The political economy of the privatisation of the land market in Shanghai

Abstract

This paper examines a land market in which the authority in China has a monopolistic power in the granting of the use rights of land to developers/investors for real estate development purposes. By granting land in private treaty mode rather than open market competition to the developers/investors, the Chinese authority is actually distorting the land prices achieved in the emerging market which will subsequently lead to a distortion of normal land price behaviour. Despite the fact that the authority might have been underpricing land in Shanghai, they continue to sell land through the same private treaty mechanism. One possible explanation for this is the deeply rooted ideology of the concept of 'cost as value', while another is the possible political complications involved in the property rights of various invisible interests in land.