Institutional diversity in transferring land development rights in China : government, market, and self-organization

Abstract

The excessive urban sprawl in China has introduced new externality issues, such as a continuous reduction in cultivated land. To address this unsustainable form of urban development and to promote land adjustment in rural areas, the Chinese government has implemented the “Linkage” Policy (Zengjian Guagou), which has commodified the right to develop rural land and allowed the transfer of development rights (TDR) across two land markets. This research argues that this national land policy has not only changed the land property right structure of China but also reshaped the roles of various stakeholders in new urban land supply. The supportive market infrastructure and institutional setup in Chengdu Municipality also stimulate the emergence and increased involvement of diverse new players in consolidating village lands and resettling the affected villagers, which in turn improve the overall land utilization efficiency and result in the development of three land governance structures, namely, government-led, market-based, and self-organization models. However, due to the ambiguity of rural land ownership and the dominant role of the state in China’s dual land market, the market mechanism of China’s TDR practice is not very straightforward. To determine under which circumstances each governance structure can become the most economic choice for a specific TDR project, this study adopts the perspective of transaction cost economics to compare the process efficiency of these projects in controlling project risks and reducing transaction costs. Based on empirical evidence from Chengdu Municipality, this study identifies the actual implementation of the TDR projects, information asymmetry, uncertainties in levels of institutional environments, and human capital specificity as significant constraints in the bottom-up initiation of rural land governance. Therefore, the government-led governance structure becomes the most common choice in China’s TDR practice. To examine the actual performance of the “Linkage” Policy in promoting rural development and preserving cultivated land, this study analyzes the levels of institutional environments of such policy, the decision-making mechanism of various stakeholders, and their interactions in TDR projects. Based on an empirical study in Chengdu Municipality, this research concludes that the government-led rural land development projects bring the highest economic compensation and social welfare to villagers. However, these projects usually have a low degree of participation and a concentrated resettlement method. Moreover, in market-based land projects, the structure of resettlement housing may not be reasonable, while the rural construction land is sometimes not preserved for the future development of rural areas. The self-organization model can protect the property rights of villagers to the highest degree, but the project performance can also be influenced by varying financing capacity and leadership skills. Meanwhile, in preserving cultivated land, the villagers are mostly concerned about their distance to the contracted cultivated land, their income structure, the operation method of the cultivated land, and the agricultural production structure in their villages.