LIU Xuan

　　1　Introduction

　　Since 1978, a series of reforms have been initiated by the government towards socialist market mechanisms. With the reforms, local development interests are aroused and local governments advocate redevelopment as an effective strategy for re-imaging the city and promoting urban and economic growth (Gaubatz, 1999; He and Wu, 2007; Leaf, 1998; Tang, 1997; Yeh and Wu, 1996; Zhu, 2004). The desire to alleviate the high concentration of population, employment and urban housing in old overcrowded downtowns has triggered large-scale redevelopment and caused unprecedented changes in urban structure of Chinese cities (Wu and Yeh, 1997; Zhu, 2005). For instance, 26×106m2 of old houses were demolished in Shanghai from 1991 to 2000 (Wu, 2004). In Guangzhou, 4481.7ha of land in its central areas (Dongshan, Yuexiu, Liwan and Haizhu districts) has been induced into the land market for redevelopment during the period of 1992-1999 (Li, 2002). Then, what is the mechanism for land redevelopment at such a scale in transitional China?

　　At the core of studies of the patterns and forces of Chinas urban contemporary redevelopment dynamics are the newly initiated institutions (Zhu, 2004). Institutions are critical for land development as they define the property rights-the incentives and constraints for the players in the land market (North, 1990). The emerging land redevelopment market is structured by newly evolved market-oriented institutions, which are responsible, to a large extent, for the phenomenon of rapid urban redevelopment in China (Han, 1998; Zhou and Logan, 1996; Zhu, 2000). There were some pioneering works in analyzing Chinas land market, the progress of urban land market reforms and housing commoditization (Dowall, 1994; Wang and Murie, 1996). Housing reform and housing privatization were sped up in the last two decades, allowing private ownership of properties, an active role of developers and other actors (Wang and Murie, 1996; Zhou and Logan, 1996). During this process, some informal and quasi-legal rules in a complex web of personal relationships among local authorities, land agents, and developers have been formed (Hui and Wong, 1999; Lim and Lee, 1990).

　　The particular changes from a centrally-controlled urban development to a socialist market mechanism reveal a huge knowledge gap in the modern orthodox literature of the land redevelopment studies. In spite of the rapid accumulation of research publications in the study of Chinas land redevelopment, Chinas institutional changes demonstrate quite unconventional characteristics that existing research is far from enough. Previous research provides especially little insight into the evolution of institutions and land redevelopment patterns over times.

　　Based on the economic analyses of property rights, this study attempts to build on the existing knowledge of land redevelopment by providing an insight of the behavior of actors in land redevelopment, and to develop a theoretical framework for analyzing institutional transitions and their impact. Hence, this study aims to answer these research questions: what patterns of land redevelopment have been developed in transitional China and how do the institutions evolve and structure the land redevelopment patterns?

　　2　Theoretical Framework

　　Following the definition of property rights, all attributes build the responsibility of the owner (Alchian, 1977) and change of situation of attributes will certainly affect the owner(s) behavior. Institutions define and enforce property rights so as to induce potentially mutually beneficial resources uses and activity (North, 1990; Barzel, 1997; Coase, 1960; Demsetz, 1967). Institutions in one era are influenced by those counterparts through a series of events and junctures in the previous one (North, 1990), which means “path dependent” (Arthur, 1994; Hall, 1986).

　　Although all urban land in China is owned by the state, there were, before 1978, two types of land users in inner cities-danweis1 (work units, including State Owned Enterprises-SOEs) and urban housing. Land was allocated to danweis through administrative channels which did not impose a rental arrangement on them (Zhu, 2004). Being the units through which the state organized production and distributed social welfare, danweis in practice controlled state assets assigned for utilization. “in socialist systems, the right of use …even if referred to as‘tenancy’, equaled or exceeded in many ways those conventionally associated with ‘ownership’” (Marcuse, 1996). It is very hard for the state as the land owner to retrieve land once land was assigned to danweis.

　　As for urban housing in the central areas, residents were stratified into the tenure of private, workplace and municipal housing according to their socio-economic status. Residents were relatively passive in land redevelopment projects as the processes of demolition and resettlement for redevelopment projects are regarded as the reassignment of state-owned land by the state (Wu, 2004). Nevertheless, passive relocations are not necessarily equivalent to involuntary ones, as the households are offered the rights to bargain for the compensation. Compensation is awarded according to a pre-set standard but there is a large scope for bargaining between the construction units and households.

　　Due to political constraints, gradualism prevails and leads to trail and error in the implementation of new initiatives (Wang, 1994; Zhu, 2005). Old organizations are given opportunities to adapt to the new system. In order to carry out the transformation with the old actors influencing the institutions, institutional changes are gradual. The transitional institutions thus emerge as a link between the out-going central planning system and the incoming market mechanisms. A model of two level redevelopment process is thus introduced in this research as a hypothesis to track the evolution of transitional institutions in the land redevelopment process (Fig.1). Functions of institutions are realized through the structuring of actors property rights over land in the land market for redevelopment (Webster and Lai, 2003).

