Keywords

2.1 Introduction of Guangzhou

Guangzhou, with the nicknames of the Flower City and the Goat City, is the third biggest metropolis in China, and the capital of Guangdong Province. In 2013, Guangzhou produced a Gross Domestic Product (GDP) of 1,542,014 million China Yuan (CNY) (exchange rate between CNY and GBP is 1:9.64 at 20 May 2015), which is equal to 119,695 CNY per capita GDP (Statistics Bureau of Guangzhou Municipality and Guangzhou Survey Office of National Bureau of Statistics 2014). It is the political, economic and cultural centre of Guangdong Province and South China. As a sub-provincial municipality, it has more autonomy than other normal municipal cities. Guangzhou is located north of the Pearl River Delta around 100 kms away from both Hong Kong and Macau, two international cities and former colonies.

The city of Guangzhou was originally built more than 2,000 years ago and became the capital of the Nanyue Kingdom in 203 BC. The city was first named Panyu and was later named Guangzhou in AD 264 in the Han Dynasty. In 1757 Guangzhou was the only port still open to international businesses when other ports were forbidden to do so according to the Hai Jin (海禁) policy from the Qing Dynasty. It was a prosperous period for Guangzhou until the Opium War of 1840. In 1921, the Guangzhou municipal government was built as the first municipality in China in a modern sense (The editor committee of the chronicle of Guangzhou 1998).

Guangzhou was launched as an open city in the second batch of cities open to global business in 1984, after the first batch of four open cities (Shenzhen, Zhuhai, Shantou and Xiamen, the first three situated in the Guangdong Province) was announced in 1981. In 2010, this city hosted the 16th Asian Games. Historically, Guangzhou is famous for its openness to new possibilities. After 1978 it acts as a pioneer in China’s reform, ‘Guangdong is the province one step ahead in China and Guangzhou is the city one step ahead in Guangdong’ (Xu and Yeh 2003, p. 361).

Guangzhou had a 12.9 million population in 2013, and covers an area of 7434.4 km2 within 11 urban districts (Liwan District 荔湾区、Yuexiu District 越秀区、Haizhu District 海珠区、Tianhe District 天河区、Baiyun District 白云区、Huangpu District 黄埔区、Panyu District 番禺区、Huadu 花都区、Nansha District 南沙区、Zengcheng Distri ct 增城区、Conghua District 从化区). Liwan District, Yuexiu District, Haizhu District and Tianhe District are considered as urban areas while other districts have more characteristics of suburban areas.

According to the sixth National Census in 2010 statistics these four urban districts have a population of 5,046,575 which is 39.73% of the total population of Guangzhou, while the four districts only occupy 3.76% of the whole territory in this municipality (Zhang 2015). This research about urban redevelopment mainly concerns these four urban districts (Figs. 2.1 and 2.2).

Fig. 2.1
A satellite map of Asia highlights China, Peking, Guangzhou, and Hongkong.

Source author’s drawing based on Google map, 2016

The location of Guangzhou in East Asia.

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Fig. 2.2
A map of Guangzhou marks areas at the southwest from 1 to 4 which are Liwan, Yuexiu, Haizhu, and Tianhe, respectively. The other areas that surround them are Conghua, Huada, Baiyun, Zengcheng, Huangpu, Panyu, and Nansha.

Source author’s drawing

Districts of Guangzhou in 2013.

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2.2 China’s Authoritarian Political Regime

Urban governance in China is deeply rooted in China’s one-party political system. After the reform began in 1978, total control over the whole country has been relaxed; this change has been characterised as a transformation from a totalitarian regime to an authoritarian one (Nathan 2007). An authoritarian regime is described as a.

Political system with limited, not responsible, political pluralism, without an elaborate guiding ideology, but with distinctive mentalities, without extensive nor intensive political mobilisation, except at some points in their development. A leader, or occasionally a small group, exercises power within formally ill-defined limits but actually quite predictable ones (Linz 1964, p. 55).

These partially pluralistic elements are the most distinctive feature of an authoritarian regime compared with totalitarian regime and democratic one. This regime can involve some interest groups in the political process, which are decided by rulers rather than by institutional arrangement in a representative way. Ideology has less importance when practical considerations might be more dominant (Linz 2000).

