Land Institutions and Chinese Political Economy: Institutional Complementarities and Macroeconomic Management

by Meg Rithmire

Executive Summary — This paper shows the ways in which the Chinese Communist Party (CCP) has used land as a policy tool. CCP leaders intentionally reorganized fiscal, financial, and land institutions to put land at the center of local government finances in the mid-1990s. Since the late 1990s, the CCP has used the land supply as a key tool of macroeconomic expansion and contraction. Local officials act as agents of the center: pursuing land development when pushed to so do by central authorities concerned about managing economic growth.

Author Abstract

A rich body of literature examines the politics of economic management and economic intervention in advanced industrial democracies. While all governments have monetary and fiscal tools, such as the manipulation of interest rates, exchange rates, and government spending, at their disposal to manage and smooth business cycles, they employ these tools in different ways for political reasons. This paper argues that the Chinese Communist Party (CCP) has used the land supply as a key instrument of macro-economic regulation. The paper draws on local and central documents to track, first, how, during the 1990s, land became the CCP's central means of macroeconomic management and, second, demonstrate the use of land as an economic policy tool. In particular, the paper analyzes key episodes of macroeconomic policymaking to show the causal logic at work. In each instance, the CCP relied on manipulation of the national land supply and local land access to either stimulate economic growth or rein in an overheating economy. China's land institutions share "complementarities" with fiscal and financial institutions and benefit powerful political actors while imposing costs on marginal ones.

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