　　3　Land redevelopment of Jinhua Street

　　3.1　Status of Jinhua Street

　　To gain insight into the process of land redevelopment, a street community (jiedao in Chinese) of Jinhua Street with an area about 44ha in Liwan District, Guangzhou City is chosen for investigation. Jinhua Street belongs to traditional commercial area of Xiguan. During the period from 1948 to 1978, it was chosen as the pilot area for the development of textile mills, and industrial land there thus increased to 26.18% before the economic reform started in 1978. Besides the industrial areas, most street blocks in Jinhua Street were divided by individual land users into small parcels for private houses (Fig.2). Lacking in maintenance for over 30 years, the majority of neighbourhoods in Jinhua Street were aged and the urban landscape was dilapidated, crowded and congested. The width of most streets and lanes within Jinhua Street ranged from 2 to 3m, which made it very difficult for fire engines and ambulances to pass. The population density in Jinhua Street was as high as 67,215 person/km? (Wei, 1997). At the beginning of the period of economic reform, urban redevelopment of Jinhua Street, therefore, became one of the most urgent tasks for the local government. 

　　Fig.2　Land use in Jinhua Street in early 1980s

　　In the 1980s, street community of Jinhua Street was chose as a pilot project for comprehensive large-scale redevelopment and experienced all kinds of redevelopment since 1978. The examination of urban redevelopment in Jinhua can thus shed light on the urban redevelopment issues and problems in the city of Guangzhou and other Chinese cities. 

　　3.2　Redevelopment characteristics

　　This urban redevelopment of Jinhua Street covers the period from 1978 to present, observing the following redevelopment characteristics.

　　3.2.1　Rapid land redevelopment

　　Thirty nine projects were carried out within just over 25 years (1978－2004) and 92 buildings were constructed. Jinhua Street has changed from a dilapidated residential area with concentrated light industries to an area of commodity housing, commercial buildings, offices and modern infrastructures. Figure 3 shows the overall changes of the built environment in Jinhua Street.

　　3.2.2　Steps of physical changes

　　During this transitional period, institutiona`ges were introduced and those led to three steps of urban redevelopment in Jinhua Street. Those were 1) housing, workshops and offices developed by danweis for their own use, 2) comprehensive urban redevelopment projects, and 3) development of SOEs land. For each type of redevelopment, different actors were involved.

　　(1) The 1980s: housing, workshops and offices developed by danweis

　　After decades of stagnation, urban redevelopment was first carried out by danweis for housing provision and facilities. With scattered development of middle-rise housing, workshops and offices, the danweis changed the landscape of dilapidated neighborhoods during the 1980s. However, during this period, supply-side constraints hampered urban redevelopment of central areas and Jinhua Streets urban redevelopment has been stagnated for 30 years. Even after more investment was drawn into urban redevelopment, only 17 buildings were built over 10 years.

　　(2) The 1990s: large comprehensive urban redevelopment project

　　In 1988, the Guangzhou Municipal Construction Commission and Guangzhou Liwan Urban Construction Development Company (LUCDC), Xiguan Development Company (XDC) and Lihua Real Estate Management Company (LREMC) signed an agreement to undertake the Jinhua Street redevelopment project. An area of 29ha had been divided into 27 land parcels for redevelopment by the three developers. To facilitate the redevelopment, the headquarter for urban renewal of Jinhua Street was established under the local government of Liwan District and a plan was drawn for the redevelopment. All those three developers were subordinate developers of the government and their operation was thus under the supervision of different levels of government. The redevelopment of the whole area was expected to be accomplished within 5.5 years (September, 1988 - February, 1994). As the result, 57 buildings were constructed in Jinhua Street over 10 years.

　　(3) The Late 1990s: development of SOEs land

　　In the early 1990s, the state carried out a SOE reform within industry groups to reallocate the assets and resources. Associated with the SOE reform, a large number of factories were relocated to the urban periphery and the land previously occupied by them was released for redevelopment. Regulations setting deadlines for the use of allocated land pushed the SOEs to redevelop quickly. As a result, seven land parcels occupied by 6 factories were released for redevelopment in Jinhua Street. Within five years, all industrial land in Jinhua Street changed from industrial use to residential or commercial use.

　　Source: record of Planning Permission in GUPB (accessed in June, 2004), maps in Guangzhou Urban Planning & Design Survey Research Institute, maps in Liwan Urban Planning Bureau

　　Fig.3　Redevelopment projects in Jinhua Street from 1980 to 2004

　　4　Evolution of Transitional Institutions for Land Redevelopment of Jinhua Street

　　The subject of property transaction is not the land and building per se but essentially the rights over them (Barzel, 1997). Land property rights therefore matter for the performance of the property market. In China, the transitional urban land market is structured by newly evolved property rights which are responsible for the observed land redevelopment patterns. The evolution of property right structures was led by some key transitional institutions which provided incentives for collaboration among different actors and caused specific patterns of land redevelopment.

