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Land Quota Markets in Chinese Urbanization
Yuan Xiao
Ph.D. Candidate
Massachusetts Institute of Technology
United States
Densification Deep in the Countryside
World Bank Land and Poverty Conference| March 24, 2014
Land Management and China’s economic Growth
• Partial land market since 1990s
• Public ownership of urban land collective ownership of rural land
• Local Governments leverage land to raise fiscal revenues and attract investments
Taking Rural Land for Urban Development
- Rural land owned by rural collective; non-transferrable
- “Taking” granted by law (although controversial)
- Buy low and sell high
Large scale land conversion resulting in farmland loss and social conflicts
Curbing Aggressive Land ConversionCentral
Government
Imposing “Land Conversion Quota”
Social Conflicts Farmland Loss
Land Conversion by Local Governments
Urban Expansion with Quota Constraint
Urban Area
Rural Settlements
New Phenomenon: Land Quota Market
1. Densification of Rural Settlements
2. Reclaiming Old Housing Sites for Farming
URBANFRINGE
RURAL AREA
BEFORE AFTER
Scattered farmhouses
Apartment buildings
Reclaimed farmland
Using Locally Created Quotas
3. Use Local Quota for Urban Expansion
Comparative Case Study
Source: http://www.travelchinaguide.com/map/
Variation in interventions
No. of Cases
Cities with traditional land conversion
600+
Cities with Linking Programs
20+
Cities with quota markets
2 (Chongqing and Chengdu)
1
2
4. Land Quotas are Transacted on the Market
Source: http://news.ifeng.com/gundong/detail_2011_07/29/8035871_0.shtml
Urban Expansion With Local Quota Creation and Trading
• Villages in deep rural areas are affected
Urban Area
Rural Settlements
“De-spatialization” “Re-spatialization”
Chengdu 1st Zone
2nd
Zone
3rd
Zone
Overall Changes: The “Flying Land”Municipality of Chengdu• Land development is transferred from rural
areas to urban areas larger urban built-up area, smaller rural built-up area
• Residential densification increased in remote area (70% land saved = 3.33 times denser)
• A transfer of wealth from urban areas to rural areas
• Increased supply of land for urban expansion and wealth creation
• “growing the pie”, and giving a slice to peasants in remote areas.
Potential Problems
• Quality of agricultural land• Change in peasants’ lifestyle• Change in production mode • Selling quotas = outgoing of important
government resources
Thank you!
Yuan [email protected]
Additional Slides
Quota Generation and Changes in the Rural Areas
Land Use Changes at Village Level
Source: Replication of Figure 7 in Yang 2011, How to Build a New Socialist Countryside. (Unpublished manuscript)
Before
Land Use Changes in Rural Area
Source: Replication of Figure 7 in Yang 2011, How to Build a New Socialist Countryside. (Unpublished manuscript)
After
Changes in the Countryside: Village Level
• Construction land/built-up area reduced (by 70%)
• Agricultural land increased • Reclaimed agricultural land cannot be used for
future development
Changes in the Countryside: Household Level
Changes in the Countryside: New Process and New Business
• Process: construction, demolition, reclamation• New business: quota developers• Costs of quota generation
Compensation to peasant households
70% of total costs ¥ 140,000/mu
Compensation to the rural collective
13% ¥ 26,000/mu
Engineering costs 10% ¥ 20,000/muManagement and financing costs
7% ¥ 14,000/mu
100% ¥ 200,000/mu
Land Quota Certificate
Land Quota Certificate
283.5090 mu= 46.704 acre(1 Mu= 0.165 acre) Reclaim
ed lots: 172 in total
Obtained by original quota generation
(-) in Shima, Kaiyuan villages
(+) in heshan township and Changqiu town
Net (-) in construction land is quota
Right holder: Chengdu Xiangda Corp.
Quota Use and Changes in the Urban Areas
Who Buys Quotas?
Source: http://news.ifeng.com/gundong/detail_2011_07/29/8035871_0.shtml
Who Buys Quotas?
• Quota: originally a government resource
• Developers (commercial and residential projects) are required to buy local quotas
• District/county governments buy quotas for industrial projects
Quota Trading
• Cannot trade privately. Must be transferred in Municipal Rural Property Exchange Center
• Price set through open bidding
Quota and Urban Land Markets
• How does quota price affects land price?
• Who Bears the Cost of Quota
Residential/Commercial Projects
(District)Government
Real Estate Developer Land Use Right
Land Leasing Fee
Land Use Right
Industrial Projects
(District)Government
FactoryLand Use Right
Taxes + Jobs + Economic Growth
Land Use Right
Residential/Commercial Projects
(District)Government
Real Estate Developer Land Use Right
Land Leasing Fee (3 million/mu)
Land Use Right
Residential/Commercial Projects
Real Estate Developer
Land Use Right
Quota Developer
Land Quota
Land Quota
Land Quota Price (¥ 0.3million/mu)
Land Leasing Fee
Residential/Commercial ProjectsReal Estate Developer
Land Price (?)
Quota Developer
Quota Price (¥ 0.3million/mu)
(District)Government
Assertion by Local Governments and Land Developers
Worries of Ministry of Land and Resources
Residential/Commercial ProjectsReal Estate Developer
Land Price (¥ 3 million/mu)
Quota Developer
Quota Price (¥ 0.3million/mu)
(District)Government
Scenario 1: Inelastic/Tight Land Market
(¥ 3 million/mu, the same)
Residential/Commercial ProjectsReal Estate Developer
Land Price (2.7million/mu)
Quota Developer
Quota Price (¥ 0.3million/mu)
(District)Government
Scenario 2: Elastic/Not so tight Land Market
(2.7million/mu, reduced by 0.3million/mu)
More close to the current market trend in case city
Industrial Projects
(District)Government
FactoryLand Use Right
Taxes + Jobs
Land Use Right
Industrial Projects
(District)Government
Land Use Right
Land QuotaQuota Developer
Land Quota Price (¥ 0.3million/mu)
Who Bears the Costs?• Theoretically, who bears the costs depends on
how tight the land market is.
• In my case city, the government bears the costs a transfer of fiscal resources to the countryside + to quota developers
• Less revenue per mu of land, but more land becomes available make the pie bigger, and give a slice to the peasants
Quota Size and Land Supply
• “Quota of quota” Upper limit on locally created quota: 10% of
centrally allocated quota (400,000mu)• Time lag Two year production cycle + two year use
period• In reality, 12,500 mu on averaged added to
Chengdu annually between 2010-2012, about 6.25% of the annual official quota
Chengdu 1st Zone
2nd
Zone
3rd
Zone
Overall Changes: The “Flying Land”Municipality of Chengdu
• The total area of built up in the rural and urban areas remain the same.
• Land development is transferred from rural areas to urban areas larger urban built-up area, smaller rural built-up area
Villages in remote areas are condensed first
Potential Problems
• Quality of agricultural land• Change in peasants’ lifestyle• Change in production mode • Selling quotas = outgoing of important
government resources
New Socialist Countryside? Rural Urbanization?
Source: http://blog.dichan.com/cncfc/articlesshow-681424.html
Thank you!
Yuan [email protected]
Urban Expansion with Quota Constraint
Urban Area
Rural Settlements
Newly Created
Agricultural Land