked components within NRM (Figure 5) and combination of

governance mechanisms leads to increasing information needs to support effective resource

management. Engagement with a wider range of stakeholders and ‘knowledge holders’ is

required for effective governance (Squires, 2012).

Figure 5 Land tenure reform, governance arrangements and community response are

intimately connected There is an important role for the householders

Understanding People and Place in the rapidly developing GZAR: A Case study

Many communities, especially in non-developed market economies in rural GZAR, are in

transition as global changes interact with community-level social structure and dynamics, and

the influence of the nation-state grows. In both market economies and those in transition,

cultural aspects are reflected in methods of governance. Case studies provide an opportunity to

acknowledge both the qualities that make particular places and efforts unique as well as the

elements that may be generalized across contexts. Just as data collection and assessment are

necessary at multiple scales, so too we must document the successful (and unsuccessful)

approaches to ensure that learning can be shared among key actors (Majule, 2012, Shiferaw

and Bantilan, 2004). General principles can guide us in determining the appropriate institutions

and organizations needed to manage a complex natural system (Fig.5), but we must also take

into account the cultural, social, and economic attributes of the community at hand. While

acknowledging the complexity of human and natural systems is a critical first step, we also need

to move toward a deeper understanding of these complex systems and their interactions.

Human communities are geographically based on territories and landscapes with specific

cultural connotations and connections. People and place are major determinants of success of

any ‘development’ measures taken. There will be continuing struggle between the needs of

people (in terms of economic and social dimensions) and the needs of place (in terms of the

environment). Such a struggle is made even more complicated by the fact that the needs of place

overlap with economic and social dimensions as well. We characterize people as the economic,

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Feng, H., & Squires, V. R. (2021). Urbanization in China and the Role of Social And Natural Capital in Land Acquisition and Transfer Arrangements.

Archives of Business Research, 9(12). 104-114.

URL: http://dx.doi.org/10.14738/abr.912.11324

social and community aspects of natural resource management (NRM) while place is comprised

of environmental attributes that vary from one location to another, but also within. For

example, in river basins, with important aspects including upstream users vs downstream or

the reconciling the water needs of urban vs rural (mainly irrigated agriculture). Place in that

example is paramount because inevitably those upstream will have different priorities from

those downstream in a river basin. Retaining a balance between people (i.e. economic focus on

water and land markets and rural social welfare improvements via infra-structure projects)

and place issues puts pressure on authorities. Over the past 30 years here have been many

changes in China at different scales, including land fragmentation/amalgamation, exploitation

of common pool resources (forests, woodlands, wetlands and rangelands) and both household

and global governance. The biggest change has been associated with accelerated land transfers

in response to the policy to speed up the process of urbanization. The peri-urban areas have

seen much change and a significant proportion of the farmlands around villages has been

acquired for construction of infrastructure, roads, rail lines, commercial buildings, residential

and landscaping (Feng, Squires and Wu, 2021). However, land redistribution is neither efficient

nor timely. Buyers and sellers do not have the same level of information; this results in an

“information asymmetry” and an increase of transaction costs and widely variable

compensation levels. Our observation was that the households that received better

compensation payments were those that had a higher level of social capital. This is in line with

the results of study in USA by Perry and Robison (2001). Evidence is accumulating

(unpublished data) that the level of social capital that a household possesses is a major

determinant of the area of land that is compulsorily acquired by government. Those households

with low levels of social capital were less likely to emerge victorious in any dispute over level

of compensation

Social capital: New meanings for old knowledge

The term social capital captures the idea that social bonds and norms are important for

sustainability. Its value was identified by Ferdinand Tönnies as early as 1887, and later given a

theoretical framework by Coleman (1988), and brought to wide attention by Putnam (1993).

Social capital implies that there are aspects of social structure and organization that act as

resources for individuals, allowing them to realize their personal aims and interests. Such

institutions are effective because “they permit us to carry on our daily lives with a minimum of

repetition and costly negotiation” (Bromley et al. 1992). Relationships of trust, reciprocity and

exchange, common rules, norms and sanctions, and connectedness in groups are what make up

social capital, which is a necessary resource for shaping individual action to achieve positive

outcomes. Often, social capital is defined as trust, norms of reciprocity, and networks among

individuals that can be drawn upon for individual or collective benefit (Coleman, 1988; Putnam,

1993). Jin et al., (2009), Chen et al. (2004) proposed that social capital reduces transaction costs

(Perry and Robison, 2001; Kostov, 2010). In this paper, we define social capital as the extent to

which reciprocity norm, social networks and information acquisition is based on the

individual’s characteristics, in ways that serves the interests of individuals or collectives.

Social capital based on kinship and geopolitical position plays an important role in affecting

rural LAT. Social capital is different between urbanites and rural dwellers, especially farmers

and villagers.

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METHODOLOGY

Measuring social capital is not easy and some of the published procedures are too complex to

be readily applied at the village level. We therefore sought to simplify the process and make it

more readily usable. Table 1 shows the basis for our approach. The social capital analyzed in

this study included formal networks, informal networks, and the degree of difficulty associated

with accessing information. We conducted interviews and surveys. Participants included

household heads (both male and female with some 40 years of age, or younger, and others

above 60 years of age). We included staff from the village administration. Answers/statements

to some questions were analyzed against a 5-point Likert-like scale in which 1 stands for

completely agree; 2 for agree; 3 not sure; 4 is disagree and 5 is totally disagree. A Likert* scale

is a multiple-indicator or multiple-item measure of a set of attitudes relating to a particular

topic or statement. The goal of a Likert scale is to measure intensity of feelings about the subject

or matter in question (Allen and Seamen, 2007).