After the Tiananmen Square protests in 1989, the authoritarian regime in China has fallen into crisis in terms of serious economic difficulties and legitimate problems. However, the expected collapse of this communist regime has not happened after more than 25 years. Nathan (2003) raises the idea of authoritarian resilience to explain the survival of China’s regime in those crises.

Authoritarian resilience in his context means four aspects of institutionalisation of the communist regime, namely a norm-bound succession process, the meritocratic promotion system among leaders, the differentiation between departments in government and more public participation in political processes. This concept has been developed by Cai (2008) in terms of the division of functions and duties between central and local authorities; this division aims to increase institutional resilience to face popular resistance and protests. The central state grants limited autonomy to the local state to deal with protests in local level; this autonomy means the local authorities could switch between concession and repression in different situations.

2.3 Relation Between Guangzhou and the Central Government

A flexible and effective central-local relationship is a crucial part in China authoritarian regime. The governmental relationship between Guangzhou and Beijing can be analysed in two aspects. The first is about distribution of duties, resources and authorities between two levels of government. This relationship has some features similar to the Federalist system. In such a system, the local leaders have strong incentives to develop the local economy and increase fiscal income because high-quality economic performance will increase their opportunities to be promoted to higher positions by the Beijing authorities. This is the second aspect of central-municipal relation. These two parts combine to form a pro-growth framework for Guangzhou.

2.3.1 Central-Local Relations and 1994 Reform

China, with its broad territory and diverse regions, has struggled with the principal-agent problem between central and local authorities. Since the 1980s, the central state established a contract system to define this relation. In such a system, the local government was promised a fixed amount of annual revenue to submit to the central state; besides this amount, every penny of public income belonged to the local government. These contracts stimulated a prosperous local economy and lead to the decline of central authority in the 1980s. This tendency threatened the national capacity to govern the whole country; therefore, the ‘separating tax’ reform was launched in 1994 (Wang 2013). The 1994 Tax Reform was based on market-preserving methods concerned with the distribution of power and assets, including two basic and related parts: a centralised fiscal system and a decentralised administrative system.

A centralised fiscal structure occupies the central position in the ‘separating tax’ reform. There are three sets of taxes distributed between Guangzhou and the central government. The first are central taxes, which include custom duties, personal and institutional income and consumption taxes, and taxes on profits from central state-controlled State-owned Enterprises (SoEs). The second category of taxes are central-local shared taxes, such as VAT (value-added tax) (25% goes to the local government and the rest (75%) to the central government) and securities’ trading stamp duty. The third are local taxes, such as local enterprises taxes, individual income taxes, urban land use taxes and property and vehicle taxes. Basically, the central state grasps the most significant and convenient way to collect resources of taxes (Tao et al. 2009; He 2012).

To run such a reformed tax system, a newly established National Tax System with their local braches took charge of collecting taxes belonging to the central state. After the 1994 ‘separating tax’ reform, the fiscal income of the central state increased rapidly; the authoritarian regime in Beijing has enforced its dominance by strengthening national financial abilities. However, the local government takes on the majority of the expenditure with less financial support. Table 2.1 displays the distribution between the Guangzhou government and central government. The central state possesses the majority of the fiscal income; however, the local expenditure is more dependent on the Guangzhou government. Therefore, a budget deficit becomes more and more serious in the municipal finance system.

Table 2.1 Distribution of fiscal income between the central government and Guangzhou
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Decentralisation of administrative resources is another part of the 1994 ‘separating tax’ reform. This tendency was called ‘localism’ by Wu (1998); localism means that a decentralised decision-making process has transformed the local state from an executor of a central plan to a unit which could control the field of urban development, especially economic development. In fact, this Localism has a long history in the relationship between central and local states. Zheng (1995) described this relationship as a de facto federalism system when constitutionally China is definitely not a federalist country. Federalism here is a category of behaviour which helps to give provinces more autonomy and more opportunities to express their interests, therefore, conflicts between different levels can be released. This is because activities of state are less controlled by law and constitution in China; therefore, some informal arrangements are necessary.

