Administrative hierarchy and urban land expansion in transitional China

Foreign direct investment in real estate development (FDIRE) in China has been disproportionately agglomerated in the coastal region while has considerably diffused to some inland provinces along the Yangtze River. There is also significant spatial autocorrelation in the provincial distribution of FDIRE. Controlling for the spatial effects, statistical analysis indicates that FDIRE follows their international customers to China and pursues local profit opportunities as well. They avoid high financing cost and labor cost provinces but favor provinces with higher housing prices. FDIRE in China responds to the provincial differences in land and housing commercialization, and demands good regional governance, strong law enforcement and developed services. The findings imply that foreign investors in China’s real estate industry stress returns to capital while appreciate the conducive institutions when choosing locations.

What attracts foreign direct investment in China’s real estate development?

Post-Mao China has obviously moved away from the centrally planned command economy in the past two decades of reform. However, the key issue is in what direction and how far. To determine what direction China is headed for and how far China has moved in that direction, this article examines and evaluates the nature of institutional change in the ownership structure, particularly collectives, SOEs, and land ownership, which is then followed by a closer look at the post-Mao shareholding reform, its trends and problems from the basic perspective of property rights theory.

The Ownership Reform in China: What direction and how far?

The heavy reliance of Chinese local governments on land-leasing revenues in recent decades has attracted widespread criticism due to its potential risks and problems. This research, using a panel dataset of 280 prefecture-level cities in China from 1999 to 2009, explores what factors affect Chinese city governments’ dependence on land finance. The findings provide strong support for hypotheses concerning the effects of both fiscal incentives and political incentives on local fiscal behavior. Both fiscal factors—such as local reliance on fiscal transfers and fiscal decentralization—and political factors—including local top leaders’ tenure and their distance to mandatory retirement—have exerted significant impacts on city governments’ reliance on land finance. These findings point to the significance of intergovernmental fiscal arrangements and political institutions in affecting local government fiscal behavior in developing countries.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2639458_code866467.pdf?abstractid=2639458&mirid=4

The Political Economy of Land Finance in China

Two China-based geographers test the importance of market conditions and local institutions in determining the locational pattern of foreign direct investment in real estate development (FDIRE), a major component of China's urban growth since the 1980s. Using data from 35 major Chinese cities, they trace the diffusion of FDIRE from a concentration in China's major coastal cities in the late 1990s to a more dispersed pattern including large inland cities in 2008. In addition to investigating the general association between FDIRE, local market opportunities, and liberalized economies/more developed land markets, the authors assess differences in the locational behaviors of developers from Hong Kong-Taiwan-Macao and foreign countries. A concluding section explores the implications of FDIRE activity for the restructuring of China's urban system. Journal of Economic Literature, Classification Numbers: F210, L850, O180, R330. 3 figures, 7 tables, 35 references.

Real Estate FDI in Chinese Cities: Local Market Conditions and Regional Institutions

The past decade has witnessed a mass change in urban physical structure in major Chinese cities. Such changes could not have been realized without the implementation of economic reform in the urban land system. However, the economic reform measures undertaken in the urban land economy are only partial and gradual. The old socialist allocation system of land for both private and public land users still exists and in some cases such allocation exceeds the market system in terms of land granted. The pricing system of urban land is still not truly competitive as in most cases land users obtain land by means of private treaty grant with the relevant government department. Despite all these weakness in the economic reform measures, the land market in Shanghai, as well as other major cities, seems to have begun a rationalization process with less competitive land uses reallocated to the urban periphery, according to land economics principles. This paper tries to argue that under certain conditions, such as activ...

Ling-Hin Li

Papers

Economic Reform in the Urban Land System in China