Creating Space for Innovation and the Market in China’s National Park System

(Photo: Kelly Cheng Travel Photography/Getty Images)

By Li Zhu, Rose Niu, & Lucy Yu

With more than a century’s history behind them, national parks are a fixture in Americans’ lives. Key to the parks’ success—in contrast to the timelessness and constancy of the mountains and waters they protect—have been numerous innovations that tap into and capitalize on the market’s dynamic forces. Thanks to these innovations and ingenious solutions, the U.S. national park system has become an exemplar in balancing conservation with use, and a successful institution grounded in lofty ideals as well as popular support.

China is now creating its own national park system, not only to create a new protected area category better suited to the dual purpose of resource conservation and public use, but also to spearhead its effort to streamline China’s protected area system. No doubt this will be a Herculean undertaking, given the complexity and intertwined interests involved. While many of these challenges appear to be unique to China, they include many of the same issues—from land tenure to community livelihood—that have tested the wisdom and perseverance of the U.S. national park system. By thinking outside the box and harnessing what the market has to offer, the U.S. national park system has survived a century of drastic social and economic changes, and it is still thriving. It is in this department of innovation that the Chinese national park system has much to learn from its U.S. counterpart.

This month, the Paulson Institute will host a group of China’s national park policy makers and park managers for a training trip to the U.S., where they will meet with park superintendents and rangers and view the parks management systems firsthand. We hope this trip will also afford them an insider’s look at the innovations and market-based practices in action in the day-to-day operation of U.S. national parks.

No matter what country, when designating a national park, securing the land or proper rights to the land is probably the single most important effort. While most U.S. national parks are created on federal lands, there are instances where pockets of land within the park boundaries are privately held, or where the land adjacent to the park is privately owned but is integral to the ecological integrity of the landscape. In these cases, the U.S. National Park Service (NPS) can choose to buy these properties outright, if feasible. Where direct purchases are not viable, the NPS often uses market-based instruments, such as conservation easements, to ensure long-term protection of the land without changing its ownership.

A conservation easement is a legally binding agreement between a private landowner (grantor) and a conservation organization or a public agency (grantee) that places a restriction on certain types of uses or prevents development on the land in order to protect its associated resources while the land remains privately held. A conservation easement can be either donated or sold. And when donated, the easement qualifies the landowner for generous tax benefits. What’s critical to a conservation easement is that it spells out prohibited activities and uses that may damage the conservation value of the concerned land, while it allows the landowner to continue to exercise many other rights to this property. Easement holders, meanwhile, can achieve their conservation purposes without buying the land outright. Simply put, it’s effective yet economical.

In China, all land in theory is publicly owned, i.e. state-owned or collectively owned. For national park candidate sites, land ownership is often a mixture of both. Local communities have long exercised their de facto rights to use, deriving a livelihood from whatever natural resources these places have to offer, such as tea cultivation, timber harvesting, and collection of traditional Chinese medicinal herbs. After the most recent collective forest tenure reform, the percentage of forest land under individual household management has significantly increased. This has important implications for national park designations. Politically, it will be highly contentious and risky to take back or ‘nationalize’ these lands; economically, it will be as prohibitively expensive to lease back the use rights of the lands.

This is where conservation easement may come in. By entering into a well-thought-out conservation easement, local communities and park management agencies can come together to specify what activities inconsistent with the park are prohibited, and what are allowed so that local communities can continue to derive part of their living from these resources sustainably. In exchange for this conservation easement, individual households can receive certain compensation based on fair market value. Through such an arrangement, the public interest of creating a national park and the interests of local communities are reconciled.

When it comes to running a national park, concessions are another area where the U.S. national park system’s ingenuity shines. Concessions not only allow the park management to focus on protecting the park’s resources and providing high quality visitor experience, but also contribute a sizable percentage of revenue to the NPS for park improvement. In addition, it is concessioners that are making the investment in capital projects (mostly lodging and restaurant facilities) needed for their concession operations, so the park service is freed from the crushing financial burdens of building such facilities.

The National Park Service’s concession policies have also gone through some transformation over the years. The Concessions Policy Act of 1965 heavily favored incumbent concessioners, giving them preference in contract renewal. And the term of a concession contract could be as long as 30 years. The result was poor services, higher prices, and many unhappy customers. To address this, the U.S. Congress passed the NPS Concessions Management Improvement Act of 1998, which repealed earlier preference for incumbent concessioners in contract renewal, favored smaller concession operations, and shortened the maximum contract term to 20 years. Essentially, the NPS overhauled its concession policies to allow more market competition, for the benefit of visitors.

To encourage concessioners to invest in and improve visitor facilities, the NPS also implemented ‘Leasehold Surrender Interest’ (LSI), a compensation mechanism under which a concessioner is entitled to payment for the remaining value of the facilities it invested in (i.e. construction costs adjusted for inflation less depreciation) upon the contract termination or expiration. The NPS has also developed sophisticated and detailed guidelines to ensure that concessioners’ interests are properly protected based on market value, and that the policy won’t be abused by concessioners. LSI has effectively eased concessioners’ concerns over their investments becoming unrecoverable sunk costs, and therefore they’re more incentivized to compete in the bidding for concession contracts. As a result, a healthy concession market helps maximize visitors’ benefits. At the same time, the NPS has saved itself from being tied down to the financial commitments all these facilities and improvements would require.

In addition to concessions, the National Park Service also allows licensed/permitted tour guides to provide guided tours in national parks to complement those provided by park rangers. Such special tour providers are usually individuals or small tour operators. The park management makes sure that each tour guide is properly licensed and insured, and it issues each guide a permit at nominal cost. The park does not dictate the content of such tours, and largely leaves tour guides to self-regulation through competition. Such practices allow the park staff to focus on the majority of the visitors, while also providing additional options to visitors with special interests and needs. By implementing a streamlined permitting process and promoting competition among tour guides, the park management is able to save regulatory and administrative costs as well. In addition, this also creates more job opportunities for local communities.

These are only a few illustrative examples of how the U.S. National Park Service has taken advantage of innovations and the market to overcome challenges in land management, financial resources, and visitor services. What’s central to this approach is that the NPS has always stayed true to its mission: preserving natural and cultural resources and providing quality visitor experiences. In other words, the innovations and market-based tools are all a means to this end.

For China, creating a national park system doesn’t mean the government needs to be a micro-manager in every aspect of the national park system. Instead, it should focus its efforts on the key institutional setup, legislation and policies, management principles, and mechanisms, including those guiding conservation easements, concessions, and other market based practices that ensure the very goal of the national park system is fulfilled. In the meantime, it should leave ample room for innovation and the market, which, when properly harnessed, can often work wonders.