The central state has formulated the principles of policy, and the local ones produce detailed rules based on such principles. These activities are flexible and sometimes do not really obey rules of laws. Therefore, in economic aspects, the municipal level has significant autonomy in terms of decision-making in foreign investment, infrastructure, urban spatial structure and local enterprises. These autonomies help local authorities to solve the problem of budget deficits.

2.3.2 Leaders of Guangzhou in a Promotion Tournament

The central-local relationship after 1994 created the mismatch between financial resource and local expenditure; however, the increased autonomy (in theory) allowed local government the flexibility to respond to budget deficits and attempt to resolve them. This is the institutional level of problems. In an authoritarian regime, individuals at high levels are also influential because they exercise the most important authority in such a governmental system. To mobilise these leaders in local states to realise both economic growth and political stability, a Promotion Tournament has been launched in a non-election system. This model is based on the importance of incentives in transition and development.

The Chinese Communist Party state gears local leaders towards devoting attention and resources to economic development. This strong incentive is the connection between local economic performance and career turnover; this might explain why China’s significant economic growth happens. This incentive and related turnover process has been described as a tournament model by (Li and Zhou 2005). A tournament model is a form of competition in which relative performance and ranking, not the absolute performance, will decide the result and the reward of competition. This model might encourage individuals to maximise their interests by realising designed achievements under neutral risks.

The promotion process in China’s political system can be described as a tournament model due to several reasons: China’s political system is a closed labour market without any exits for officials and competitive promotion is the only pathway to develop a career; the power for promotion is centralised at higher levels; the index to make the decision about turnover, such as the increasing ratio of GDP (Gross Domestic Product) or fiscal income, is objective and can be evaluated by the higher authority to decide who will be promoted in an information-asymmetrical environment; these indices can be compared between leaders in different regions; a joint venture between leaders is impossible. This is a typical situation for a tournament model.

Competition between different local states in terms of increasing the rate of GDP or fiscal income can benefit economic development in terms of protection with property rights and growth-bias policy for capitals. Innovation and experiment are encouraged in this model, even if some of them are unofficial (at times, unlawful), for the reason that economic growth is a really crucial legitimacy problem for the Chinese government (Gries and Rosen 2004). Such experiments are realised by the autonomy of the local government to pursue innovation.

The problem with this tournament model is that the quest for economic growth ignores other aspects of governance, such as environmental problems and social conflicts. The debt crisis is another aspect of negative consequences associated with this model because the local state has strong incentives to employ all possible fiscal and financial tools and resources to achieve economic growth with less consideration for its results (Li and Zhou 2005; Zhou 2007). Jin et al. (2005) bring out another negative aspect of this model, the ‘soft constraint’ problem for local government. ‘Soft constraint’ means the local state has strong incentives to increase their expenditure to benefit local development. They may realise such expenditures through loans from the national bank system. It is difficult to control the desire of local leaders to borrow money to support urban development, even though such loans may surpass the ability of local governments to make repayments.

Xu and Wang (2010) modelled growth behaviour alongside two dimensions: competition effects and polarisation effects. Competition effects refer to the way in which successfully promoted local leaders spend more fiscal resources in the field of production than on consumption. The polarisation effect explains that leaders in relatively developed regions prefer to spend more public funding in support of industries, because improved economic conditions will lead to positive results in their career; such positive results might benefit their personal welfare in the future. However, leaders in relatively undeveloped areas might pay more attention to their own welfare directly. The diversity of China’s regions results in local leaders using diverse strategies to maximise their personal interests.

The Promotion Tournament Model aims to explain China’s significant economic development from a political economic perspective, through the changed focus from a political performance to an economic one. This model has been criticised by Tao et al. (2010) from the vision of a centralised power system. The higher leader will not employ such a clear index, such as the increasing rate of GDP, to make a judgement for promotion because this transparent method cannot match the essential element of the centralised system, the secret political process. Factions and personal relationships (patron-client relationships) might be more important in the process of promotion (Shih 2009). Even in a formal contract promotion is based on a comprehensive evaluation standard which includes moral requirements, political ability, diligence, performance and honesty. Economic performance is just one of the qualities required for promotion.

At the same time, official statistics are questioned in terms of their reliability, because the local officials have a strong tradition to ‘create’ numbers rather than purely record numbers (Tao et al. 2010). Similarly, Chen et al. (2016) also summarised that the tournament model has overlooked political aspects of promotion, such as political loyalty and factors of factions.

