rural land. P1’s value is therefore based on the state’s calculation of its value. 4 As DE-DG rises it also naturally inflates the value of the urban periphery and thus stimulates the conversion of rural to urban land by the government. It isn’t difficult to see how the artificially low price of rural land at the periphery encourages rapacious officials to expropriate land (bracketed between Q1 and Q2), sell to developers at value FG, compensate rural peasants the value P1 and pocket land residuals 5 FEG for themselves. Real estate speculation at the rural-urban envelope is thus enacted by the local government, who (strongly bringing to mind the live-work compounds of socialist economic development) tend to first build on expropriated land Urban Development Zones (UDZs). The reason for this is simple – to act as a multiplier effect on land requisition. The basic algorithm being 1) begin land development, 2) drive up land cost and 3) profit: extract inflated residuals from urbanisation. Going back to figure 1 , the basic behaviour is captured by the expansion of urban boundary from Q1 to Q3, with Q2 defined as a new urban centre. The development spurs a price increase so that line FG oscillates back up to centre FH and produces a multi-polar urban field. Thus there is little stopping local officials in search of revenue from overbuilding UDZs that supply multiple peripheral zones even if they lack any proportional demand.
China’s unique trajectory of urban and economic development can be attributed to the constraints it places on individual choice. More specifically, it was a function of China’s dual-institutional system, a vestigial remnant from the Great Leap Forward (GLF) - Chairman Mao Zedong’s 1 attempt to induce a modern communist state through rapid industrialisation and collectivisation. The dual-institutional structure was born from the Party’s need for a population control mechanism that restricted rural to urban migration during this process. The Hukou system, which at the time was simply a household registration classification, was adapted to fix citizens by status and location to their geography. While theoretically it’s possible to change one’s hukou status, such situations are rare and for the most part hukou is permanent and thus is an effective impediment against rural to urban migration. While both urban and rural land ownership lies with the Party, since China’s transition to state capitalism urban hukou today enjoy nominal rights of property recognised through land-use rights. Land use rights can be bid for and auctioned in the market and in this way participate in a market-for-land exchange. 2 Rural land on the other hand has fixed land-use rights and so cannot use, sell, transfer or rent their lands for non-agricultural use. Moreover their land ownership lies with village cooperative, with individual land locally negotiated and ambiguously defined. The dual-institutional system today thus additionally controls market rights between rural and urban sectors. The emergence of the derivatives 3 market for urban land-use in the 1990s was the departure point for a new era of capitalist development and economic growth. Development at the urban expansion however was still done via the Party. Section DE of figure 1 shows land bid price is proportional to the city centre; over time the land rent curve rotates counter-clockwise DE to DG as land value rises. The urban periphery here is the boundary at which the land bid price is worth less than the value denoted by Line P1, which does not react to the urban market because it is
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1 Quite possibly history’s greatest monster and unsurprisingly, still officially venerated by the PRC. 2 Xun, Xianxiang and Zhigang, p16 3 derivatives : a contract or security that derives its value from that of an underlying asset (as another security) or from the value of a rate (as of interest or currency exchange) or index of asset value (as a stock index). 4 P1 is calculated based on potential profit accrued from agricultural production on land. There are slight variations in price but for the purpose of the article we chose to simplify it to a consistent line. 5 land rent residuals : leftover revenue from land expropriation and conversion is called land rent residuals.
Semi-formal neighbourhood just south of Tiananmen Square
wong + vasanthakumar
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