China shows the way to protect private property

It is a sign of our times that China has now enshrined private property rights into its constitution with an amendment approved by the National People's Congress this week. For the first time since the communist party took power in 1949 it is actually legal to own property in China.

The situation in the Gulf States is somewhat different. In some cases land has been granted to nationals for their life-time use by local rulers. In others a more direct form of ownership has arisen but qualified by restriction to nationals of the country concerned.

This has started to change. In Bahrain and Oman the law has been altered to allow other GCC nationals and foreigners to buy real estate. In Dubai the sale of freehold property has started on the basis of local law, pending a new UAE federal law.

Interestingly in China, officials still prefer to talk about 'non-state-owned property' rather than 'private property'. Old habits die hard. But the need for private real estate is well appreciated.

One argument is that land is the 'birthright of a people'. This was the old communist view in China. Now, however, the ruling elite realizes that land is only as good as the use it is put to, and the value added to it.

In short to maximize the value of a national 'birthright' land needs to be owned, traded and used for profitable activity. That activity might be as simple as homes for people to live in, or for a new industrial trading city.

Holding on to a 'birthright' that does not have an income stream - or has one smaller than it could do - is a false economy.

Now even the Chinese have come to appreciate that private enterprise and private ownership are the best approach to maximizing the value of land. Hence private property has become a part of the constitution of what was once a communist state.

Gulf States can surely learn from this example, and should be looking at modernizing their approach to property ownership. This is how to expand local economies, create jobs and maximize economic welfare.

The old rules of state ownership no longer apply in China. Why should they be any more relevant to the modern Gulf States?