In such criticisms, Tao et al. (2010) argue that the ideas of Li and Zhou (2005) about the Promotion Tournament Model are based more on theoretical and statistical analysis; however, the promotion process in reality is complex and diverse in different situations, and more factors are at work in such a process. Leaders at the local level might face three dimensions of requirements for promotion: stability and legitimacy as the local state, economic performance as the local government, and maximising leaders’ preferences in the hierarchical system (He et al. 2014). Such three dimensions may mix and conflict with one another in different fields.

However, even in these three parts, economic growth is still in the central position because stability and legitimacy are dependent on growth, and economic improvement has priority among the preferences of leaders. Moreover, the communist regime is glad to announce that economic performance is important for political promotion, for the reason that this announcement could increase the population’s confidence about the regime’s capacity to govern China (Chen et al. 2016). At least on the public dimension of promotion, economic performance in the leaders’ tenure is an important factor. Therefore, the political leaders of Guangzhou, one of the largest cities in China, are also involved in this Promotion Tournament in terms of a pro-growth governance competition.

2.4 A Land-Oriented Growth Structure and the Role of Urban Redevelopment

Urban economic activities are dependent on urban land; the achievement of the pro-growth incentive for Guangzhou is also reliant on land issues. The main part of the growth mechanism is land-oriented due to the institutional structure around property rights and regulations relating to land, especially the local state’s monopoly in the primary land market. The fees from leasing state-owned land to private users and taxes from the construction and transaction process provide strong support to the financial capacity of the local state, because since the 1994 tax reform, the income from land leasing and construction mainly belongs to the local government.

Urban redevelopment is an important part of this land-oriented growth regime, as property owners earn income from land leasing and construction, which arise during the redevelopment process. For instance, the 1998 amendment of the Land Administration Act announced that income earned from land designated as suitable for construction ought to be shared between the central and local government (30% belong to the central state, while 70% are local revenues). Existing construction land, already subject to urban redevelopment, could also produce fees and taxes which are totally controlled by the local state (He et al. 2014).

The land administration institutions mainly cover the administration of land property rights, the land administrative system and urban planning system; these create opportunities and set out the constraints and preferences of involved social groups in their social interactions in urban redevelopment. These three institutional elements combining with other institutional arrangements, such as housing reform, have built up an institutional structure to support land-oriented growth.

2.4.1 Land Property Rights and Regulations

Land resources are categorised by the state in terms of location, usage and ownership. In terms of different locations, land can be divided into urban land (cities, towns, industrial spots) and rural land. Before the Urban and Rural Planning Act in 2007, planning regulations were only applicable for building development on urban land. Land under diverse usages may include construction land (non-agricultural usage), agricultural land and unused land. Buildings may only be constructed on construction land; because of various types of ownership, land can be defined as state-owned land in urban areas and land in collective ownership in rural ones (Lin and Ho 2005).

These definitions of land have strong influences over processes concerning entitlement, usage and transactions of land. Such issues are controlled by the land administrative departments through territorial planning and other instruments. In addition, urban planning sectors are also crucial to realise the potential values of land when they regulate construction activities, such as function, density, height and architectural style of buildings. The functions of the land administrative departments and urban planning sectors are based on the property rights of land. Regulations from these two systems also influence how land property rights work in practice.

China’s land ownership is special in terms of its communist characteristics and capitalist features. Its communist ideology used to control ownership and land use policy for decades. Such a control has been challenged significantly after reform since 1978, while the CCP preferred to focus more on economic development under the strategy of separating economics from politics (政经分离). Land started to be regarded as a crucial factor in production and it was felt that the distribution of lands should be more effective (Zhang 1997).

China’s reform after 1978 is characterised by the phrase ‘groping for stones to cross the river’; there is no well-designed ‘blueprint’ as an ideal destination of its transformation. A large number of experiments took place to explore the better pathway to develop as the ‘stones’ to cross the river, but there was a lack of clarity even about what would be on the other side of the river. The institutional changes to land ownership are typical cases of such methods: as there was no clear target of reform, vested interests stood in conflict with new requirements from the changed environment; this has become a common characteristic of China’s reform.

