Secure property rights are fundamental to economic growth and prosperity. In China formal legal institutions on land property discriminate against rural land by design and result in distorted land markets where rural land must go through state expropriation to be tradable in urban land markets and the resulting land-taking compensation that villagers receive is calculated at below market values. This research examines how the state and society interact to shape the development of land property rights in China. I find that land-losing villagers use negotiation that takes place in a non-hostile manner as a means to engage with local governments and improve their compensation arrangement. More importantly, what they negotiate about focuses on local specific considerations that are not specified in formal compensation policy – which I call “non-programmatic compensation.” Such type of compensation negotiation is acceptable to both the local government and land-losing villagers: it allows villagers to capture additional land values without pushing their local government to raise compensation standards that apply elsewhere within administrative jurisdiction. One of the consequences is the development of fragmented compensation regime where formal compensation standards remain low and stagnant while villagers improve their land rights through non-programmatic compensation which varies across localities and across projects of land expropriation.