A Transitional Institution for the Emerging Land Market in Urban China

Abstract

Chinese economic reforms since 1978 have been a continuous process of fundamental institutional change. The new institution of ambiguous property rights over state-owned urban land evolves from the socialist people's landownership. This institutional change is driven by the changing economic system and by two new organisations-the local developmental state and danwei-enterprises. The new institution facilitates the formation of an emerging land market. This land market, structured by ambiguous property rights, has accounted for the dynamic urban physical growth in many of China's coastal cities in the 1980s and 1990s. Nevertheless, massive rent dissipation induced by the new institution does not provide market certainty, nor does it offer incentives for optimal development. The cost incurred by the institution is gradually overtaking its benefit. The ambiguous property rights are deemed to be a transitional institution during the development of land markets in urban China.