At the beginning of the transition, foreign investors (including investors from Hong Kong and Taiwan) invested to build factories and properties on state-owned land or land in collective ownership. They felt unsafe because they had no property rights to the land which they had developed, as it belonged to the state in the case of urban land, or was collectively owned land in rural areas. They also felt uncertain about land use plans and land laws, unsure whether buildings on the land needed to conform to planning regulations.

To satisfy both the ideological requirements from Marxism and market conditions from foreign investors, political compromises were made in terms of property rights and land allocation methods. It meant that the use-rights of state-owned land were separated from state ownership; such land use-rights could be transferred to land users by payment of fees. The state is still the owner of urban land as the representative of the whole population of China.

At the same time, the former methods used to distribute land were still in force in which the state allocated land at no cost to work units or other publicly owned entities. These two opposing methods have typically accommodated the requirements of private investors, while (formally) maintaining the socialist principles. After several experiments involving land use-rights, transactions were established in Shenzhen and other Chinese cities, such a method has been approved by the first and second revising of the 1982 Land Administrative Act in 1988 and 1998 (the third revision took place in 2004) (Zhang 1997; Ho and Lin 2003; Lin and Ho 2005).

These differing methods for the conveyance of land produce a market track (in which land use-rights are bought) and a traditional, socialist land use track. The land management system is divided into a double track system. In the traditional socialist system, the free allocation process still exists for the use of land by state-owned departments or the non-profit sector. This type of land use rights is allocated by the state with no time limitation of expiry; but it cannot be directly transferred to other entities though the market process. It needs an expropriation process by the state or the payment of stipulated land fees to the local government.

The second land management system covers the conveyance of land for commercial functions by the private sector. This transaction is a market process conducted through negotiation or auction. Different categories of land usage have different lengths of use-right: commercial houses have 70 years, industrial land has 30 years and commercial functions, such as retail and hotel, have 50 years to use the lands. These lands can be sold to other users, or rented to others in the secondary land market, and such use-right land could be collateral to obtain bank loans. However, the primary land market, whether composed of freely distributed land or high-cost land conveyed by the purchase of land use-rights, is monopolised by the local state and operated by the land administration authorities (Zhu 2002; Lin and Ho 2005). In Guangzhou, these issues are controlled by the Guangzhou Land Development Centre which was established in 1992 as a department in the Guangzhou Municipal Land Resource and Housing Administrative Bureau.

State-owned lands in urban areas are controlled by the local government as the representative of the state, and the local government has the right to change the function of the land, consequently affecting local residents. The houses on the land belong to the householder, but they do not own the land under their house, they merely have the right to use it. Local government has the legal right and process to requisition state-owned lands; if there are public interests (there is great debate about its definition) in this requisition, compensation could be relatively low compared with the market prices of requisitioned houses. If this is a requisition for commercial interests, legally, the state should pay the same level of market prices to the former owners, or provide new houses within the same area (Zhu 2004).

Lands in collective ownership are located in rural areas and belong to the collective economic organisations, these organisations are owned by villagers, but if some of them leave this village and the collective economic organisation, they will lose their ownership of lands. Their land ownership can only be traded between villagers belonging to the same villages. Construction land in villages includes residential areas, township and village enterprises (TVEs) and infrastructure land. Legally, foreign investors could not construct on rural construction land; only urban construction land is suitable. The transformation of agricultural land to construction land is strictly controlled by the land administrative department in terms of the territorial plan and other institutions (Lin and Ho 2005; OECD 2010; Cheng 2011).

Conversion from rural land to urban land often happens in urban marginal areas, and sometimes in the city centre when urban villages are redeveloped; further consideration will be given to this issue later. This conversion is excellent business for the local state, because the activity is monopolised by local government and can produce significant revenue. According to the planning regulations imposed by land administrative institutions, construction land on rural land may be used for limited functions such as for public facilities and infrastructure.

