Becoming Beautiful: Property Rights For Natural Resources

By Yuanchao Xu 19 March, 2020

Two Sessions may be postponed but CWR's Xu shows that China's ecological civilisation is still on track

A clear property rights system for natural resources is a key step towards balancing development & protection; by 2020, the Ministry of Natural Resources aims to build this for coal, water, forests etc.
The top priority is to classify & register natural resources so that ownership & use rights can be separated; a principal-agent management system is also suggested with pilots in 4 provinces
Balance sheets for natural resources will also be made, monitored & updated on a real-time basis; expect existing laws on natural resources to be amended to synergise with this reform

A clear property rights system is the cornerstone of a market-oriented economy. This is not only important for doing business, but also for ecological protection. Yet unclear property rights and responsibilities have long been a restraint in the utilisation of natural resources in China.

In 2018, the Chinese government conducted a ministry reform in 2018, in which the Ministry of Natural Resources (MNR) was established and acted as a proxy to own and manage all natural resources. By centralising the ownership (as compared to the lack of clear ownership before), the MNR acts as the first step towards a clear property system for natural resources, as well as transitioning the government’s decision making process from an economy-oriented one to a holistic one which strikes a better balance between economy and environment.

By 2020, the MNR aims to build a property rights system for natural resource assets…


…confirming ownership, clarifying use rights & responsibilities, ensure strict protection etc.

As we have discussed earlier in our article Ministry Reform: 9 Dragons To 2, the MNR has two main missions: 1) the designation of ecological redlines and 2) the limiting the over-exploitation of natural resources. Both missions need a clear property system for natural resources. As such, the government has taken a further step by issuing the “Guiding Opinions for the Reform on Coordinating and Promoting a Property Right System for Natural Resources Assets” in April 2019, aiming to build a property rights system for natural resource assets with confirmed ownership, clarified use rights & responsibilities, strict protection, smooth transfer and effective supervision by 2020.

Several key tasks are proposed in this document:

Build & improve the property right system for natural resources

The top priority of the reform is to scientifically classify and register natural resources in a way that that the separation of ownership and use rights can be promoted. Regarding different types of resources, several key measures are suggested:

Land resources
  • Separation of ownership, contracting rights and management rights for rural land
  • Separation of ownership, entitlement and use rights
  • Separation of land use rights for spaces above the ground, on the ground and under the ground, etc.
Mineral resources
  • Research on the combination of prospecting and mining rights;
  • Improve the connections among prospecting rights, mining rights and land use rights, etc.
Ocean resources
  • Improve the selling, transferring, pledging and leasing rights on ocean areas;
  • Build the property rights system for uninhabited islands;
  • Clear the relationship among fish farming rights, ocean space use rights, contracting rights and water withdrawal rights


Principal-agent management & central-local funding systems

A principal-agent management system is suggested in the guideline in which appointed provincial level/city level governments can exercise property rights on natural resources for the people. Pilot provinces for this principal-agent system include Fujian, Jiangxi, Guizhou and Hainan.

Pilot provinces for this principal-agent system include Fujian, Jiangxi, Guizhou & Hainan

Moreover, the existing central-local income funding system for natural resources is to be improved. Reasonable adjustments can be made to the system so that local authorities can be more flexible in supporting local ecological protection projects.

For rural areas, the property rights on collectively owned natural resources belong to rural collective economic organisations.

Conduct investigation & registration of natural resources

A unified classification and accounting system for natural resources was also suggested. This means balance sheets for natural resources will be made, monitored and updated on a real-time basis.

Balance sheets for natural resources will be made, monitored & updated on a real-time basis

Furthermore, an information platform will be built for the registration of different types of natural resources. The ‘Provisional Measures for the Unified Confirmation and Registration of Natural Resources’ was issued as the guidance for the registration.


Holistic protection & intensive development of natural resources

To strike this balance, a national territory map is to be made. Controlling lines such as ecological redlines, permanent basic arable lands and urban development boundaries should be clearly designated. Holistic measures should be taken for the protection of natural resources.

Standards for natural resources development and corresponding industry access policies are to be improved. Resource exploitation efficiencies and environmental protection requirements are two important criteria in selecting transferees of natural resource use rights.

Improve the legal system for natural resources properties

Several amendments are going to be made to existing laws regarding natural resources including the Mineral Resources Law, the Water Law, the Forest Law, the Grassland Law, the Law on the Administration of Sea Areas and the Island Protection Law.

Further Reading

  • Ministry Reform: 9 Dragons To 2 – What does China’s long-awaited ministry re-shuffle mean – who manages what and how? China Water Risk’s Woody Chan and Yuanchao Xu review the roles and impacts of the new Ministry of Ecological Environment & Ministry of Natural Resources
  • Dirty & Thirsty – Not Just A Paper Tiger – China is the world’s largest paper producer but the industry is a Top-3 polluter. Pollution crackdowns have led to cuts across provinces and water quality has improved. With rising enforcement, is this just the beginning?
  • Too Big To Fail! Protect At All Costs – Multiple policy innovations have been unleashed to protect the Yangtze River as it is too big to fail – corporates and investors need to get on top of the YREB to avoid regulatory shocks
  • 2018 State Of Ecology & Environment Report Review – It is one year on since the Ministry of Ecology and Environment (MEE) reform, has it impacted China’s water? What has worsened & what has improved? We review the latest 2018 report
  • 5 Trends For The Year Of The Rat – Will the rat bring more outbreaks or will we get sunk like a drowned rat by water and climate risks? Or can we stay ahead with our wits and cunning to win the rat race? Find out what the lunar new year has in store for us in our 5 trends

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Yuanchao Xu
Author: Yuanchao Xu
Yuanchao uses his analytical proficiencies towards the assessment and visualization of water risks for China Water Risk. Prior to joining, Yuanchao was based in Europe completing the Erasmus Mundus Master Program where he specialsed in hydro-informatics and water management. He applied his skills in climate forecasting and water resource modelling to the EUPORIAS project with DHI (Danish Hydraulic Institute) which resulted in a conference paper on seasonal climate forecasting. Building on this work, he went on to develop hyfo, an open-source R programme for climate scientists and modellers to analyse and visualize data. Yuanchao’s bachelor degree was from the China Agricultural University where he specialized in heat energy and power engineering. During his time there, he also patented a testing instrument for hydraulic machinery. He has studied and worked in Beijing, Nice, Newcastle and Copenhagen.
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