Land Property Rights and Urbanization in China

Property rights have an incentive effect on the behaviours of economic agents. This paper proposes that the system of paying for the use of state-owned land has engendered a dualistic structure of land property rights in urban China, including full urban state-owned land property rights and limited rural collective land property rights. It argues that both market supply and planning acquisition offer incentives for governments to access land use residuals. In the context of fiscal decentralization, land rent residuals accelerate urbanization by encouraging urban and rural governments to extend and intensify land usage. The problem of chengzhongcun appears when rural institutions seek residuals. To improve the quality of China's urbanization, Chinese government at various levels needs to improve the system of property rights through reforming rural collective property rights.