The expansion of construction land plots depends on the increasing population of villages, requiring more (spacious) housing. Therefore, it is under strict control. However, the state-owned land in urban areas has much less restrictions on its development; therefore it has much higher value in the market. The local government can reassign rural land for development with compensation to the villagers, the former owners of rural collectively owned land. Compensation for such ownership changes sometimes are relatively low because they follow the standard of agricultural output from these lands; when the land is transformed into state-owned land with a greater range of uses permitted, the land value will increase significantly (Lin and Ho 2005; Cheng 2011; Wang 2013).

Such land conversion or change of use is profitable business for the local government to produce revenue: there is a great gap between prices of rural land and urban construction land, and the majority of income derived from the increase in price belongs to the local state. However, such a land conversion might threaten food security and social stability because the amount of agriculture land has been reduced and villagers have lost their means of production. Therefore, the central state has strict regulations over this conversion through the land administrative system (Lin and Ho 2005).

These regulations about land transactions between entities, transformation of agricultural land to construction land and conversion from rural land to urban land are executed by land administrative departments. They are about the land itself. In addition, urban planning is another regulatory mechanism to control construction activities on land. Urban planning activities are based on the 1989 Urban Planning Act, which has been developed into the 2007 Urban and Rural Planning (Xu and Ng 1998) argued that the ideology of socialist cities as a base for production has been changed; cities also act as important centres of transport, consumption and financial sectors after reform.

The function of planning is transformed from a project-lead plan to overseeing comprehensive development. Wu (1998) also stated that the philosophy of planning has been changed from political propaganda, to the stimulation of urban economic growth. However, in the central level of government, the Ministry of Construction has fewer concerns about growth, but more about the control of urban development in line with professional standards.

The statutory planning system contains a master plan, district plan and detailed development control plan (DDCP) according to the 1989 act (Xu and Ng 1998). DDCP is similar to zoning in the US system with a similar scale, function and objects to control the function, density, height and style of buildings; however, the DDCP is more about governmental commands, while zoning is about legislation. The majority of DDCPs are approved by the Guangzhou Urban Planning Bureau; some of the most important ones need to be submitted to the Guangzhou Municipal Government (Wu 1998). Urban redevelopment projects are mostly covered by DDCP rather than other categories of planning. DDCPs are often associated with governmental strategy to develop some specific areas and lease newly developed land or redeveloped areas in such locations.

Urban design is another mechanism for the local state to advertise some hot spot in the urban developmental map because urban design is non-statutory planning. This category of planning has less legal limitations and could conveniently follow the leaders’ ideas about urban development. At the same time, the urban planning system also has the function of historical preservation which is usually an anti-growth institution in the urban redevelopment process. This preservation system has three levels: relic level (building level), district level and city level. The relic level is under the legal supervision of the Cultural Relics Protection Law of the People's Republic of China in 1982 and its amendments; urban planning. The other two levels are more concerned with specific historical preservation planning which is applied to involved areas with the normal DDCP. It is an additional regulation for historical districts or municipalities (Zhang 2010; Li 2012).

Guangzhou has been announced as a historical city with cultural significance in 1982; following which it was supposed to invoke planning for historical preservation. However, until 2014, Guangzhou has not yet applied protective planning measures for historical preservation because this might be an obstacle for economic development in old towns (Interview from Li 2013).

Based on such urban planning systems in Chinese cities, there are two innovations in Guangzhou. The first one is the Planning Commission which has been built up since 2006. This commission with members composed of city leaders, leaders from involved bureaus, experts about planning and representatives from citizens, has the administrative power to approve any important planning issues. All major modifications of DDCPs in redevelopment projects need to be permitted by this commission. The mayor of the commission becomes more and more dominant over other members, in spite of its diverse and varied composition (Interview from Li 2013, 2014; Interview from Yuan 2014).

Another important institutional change is the strategic development plan at the city level to adopt the economic competition between Chinese cities. The new type of plan is a non-statutory plan to deal with limitations of the master plan, which has a lengthy process of approval and does not focus on attracting investment to benefit industries. The Guangzhou strategic development plan is the first one among Chinese cities and aims to develop a strategy to adopt its extended administrative territory in 2000 by grasping new opportunities.

This plan is more concerned with the intention of the local leader (in the case of Guangzhou this is the mayor) to develop the urban economy. It might lead to less consideration about social and environmental issues with scientific approaches to planning. This plan employs a spatial strategy which includes the location of new industrial clusters, new public transport systems and a new polycentric urban structure (Wu and Zhang 2007). Urban redevelopment projects are involved in such strategic development as part of spatial strategy and mega projects.