We used the factor analysis method to assess the villagers’ social capital index and the Kaiser- Meyer Olkin test (KMO). The KMO was 0.66 (> .06) so was relevant and appropriate) and we

identified three main groupings (F1, F2 and F3) to give a total contribution to variance of 64.6%.

F1 contains S4, S6, S7 and S8 and contributed 41.6%; F2 contains S1, S5, S9 and S10 and

contributed 11.5% while F3 contained S2, S3 and S11 and contributed 11.4%. With this method

we obtained a value for the villagers’ social value according to Equation 1.

Social capital = F1* 41.6 +F2 *11.5 +F3 *11.4)/64.4 Eq.1

Table 1 Assessment of villagers’ social capital

Dimension Question/statement Mean STD

error

Note

Formal

network

(S1) Membership of

party, club, social

group

(S2) Participate in

religious activities

(S3) Would you make

a contribution to a

project that would

bring good to your

village

0.39 0.49

0.26 0.44

1.48 0.87

1=yes 0=no

1=yes 0=no

Likert-like

scale

Informal

network

(S4) Have a lot of good

friends?

(S5) Often get

together with

relatives and friends

(S6) Have some

relatives or friends

working in

administrative roles?

(S7) Average yearly

spending on

relationship-building

(weddings, funerals)

2.10 0.70

1.81 0.88

4.54 1.19

10.32 2.34

0.85 0.49

Likert-like

scale

Likert-like

scale

Likert-like

scale

5000

Yuan (CNY)

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Feng, H., & Squires, V. R. (2021). Urbanization in China and the Role of Social And Natural Capital in Land Acquisition and Transfer Arrangements.

Archives of Business Research, 9(12). 104-114.

URL: http://dx.doi.org/10.14738/abr.912.11324

(S8) Are there some

customs/habits that

everyone must

observe in your

village?

1=yes 0=no

Access to

information

(S9) Is it easy to get

information on land

values and

compensation levels?

(S10) Is it easy to get

access to agricultural

extension services

and new technologies

(S11) Would you

identify as someone

who is receptive to

new ideas or

technologies?

2.86 1.13

3.10 1.17

3.79 0.94

Likert-like

scale

Likert-like

scale

Likert-like

scale

Data source: field survey in Qinbei County, Guangxi

Acknowledging the power of people and their relationships

The knowledge and values of local communities are now being acknowledged as contributing

to better governance of natural resources. For as long as people have managed natural

resources, they have engaged in forms of collective action, collaborating on management of

farm, forest, grassland, and aquatic resources. Collective action has been institutionalized in

many forms of association. Relationships of trust, reciprocity and exchange, common rules,

norms and sanctions, and connectedness in groups are what make up social capital, which is a

necessary resource for shaping individual action to achieve positive outcomes. The concept of

social capital captures the idea that social bonds and norms are important for system

sustainability. The importance of local institutions has long been understood in the common- property literature but has only recently come to be recognized as important for conservation

and management of natural resources (O'Riordan & Stoll-Kleeman 2002).

Changing the behavior of individuals (rather than of groups or communities) has become a pre- occupation of many policy makers and practitioners. As a result, local institutions have

diminished in importance and often entirely disappeared, and so the state has increasingly

taken responsibility for natural resources, often under the mistaken assumption that local

resources are inevitably mismanaged by local people (Gadgil et al. 2000). According to Brand

(2009) the maintenance of critical natural capital (a sub-set of social capital) is an important

objective of sustainable economic development. “Critical natural capital represents a

multidimensional concept, as it mirrors the different frameworks of various scientific

disciplines and social groups in valuing nature”. Widespread and rampant LAT that

accompanies accelerated economic development in peri-urban and rural areas needs to take

critical natural capital into account.

Evidence from both the land and marine sectors shows that when people are well connected in

groups and networks, and when their knowledge is sought, incorporated, and built upon during

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planning and implementation of conservation and development activities, then they are more

likely to sustain stewardship and protection over the long term. Community Participation is a

vital element (Cernea 1991) especially when designing management institutions for common- pool resources (Ostrom, 1990). The engagement with relevant stakeholders is vital, and the

first step to a successful cooperative management approach is communication. Possessing

multiple ways to communicate about the resources or services being managed—to allow

“movement beyond anonymity”—has proven to be an essential element in successful co- management of shared resources. This closely aligned to what Ffolliot and Brooks (2014) call

locally-led initiatives.

SUMMARY AND CONCLUSIONS

Regulatory reform has emerged as an important policy area in Guangxi Autonomous Region

(GAZR). For regulatory reforms to be beneficial, the regulatory regimes need to be transparent,

coherent, and comprehensive, spanning from establishing the appropriate institutional

framework to liberalizing network industries, advocating and enforcing competition policy and

law and opening external and internal markets to trade and investment. An unregulated market

economy may lead to social inequality that are considered to be socially or politically

undesirable. If this is so, then the purpose of regulatory reform is not to leave the market

unfettered, but to ensure that the policy objectives that have been fixed can be efficiently met.

By keeping unnecessary burdens and distortions to a minimum, the benefits of each piece of

new regulation can be assured. Ecosystem-human interdependencies happen within complex

socio-ecological systems in GZAR, with highly interdependent governance arrangements,

technology choice and economic considerations (Fig 4) but the value of social capital among the

villagers and other rural dwellers cannot be over-emphasized when it comes to getting fair

compensation when LAT projects are imposed.

Ecosystem-human interdependencies happen within complex socio-ecological systems in

GZAR, with highly interdependent governance arrangements, technology choice and economic

considerations (Fig 6).

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Archives of Business Research, 9(12). 104-114.

URL: http://dx.doi.org/10.14738/abr.912.11324

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