Land leasing and local government behaviour in China: Evidence from Beijing

TLDR

Since 2004, listing and tender auctions have dominated land lease arrangements in Beijing, with listing auctions resembling English auctions and tender auctions determined by price, financial capability, and reputation. The study examines price differences between listing and tender auctions for land parcels granted in Beijing from 2006 to 2012. It analyzes how these auctions influence urban development and price stabilization. The study finds that Beijing’s land policy, aimed at stabilizing prices and providing affordable housing, is integrated with urban development planning in spatial and density patterns, and that land leasing is both a policy and part of local development strategy.

Abstract

Since 2004, two auction mechanisms – listing auctions and tender auctions – have played a dominant role in land lease arrangements for real estate development in Beijing. Listing auctions in land markets are similar to general English auctions, where bidders offer the highest price to win. However, in tender auctions, winners are determined by the bidding price and the bidder’s financial capability and reputation. Based on granted land parcels from 2006 to 2012 in Beijing, this paper attempts to examine the price differences between the two auctions and the role of land auction in urban development and price stabilisation. We find that land policy in Beijing, which aims to stabilise land prices and to provide low-price residences, has been integrated with urban development planning in terms of spatial and density pattern. Land leasing in Beijing is not only a land policy but also a part of the strategy framework of local development.