The Value of Political Connections of Developers in Residential Land Leasing: Case of Chengdu, China

Abstract

The graduate approach applied in China for the economic transition poses the risk of continued government influence on the market. The land reform and the following adjustment in China have introduced a seemingly complete market for residential land. However, a widely practiced coalition between the local developmental states and developers might impact residential land leasing in a more hidden way. Taking central Chengdu as the study area, this study takes the enterprise ownership and affiliations as two explanatory factors that impact the land leasing prices and builds an MGWR model to evaluate the premium of political connections for the developers to obtain the land. The result gives a clue to the local protectionism and preference for state-owned enterprises that might exist in land leasing in Chengdu. It is proved in this study that the average purchase price by state-owned enterprises is 8.9% lower than the prices that private enterprises could enjoy, and the average land leasing price by local enterprises is 14.2% lower than that enjoyed by non-local enterprises. The preceding conceptual and empirical discussion in this study advocates for a review and rethinking of the public sector’s intervention in China’s land market. In-depth analyses of the factors that define the land leasing behaviors of the local government are needed.