Institutional change and state-owned enterprises in China's urban housing market

Abstract

This paper analyses institutional change and its consequences on the conduct of state owned enterprises (SOEs) in China's housing sector since reforms began in 1978. Three distinct phases can be identified. In the pilot phase of 1978–1988, SOEs became producers and distributors of houses. In the second phase of 1988–1998, SOEs focused on the resale of public houses and became important contributors to the housing provident funds. In the third phase since 1998, SOEs expanded their role to become developers, investors and speculators in the housing market. The transformation of the urban housing sector from in-kind provision to market-based allocation helped turn losses made in the past to profits. The autonomy and the infusion of private modern management principles have stimulated upgrading in the construction and designing technology of houses developed by SOEs. However, as instruments of the state, SOEs still function as providers of social welfare to urban dwellers by promoting affordable housing to the poor, which shows that the state has remained central in balancing private and public interests in the housing market.