Book review: Urban Development in China Under the Institution of Land Rights

Jieming Zhu, Urban Development in China Under the Institution of Land Rights, London and New York: Routledge, 2020, 208 pp.: ISBN: 9780367358037, £130.00 (hbk)

Elementary economics starts with theories of consumption and production, and the theory of production lists four factors of production: land, labour, capital and organisation. As per this ordering, land seems to be the most important as no production process would be possible without land, whatever be the nature of production. However, when it comes to analysis, production theory concentrates on the combination of labour and capital, assuming land is available as an input. At the time when land was abundant this assumption was valid. However, with industrialisation and urbanisation, land especially in urban areas became a scarce and highly priced commodity, and it became essential to bring land into the analysis of production directly. Apart from Marxian treatment of land as an essential input, Alfred Marshall was the first to treat land (especially urban land) in detail. Urban land derives its value from its use, which is determined by its location, accessibility and availability of amenities. Again, the supply of land is fixed, a given by nature but even more so in urban areas, where it is constricted by an administrative boundary demarcating it from ‘rural’. Land is again different from other commodities in the sense that ownership does not give absolute control over its utilisation; it is in turn guided by the property rights and urban planning regulations and building laws.

When the People’s Republic of China came into existence in 1949, the Chinese Communist Party wanted to build a new socialist China. Ideologically, they were influenced by the Soviet Union, with the model of a planned and centrally controlled economy. Private ownership of the means of production was to be prohibited to do away with the commodity–money relationship. State ownership of means of production would be the ‘cornerstone’ of the new socialist economy. The central control of resource allocation started with nationalisation of all means of production including land. It was not easy drop, before the 1949 Revolution, land was privately owned. In the rural areas, agricultural land was owned by landlords, who either used agricultural labourers for cultivation or leased it to tenant farmers. Urban land was also privately owned but there was substantial ownership by the government. Through land reform, rural land was confiscated from the landlords and redistributed to the landless peasants. That was not the case with urban land, except for land owned by foreigners and the Kuomintang government. However, this was short lived. By 1956, the rural cooperative movement had abolished private ownership of land, to be replaced by collective ownership. In the urban areas, socialist reform of the private industries also changed the ownership of land. All other private properties and land were converted to state ownership by 1958. However, it was only accepted formally in the 1982 Constitution. Land was recognised as the most important means of production. Urban land belonged to the state and in the countryside and periurban areas, it was collectively owned. No organisation or individual was allowed to appropriate, buy, sell or lease land or illegally transfer it, so China determined to develop socialist producer cities without a land market. However, without any land market mechanism, an inefficient allocation of land led to a rigid urban spatial structure even with internal restructuring of the cities to utilise land optimally. Urban problems arose from inadequate investment in urban infrastructure and incompetent management by inexperienced city governments. The economic reforms from 1978 changed the direction of the economy towards a socialist market economy and land was recognised as an asset. This book is the story of this transformation spanning over four decades. The manifestation of property rights with both economic and legal aspects was not easy.

There are eight chapters in the book, chronologically set to the evolution of the institution of land rights in China in the last four decades (1978–2018). The first chapter is about the role of land in development and urbanisation, whereas the last chapter (chapter 8) is about the conflict of land rights with sustainability (mainly environmental and ecological conservation) under market forces.

The second chapter looks at the allocation and utilisation of land in the centrally planned regime (1949–1978). Land was treated as a means of production. The state-owned enterprises (SOE) got land free of cost. Sometimes cities were restructured for optimum use of land, however, the policy for building socialist producer cities neglected housing along with urban services and infrastructure. Excessive land provision in ‘new industrial cities’ was in sharp contrast with the ‘old consumer cities’ in the coastal region. Housing was thought to be a consumer good, rather than an important requirement of urban living. Economic reforms started in 1978 and the ideas about land changed as it became regarded as an asset. A market for land leasehold started to emerge.

Chapter 3 is about the Shenzhen Special Economic Zone (SSEZ), which became a pioneer in market-driven land development. The government, experiencing a financial crunch, was not in a position to invest in land for development, and overseas investors were not entitled to free land. Thus, SSEZ was an experimental place where a new generation of market-oriented developers, who started to utilise land rent as a source of finance, emerged. In 1984, the State Economic Commission and Ministry of Urban and Rural Construction and Environmental Protection made the state-owned development companies become independent business entities. After that, real estate developers (mainly from SOEs) participated in urban spatial development and redevelopment. A dual land market with arbitrage opportunities soon developed and the promulgation of 1988 for urban land privatisation and marketisation changed the urban landscape of China.

Chapter 4 deals with the land markets in the making through gradualist reform. The evils of the capitalist system, in terms of principal–agent problems, emerged with ambiguity regarding land rights. Two new agents of local government and danwei-enterprises made an informal coalition. There was no third party for mediation in the land market and land rent seeking and grabbing became rampant, which affected the built environment.

Chapter 5 is about the transitional use of the socialist land development right to the market along with urban restructuring. There was duality in institutions – land acquisition under development rights along with leasehold land. The degree of control over land conferred by de facto property rights varied among users, depending on their positions. Ordinary urban residents were situated on the lowest tier of social structure and had least control over their occupied land.

Chapter 6 concerns the rural spatial changes that came from the bottom, where the land right was collective. The rural non-farm sector gave way to in-situ urbanisation. The rise of a rentier class and private governance is described here with case studies.

The seventh chapter examines the issue of governance over spatial change. The high rate of urbanisation in China calls for the development of the compact city as population sizes are large and the density high. The absence of state gives rise to interrelated land rights, which generally leads to unsustainable landforms. The author takes the case study of The Renewal and Refurbishment of the Pearl River Delta to look at the process of rural fragmentation to urban integration.

It is easy to comprehend that the author’s task was not a simple one. Zhu has tried to explore the situation where the socialist state was transforming itself by constructing the market for an imperfect commodity like land. History shows that landownership not only gives rise to inequalities in income and wealth, but also leads to a non-working rentier class with feudal values and bourgeois vices. Articles based on singular case studies are available in Urban Studies and other journals: the story of Shenzen (Lai et al., 2016) or the role of a particular policy, for example, Increasing versus Decreasing Balance (Chen et al., 2023) are detailed analyses of specific programmes. However, this book is gigantic in the sense that it covers the urban development of China, focusing on land, for a span of seven decades: the nuances of nationalised land for three decades (1949–1978); and then the gradual transformation towards market, separately for villages and cities, the transformation of villages through non-farm activities, migrants and residents and all the related issues were covered over four decades (1978–2018). Various methods, such as case studies, data analysis and legal discourse, are used to tell the complete story with all its virtues and vices.

As the book is intended for both Chinese and non-Chinese academics, a map of China showing the location of the case studies would have been helpful. A chronological table detailing important policy changes and legal provisions would also have been useful for readers less familiar with Chinese political changes.

References

Chen M, Yao S, Hu C, et al. (2023) Transfer or retain land development rights: The role of China’s IDB programme in supporting inclusive urbanization. Urban Studies. Epub ahead of print 10 March 2023. Crossref; Google Scholar

Lai Y, Chan EHW, Choy L (2016) Village-led land development under state-led institutional arrangements in urbanising China: The case of Shenzhen. Urban Studies 54(7): 1736–1759.Crossref; Google Scholar