The formation of a market-oriented local property development industry in transitional China: A Shenzhen case study

Abstract

The fast-paced and large-scale Chinese urban development since 1980 is unprecedented in China's urban history. Much of the credit has to be attributed to a nascent local property industry which itself is the product of the economic reforms. Two factors-building commodification and marketization, and state-owned-enterprise (SOE) reforms-have germinated a local property industry, with the facilitation of inward foreign capital, in the context of transition from a static and rigid planning system to a dynamic market-oriented economy. Nevertheless, the gradualist economic reforms and piecemeal SOE transformation, which are intended to transform the Chinese urban economy by increment and experimentation, complicate the evolution of the property industry, which has developed unique characteristics in the transitional time between plan and market. The presence of inequality in the market and absence of measures for hardening soft budget constraints have moulded a market in the making. Market efficiency is compromised and a dual plan-market system puts the competitiveness of the growing property industry in jeopardy.