Even though its role is diminishing, Hong Kong has played a unique and irreplaceable part in China's economic story over the past two-plus decades.

Massive foreign direct investment in the mainland from and through Hong Kong, and China's external trade with and through Hong Kong are cited.

But these are just the physical and visible aspects of Hong Kong's role.

The more subtle and somewhat invisible aspect of Hong Kong's contribution to China's development has been its conceptual influence in opening mainland eyes on how to start a capitalist-style, freewheeling market economy.

Deng Xiaoping was uncertain, when he launched his reforms and opened China's doors to the world in the late 1970s, how to accomplish the monumental task of turning China away from a command economy to a market one.

Deng resorted to trial and error, or as he himself put it, ``Crossing the river by feeling for stones in the riverbed.'' And, in his effort to find the hidden stones, Hong Kong served as an excellent reference.

The antecedents for China's current law governing the leasing of land are an example stemming largely, as they do, from pre-1997 British practice where London had governed for more than 150 years. All of the territory's land was legally owned by the Crown. Land ``sales'' in the territory were in fact leases or rentals. Residents did not permanently own a piece of the land, a practice that continues in the SAR today with minor wording changes in relevant laws that reflect the decolonization.

From a pragmatic standpoint, this colonial practice appeared to best serve Beijing's purposes in developing a private real estate market. China's laws, inherited from Maoist socialism, still stipulate that all land and other natural resources are owned by the state. The similarity between Hong Kong and the mainland regarding land ownership is clear. In both there is one sole landowner, whatever it is called.

Because of the similarity, Hong Kong's land-lease laws were readily available to be borrowed by the mainland when Beijing moved to privatize housing in the mid 1990s.

China has approached privatization cautiously by feeling the stones. And, in the process, it has gradually developed a legal regime governing the use of land that is similar to Hong Kong's, although the terms are different.

To safeguard state ownership of the land, China continues to insist that land is not for sale so it came up with the term ``the right to use land.'' Buyers must pay for the right to use land for a specified period, but that purchase contains within it the right to transfer the property to a new user.

China's regulation governing the transfer of land-use right, effective since 1990, stipulates the maximum time periods for various land use. For residential housing, the land-use right is a maximum of 70 years. It is 40 years for building commercial, tourism and entertainment facilities, and 50 years for other uses.

After 15 years of enforcement, however, China's regulatory pitfalls become increasingly troubling.

``When the right for using a piece of land expires,'' the regulation states, ``the state will take back, gratis, the land-use right and any object built on that piece of land. The land user must return the certificate for the land use.''

That is the difference between Hong Kong's regulation, where land leases can be extended on their expiry.

With more mainland residents now in private housing, concern is growing that owners could be forced to return their land and housing on it to the state with no compensation.

Many Chinese legal authorities have written to point out that the law is at odds with the constitution, which enshrined the inviolability of private property at the 2004 National People's Congress annual meeting in Beijing.

In a fence-mending move, Beijing has added a clause to a draft law on real property rights to be legislated by the National People's Congress, which allows land users to apply for an extension of their rights when they are near expiry.

With this step, the mainland is once again moving close to Hong Kong's practice. However, the colonial practices of a long-gone government might not be the best model for China. China is a sovereign country. And it would be better for Beijing, in the long run, to refer to practices in other sovereign countries, like the United States or Japan, in developing private real estate.

China should consider allowing its citizens to permanently own land. Allowing such a thorough-going privatization would take care of the mounting problems regarding land disposals once and for all.

There are myriad abuses of power by local officials who arbitrarily take back, in the name of the state, farming land from peasants whose families have occupied it for centuries to convert it to property development.

Reports of farmers' massive resistance are constantly in the news. Similarly, in cities, redevelopment of old districts has also created big problems as local officials commit all kinds of outrages, also in the name of the state.

Private ownership would make land requisition a commercial issue and end these abuses in a rational manner.

zhong.wu@singtaonewscorp.com