　　4.1　The 1980s: strong land use rights

　　Ever since the 1990s when the transfer of land use rights became legal, Chinese cities have quickly been transformed into growth machines to promote local economic expansion and wealth accumulation. The local developmental state advocated land redevelopment to improve urban images and to promote local economic growth. However, the existing land users initially had strong land use rights which hampered the urban redevelopment (Zhu, 2004). In the 1980s, it was up to the danweis to decide whether and how to redevelop their land, and all residents, including owners and tenants had to be compensated and resettled on-site. It was thus hard for the local government to initiate redevelopment projects. As the proof, all the 17 buildings constructed in the 1980s were built by danweis on their “own” land.

　　4.2　The 1990s: in-kind land leasing payment to phase out residents land use rights

　　4.2.1　Developers compensating to residents

　　Coalitions between the local governments and developers were initiated due to the conflict between the high costs of compensation to the residents and the limited budgets of the local developmental state. Instead of the government, the developers carried out the tasks of land acquisition and compensating the residents. In the redevelopment projects of Jinhua Street, the developers negotiated with the households a precise settlement concerning the resettlement housing, temporary shelters and other compensation. Following the standards set in the Guideline to Implementation of Urban Demolition and Resettlement in Guangzhou (1992), the three developers resettled 7492 households in on-site resettlement housing Interviews with officials in the Urban Planning Bureau of Liwan District, Oct.14, 2004. By resettling the residents, their land use rights were compensated and phased out in the emerging land market. It was also regulated that all resettled households would receive extra payment for moving, temporary shelters, etc.

　　4.2.2　Developers providing public facilities

　　The public-private coalitions introduced a special way for the developers to obtain land use rights. The developers obtained the land without any payment to the government, but they had to provide public facilities and passed those to the local state at no cost, in addition to providing resettlement housing for the residents.

　　4.2.3　Flexible planning control

　　By studying both the land use plan of Jinhua Street and the planning permission of each parcel, it has been revealed that the discrepancies were striking between them (Table 1). The local state changed the planning control parameters in redevelopment projects when the developers applied for a higher plot ratio to achieve a financial balance of the urban redevelopment project and increase possible profits.

　　Source: Guangzhou Urban Planning Bureau files, accessed in August, 2004

　　4.3　The late 1990s: commoditization of short-term de facto ownership of SOEs

　　With the issue of the Blueprint for the Implementation of Experiments to optimize the Capital Structure of Guangzhou in 1996 the SOE reform started to rearrange resources among industrial groups and a large amount of factories were closed or relocated to the urban periphery. At the same time, a Notice on The Reduction of Land Lease Payments of State-owned Enterprises was issued, according to which SOEs under reform were allowed to change the land use type and redevelop It was forbidden to develop the land parcel by the SOE itself. Only joint-ventures were allowed.

　　 or transfer the administratively allocated land under the supervision of their industrial groups. As a supplement, the Guangzhou municipality issued a Temporary Regulation on Management of Administratively Allocated Land During SOE Reforms in 1998 to determine that SOEs were only allowed to keep their land as administratively allocated for 5 more years after their relocation without paying land lease or rent. SOEs thus could have de facto ownership over their occupied land for a short period of 5 years.

　　4.4　After 2004: market mechanism for land redevelopment

　　With both the residents and the SOEs land use rights being compensated, the old land property rights system was replaced by a new one. On 31 August 2004, the new regulation of Notice on Strengthening the Supervision of Land Leasing of Profitable Projects via Bidding, Tender and Listing was issued by the State. The Regulation required land to be leased through tender and bidding for all “profitable projects”, which include office buildings, commercial buildings and commodity housing. Negotiation is strictly forbidden for such projects.

　　5　Conclusion and Disscussion

　　Building effective institutions for markets is a great challenge to many developing countries and transitional economies. Changes in the power of decision-making and land revenue collection were made within the old system which was based on a pivotal role of central planning. The old institutions had a strong bargaining position to influence institutional changes. At the early stage of transition, the local government could not afford the compensation to existing land users and therefore would not carry out land redevelopment.

　　During the transition, the local government initiated a gradual evolution of institutions to speed up local land redevelopment. Under local growth coalitions between the government and developers, the property rights of state subordinated developers were characterized by in-kind land leasing payment with flexible planning control on the basis of bargaining. During this process, the residents land use rights were compensated and phased out. Later, de facto ownership was offered to SOEs for a short period. Allowing them to use, develop and transfer their occupied land was to speed up redevelopment of SOE occupied land. The evolution of transitional institutions helped to dispel existing land use rights of residents and SOEs and enable further development to follow market mechanisms.

　　原载：Chinese Geographical Seience,2009,19(1):1-7.