Industrial land development in urban villages in China: A property rights perspective

• Impact of incomplete property rights on land development in urban villages in China.
• Key institutional constraints on the land development in urban villages.
• Compare two representative cases that involve collective and state land in Shenzhen.

The rapid urbanization of China during the past decades has led to the emergence and development of urban villages. Existing literature has largely focused on the lack of state regulations in the development of urban villages. This paper comprehensively identifies and investigates the institutional constraints on land development in urban villages in China based on a property rights framework and a comparative study on two representative cases in Shenzhen. The key institutional constraints on the land development in urban villages include 1) land insecurity caused by the possibility of government expropriation, 2) unequal access to credit because of unequal land rights, and 3) absence of state regulations on collective land transactions because of the lack of de jure property rights. These institutional constraints weakened the land-related investment incentives and ability of villagers, and resulted in inferior infrastructure and poorly constructed environment in urban villages.