The government’s continued reliance on formal systems of regulation at the central and local levels is evident in the new Property Rights Law, with its processes for registration and administration of property rights. State policy decisions and responses to issues of property relations remain subject to the limitations of formal institutionalism, which reflect the influences of liberal property models as well as the state’s imperative to ensure (or appear to ensure) regulatory control. Yet the predominance of informal relations in local socioeconomic and political life is well known.140 The formal regulatory ethos that pervades the Property Rights Law poses significant challenges for inhabitants of rural society, whose reality of socioeconomic and political relations is often far removed from the practices of legal formalism.
This tension has the potential not only to impede the effectiveness of the Property Rights Law in controlling unauthorized creation and transfer of private property rights in land but also to put institutional pressure on traditional social relations in rural areas. To the extent that enjoying the benefits of property rights protection requires compliance with formal regulatory models, this privileges people already adept at communicating and acting in the formal regulatory world, while excluding and marginalizing those who are no so adept. In the short term, this state of affairs has the potential to aggravate rather than relieve socioeconomic tensions and, in the longer term, may undermine traditional patterns of socioeconomic and political relations. The orientation of China’s Property Rights Law remains focused on formal processes of project approvals, licenses, formalized regulation, and the “legalization” of economic relations. In China’s rural societies, however, much economic activity is conducted through informal family networks and market networks. Local merchants often consider formal requirements of licensing to be mechanisms for state control, as indeed they are. The new law reveals dynamics of regulatory formalism by the way it confers on local officials authority to approve registration and transfer of property rights in land. Yet, more often than not, basic decisions on property-related issues of allocation, development, and land use are made informally at the family or community level with little attention to regulatory formalities.141