Institutional barriers to redevelopment of urban villages in China: A transaction cost perspective

Abstract

Compared with other newly developed urban areas, urban villages in China are in greater need for redevelopment. Governed by institutions inherited from the local-state-dominated dual land ownership system, the redevelopment of these villages follows a state-led land requisition system, which confers development rights to local governments while limiting the rights of village collectives. Two other complementary arrangements include the top-down land use planning system and the state-monopolized land transfer system. Although these institutional arrangements favor land conversion in greenfield development, they cannot be easily implemented in the village redevelopment process. By reviewing the redevelopment policies and practices, this study empirically examines the redevelopment of urban villages in Shenzhen during the policy period from 2004 to 2009 and adopts the transaction cost perspective in analyzing how state-led institutional arrangements have resulted in many time-consuming transactions and hindered the redevelopment of urban villages.