2.5 An Institutional Framework of Land-Oriented Growth and Redevelopment

The institutions discussed in this chapter bring about fundamental interaction processes between central and local government, which means power, resources and responsibilities are distributed and redistributed between different administrative levels. Within such an authoritarian regime with top-down political control, partial autonomy of local state and limited social participation, a great number of motivations for local development and competition are produced in an inner-city competition.

At the same time, the central government gets the major part of the tax income and funds a minor part of the social services, so the local government needs to find new financial resources to support this unbalanced structure. Furthermore, according to the ‘Promotion Tournament Model’, the competition for political promotion is based on competition of economic performance in the Chinese bureaucratic system. Increased GDP and revenue are the main indicators for economic performance (Li and Zhou 2005).

Meanwhile, local fiscal income can stimulate economic growth through constructing infrastructures and public facilities to support and upgrade local industries. Therefore, the competition of development between local governments and officers make the consequence of unbalanced distribution more serious. During the same time, reform of the housing system stopped the public supply of housing; people need to find housing in the real estate market. The real estate market is built on the basis of the land market, in which the government monopolises the primary local land market, which means local governments could get monopolistic rents to support the system of tax distribution and develop the urban economy to win the competition of development.

Therefore, there is a land-oriented growth pattern in Chinese cities, which depends on consuming land resources to stimulate economy and produce fiscal income. Compared with supporting economic growth, land market issues directly contribute to increase local financial resources. Property rights of land and regulations on land provide opportunities for the local state to grasp revenues.

Commercial constructions may only legally be built on urban construction land. There are two pathways to gather urban construction land: through expropriated urban land or through conversion from rural land. Both of these processes can only be operated by land administrative departments because the transformation of ownership, usage and category is controlled by these departments. Governmental sectors’ monopoly of land as the only buyer brings about strong abilities to demand a low price. After the acquisition of land from former users, the process of urban planning is then used to increase land value.

Urban planning as a professional tool is mainly controlled by the local government to maximise the values of land to be leased in the land market. DDCP, urban design or strategic plans, all of them can contribute to increase land values in terms of providing a clear developmental strategy, reducing uncertainty in the future and advertising the project and the city.

As for the results, firstly, the local state can benefit from the land-let market when it is the only seller in the primary land market, whatever the land is, from expropriated urban land or conversion from rural land, and whoever they are sold to, private entities or public enterprises. This land-let income is more dependent on the real estate industry which has developed significantly since 1994.

Secondly, the local state can get tax income from the construction process and selling process of the real estate industry because most of these tax bases belong to the local state, according to the reform of the system of tax distribution in 1994.

Thirdly, the local government can get loans from the national bank system by using the state-owned lands under the effective control of the local government and their future income as mortgages. Such income and loans will be invested in infrastructure to develop urban economy (Tao et al. 2009). Urban redevelopment has an important role in such a process because it can gain fiscal income through the three methods mentioned above; moreover, the land income from land redevelopment mainly belongs to the local state.

Such institutions discussed above have interconnected with each other on the issues of developing or redeveloping land to produce taxes and fiscal incomes. The ‘separating tax’ reform after 1994 and the Promotion Tournament bring about incentives to local leaders to stimulate the growth of economy and revenue; housing reform has released the potential of the real estate market to increase the attraction of the urban land market; highly state-controlled property rights of urban and rural land give the local state dominance to realise the potential values of land; land administrative sectors have institutional resources to operate the land-value increasing process before the primary land market; urban planning is a professional tool to organise land-leasing activities and maximise land values.

Of course, this is not the whole story of urban economic growth in Chinese cities; developments in industrial zones have some different logic (Tao et al. 2009). However, it is an institutional framework to realise incentives of local leaders to stimulate economic growth with successful results in the last few decades. Urban redevelopment is a crucial part of such growth because redevelopment has been involved in every institutional activity focusing on growth: it produces land rent; it increases taxes from construction and selling; it supports the upgrading of the urban economy; it facilitates mortgages to provide loans for building infrastructures. It is a pillar of this land-oriented growth.