Land Institutions and Chinese Political Economy

• Published date: 01 March 2017
• Date: 01 March 2017
• DOI: http://doi.org/10.1177/0032329216683167
• Subject Matter: Articles

Politics & Society

2017, Vol. 45(1) 123 –153

© 2017 SAGE Publications

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DOI: 10.1177/0032329216683167

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Article

Land Institutions

and Chinese Political

Economy: Institutional

Complementarities and

Macroeconomic Management

Meg Elizabeth Rithmire

Harvard Business School

Abstract

This article critically examines the origins and evolution of China’s unique land

institutions and situates land policy in the larger context of China’s reforms and

pursuit of economic growth. It argues that the Chinese Communist Party (CCP)

has strengthened the institutions that permit land expropriation—namely, urban/

rural dualism, decentralized land ownership, and hierarchical land management—in

order to use land as a key instrument of macroeconomic regulation, helping the CCP

respond to domestic and international economic trends and manage expansion and

contraction. Key episodes of macroeconomic policymaking are analyzed, with the use

of local and central documents, to show how the CCP relied on the manipulation

and distribution of the national land supply either to stimulate economic growth

or to rein in an overheating economy. China’s land institutions, therefore, share

“complementarities” with fiscal and financial institutions and benefit powerful political

actors while imposing costs on marginal ones.

Keywords

China, economic reform, land policy, macromanagement

Corresponding Author:

Meg Elizabeth Rithmire, Harvard Business School, 267 Morgan Hall, Soldiers Field Road, Boston,

MA 02163, USA.

Email: mrithmire@hbs.edu

683167PASXXX10.1177/0032329216683167Politics & SocietyRithmire

research-article2017

124 Politics & Society 45(1)

Over the last twenty years, Chinese cities have expanded rapidly; the area of urban

construction doubled (from 20,000 to 40,000 square kilometers) between 1996 and

2010, and real estate investment as a percent of GDP has gone from near zero in the

early 1990s to a steady 15 percent in the last decade.1 At the same time, disputes

about land have emerged as the principal source of state–society conflict in China.

Land conflict accounts for the majority of the hundreds of thousands of “mass inci-

dents” of protest that engulf rural and periurban China each year as well as the major-

ity of petitions and letters filed by citizens to appeal to higher governmental authorities

for redress.2

Land has become central to Chinese politics and the Chinese model of develop-

ment. Whether they call it “land-centered development,”3 “the urbanization of the

local state,”4 or recycle the older concept of “state-led development,”5 scholars agree

that the pursuit of land development, principally through rural-to-urban land conver-

sion, figures prominently in the political and economic strategies of local govern-

ments, much of the time to the discontent of the rural population and, it is usually

argued, central officials who seem incapable of reining in the most predatory local

officials.

Yet the rich volume of research on China’s unique land institutions has failed to

resolve a central puzzle: if China’s land institutions, characterized most generally by

decentralized public ownership and urban/rural dualism, generate so much economic

distortion and political and social conflict, why has the Chinese Communist Party

(CCP) retained and even reinforced these arrangements over time? Many scholars

explain the longevity of the CCP regime by looking to its “adaptive capacity,” or its

ability and willingness to respond and change course because of popular discontent or

pragmatic needs.6 For example, the regime eliminated the millennia-old agricultural

tax in 2006 in the face of widespread rural unrest. Why, then, have the institutions

governing land been strengthened over time even as their negative effects become

increasingly hard to address?

I argue that the CCP has strengthened these institutions despite their adverse effects

because they share “institutional complementarities” with China’s fiscal and financial

institutions and benefit a group of powerful political actors (local governments, the

central government, public sector firms, real estate developers, and urbanites) while

imposing high costs on politically marginal groups (peasants, small-scale private

sector).7 More specifically, I show that decentralized public ownership of land coupled

with hierarchical land management has allowed the CCP to use land as a tool of mac-

roeconomic management, helping the CCP respond to domestic and international eco-

nomic shocks and trends and manage expansion and contraction. Rather than seeing

the center as passively reacting to land-hungry local officials, I argue that local offi-

cials are acting as agents of the center: pursuing land development when pushed to so

do by central authorities concerned about managing economic growth.

In arguing that land control is a key instrument of macroeconomic management

in China, this article engages two literatures. The first is the large and growing litera-

ture on land politics in China, which has focused primarily on the local effects of

land institutions rather than explaining changes in land policy over time and there-

fore has neglected this macroeconomic function of land institutions. The second is