land quota markets in chinese urbanization yuan xiao ph.d. candidate massachusetts institute of...
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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
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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
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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
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Curbing Aggressive Land ConversionCentral
Government
Imposing “Land Conversion Quota”
Social Conflicts Farmland Loss
Land Conversion by Local Governments
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Urban Expansion with Quota Constraint
Urban Area
Rural Settlements
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New Phenomenon: Land Quota Market
1. Densification of Rural Settlements
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2. Reclaiming Old Housing Sites for Farming
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URBANFRINGE
RURAL AREA
BEFORE AFTER
Scattered farmhouses
Apartment buildings
Reclaimed farmland
Using Locally Created Quotas
3. Use Local Quota for Urban Expansion
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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
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4. Land Quotas are Transacted on the Market
Source: http://news.ifeng.com/gundong/detail_2011_07/29/8035871_0.shtml
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Urban Expansion With Local Quota Creation and Trading
• Villages in deep rural areas are affected
Urban Area
Rural Settlements
“De-spatialization” “Re-spatialization”
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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.
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Potential Problems
• Quality of agricultural land• Change in peasants’ lifestyle• Change in production mode • Selling quotas = outgoing of important
government resources
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Additional Slides
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Quota Generation and Changes in the Rural Areas
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Land Use Changes at Village Level
Source: Replication of Figure 7 in Yang 2011, How to Build a New Socialist Countryside. (Unpublished manuscript)
Before
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Land Use Changes in Rural Area
Source: Replication of Figure 7 in Yang 2011, How to Build a New Socialist Countryside. (Unpublished manuscript)
After
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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
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Changes in the Countryside: Household Level
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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
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Land Quota Certificate
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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.
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Quota Use and Changes in the Urban Areas
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Who Buys Quotas?
Source: http://news.ifeng.com/gundong/detail_2011_07/29/8035871_0.shtml
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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
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Quota Trading
• Cannot trade privately. Must be transferred in Municipal Rural Property Exchange Center
• Price set through open bidding
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Quota and Urban Land Markets
• How does quota price affects land price?
• Who Bears the Cost of Quota
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Residential/Commercial Projects
(District)Government
Real Estate Developer Land Use Right
Land Leasing Fee
Land Use Right
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Industrial Projects
(District)Government
FactoryLand Use Right
Taxes + Jobs + Economic Growth
Land Use Right
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Residential/Commercial Projects
(District)Government
Real Estate Developer Land Use Right
Land Leasing Fee (3 million/mu)
Land Use Right
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Residential/Commercial Projects
Real Estate Developer
Land Use Right
Quota Developer
Land Quota
Land Quota
Land Quota Price (¥ 0.3million/mu)
Land Leasing Fee
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Residential/Commercial ProjectsReal Estate Developer
Land Price (?)
Quota Developer
Quota Price (¥ 0.3million/mu)
(District)Government
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Assertion by Local Governments and Land Developers
Worries of Ministry of Land and Resources
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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)
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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
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Industrial Projects
(District)Government
FactoryLand Use Right
Taxes + Jobs
Land Use Right
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Industrial Projects
(District)Government
Land Use Right
Land QuotaQuota Developer
Land Quota Price (¥ 0.3million/mu)
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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
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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
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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
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Potential Problems
• Quality of agricultural land• Change in peasants’ lifestyle• Change in production mode • Selling quotas = outgoing of important
government resources
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New Socialist Countryside? Rural Urbanization?
Source: http://blog.dichan.com/cncfc/articlesshow-681424.html
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Urban Expansion with Quota Constraint
Urban Area
Rural Settlements
Newly Created
Agricultural Land