Abstract

COMMERCIAL LEASING IN CHINA Patrick A. Randolph, Jr.t Jianbo Lout Chinese economic policy increasingly is given over to the concept of market operations to direct land investment and us- age. It therefore is critical that Chinese law provide a clear basis for the rights of participants in the real estate marketplace. This article will evaluate the Chinese law of commercial leasing as a basis for market development. Necessarily, the article also will provide a basic background of Chinese real estate law. The lease is a critical tool in the operation of a market econ- omy. Markets thrive when market participants are given flexibil- ity in pricing and subdividing assets. Leasing permits division of the benefits of ownership and control of property among a series of parties, thereby making the property not only more flexible in terms of possible uses, but also more attractive to capital. Through the use of leases, parties intending short-term use of real estate can meet their needs without extensive capital invest- ment. Investors who have a tentative long term interest in prop- erty can make a capital investment when opportunities arise, even if their long term uses have not yet become practical, and lease to short term users in the meantime. If owners of real property are permitted to subdivide their property by using leases, then multiple short term users can also make use of a given asset at the same time. As a consequence of this flexibility, capital investors are more likely to fund investments into real es- tate because the risk is not tied to an individual use for a limited time frame. Capital can be matched to real investment opportu- nities unhampered by a limited use framework. t Professor of Law, University of Missouri, Kansas City, School of Law. The authors acknowledge the significant support of their home institutions and the fol- lowing corporate sponsors: The Chicago Title Insurance Company, GE Capital, Amoco Corporation. The information and ideas expressed by the authors are their own, and do not necessarily reflect the positions of any sponsor. t Instructor, Law Department, Peking University, Beijing, China. Professor Lou currently is a Ph.D. Candidate at Queen Mary and Westfield College of the University of London, London, England.

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