Economic performance of industrial development on collective land in the urbanization process in China: Empirical evidence from Shenzhen

Abstract

The study investigates the economic performance of industrial development in the Chinese urbanization process under two different property rights arrangements. Industrial development contributes significantly to China's economic growth in the urbanization process. As one of the most fundamental institutional arrangements, the urban–rural dual land system is important in urbanization and industrial development in China. Two types of land system including state and collective ownership coexist in the current land administration system. According to the law, the state owns the urban land, whereas the village collective owns the rural land. State requisition is the only channel to convert rural land to urban land. Village collectives are not allowed to transfer their land for urban use. Therefore, the property rights on collective land are incomplete in the urbanization process. Do incomplete property rights cause unsatisfactory economic performance of industrial development on collective land? Based on community-level data from two districts with an area of 1557 km2 in Shenzhen in 2006, a regression analysis shows that incomplete property rights have caused significant land use inefficiency in industrial development in terms of lower land rental value and lower industrial value added per unit of land. The findings suggest that monthly rental prices of industrial plants on collective land were approximately 57% less than those on state land in 2006. The industrial value produced on collective land was RMB 6.624 billion less than on state land per km2.