Social Sciences in China (Chinese Edition)

No.4, 2015

Housing Models and Urbanization in China—Empirical Research from the Perspective of Land Supply

(Abstract)

Fan Jianyong, Mo Jiawei and Zhang Jipeng

How are we to explain the active role of local government in China’s rapid urbanization and economic development? And why is it that the soaring price of city housing has not checked the constant inflow of migrants from elsewhere? We use a land supply perspective to investigate how local governments engage the internal mechanisms of urbanization, intervening specifically in the land market to increase the supply of land for industrial use at the expense of land for housing. Our entry point is the housing model choice of newly arrived permanent residents, which we use to build a spatial equilibrium model equipped to interpret Chinese urbanization with the help of both theoretical research and empirical tests. It will be seen that the road of urbanization with Chinese characteristics can be explained by a model involving the fact that the newly arrived permanent population lives mainly in low-priced housing outside the commercial market. The increased industrial use of land has driven an increase in the permanent population and raised urban house prices, but has lowered wages.