Instrumental land use investment-driven growth in China

Abstract

In the past decade or so, local governments in China have significantly increased their land development activities by acquiring land from farmers and leasing it on a large scale to industrial and commercial developers. This paper is an analysis of how land is used under China's existing institutional background as a competitive incentive for local investment. It is argued that local land development activities have contributed to an investment-driven growth in China that is not sustainable in the long run. On the basis of a panel data covering all provinces from 1998 to 2005, we empirically analyze the impacts of public land leasing on local fiscal revenue and gross domestic product (GDP). Policy implications are drawn with regard to further steps in land reforms.