Farmland preservation and land development rights trading in Zhejiang, China

There has been a growing interest in transfer of development rights (TDR) in urban planning and economics literatures. Most studies report new practices and evaluate their policy effectiveness in developed countries, such as the United States and Europe. This paper aims to fill in an empirical gap in TDR studies by analyzing a case from a developing country. It studies the evolution of land rights trading in one Chinese province, Zhejiang. Unlike industrialized societies, the initial driving force for this institutional innovation was not local preservation movements; rather it was a strategic response to the central government's tight farmland regulation. In the late 1990s, to secure food resources, the central leaders introduced the “toughest” land regulatory regime in China and controlled farmland conversion through a number of quotas. To balance development and preservation in a fast growing regional economy, Zhejiang allowed local governments to earn land-use quotas and, more importantly, established a market for trading. More developed areas traded in land-use quotas to growing their businesses and cities, while poor areas traded out development rights for financial compensations. Drawing on extensive interviews and internal publications, this paper supports the claim that land rights trading has achieved both objectives of farmland preservation and development. The study broadens the scope of existing studies on TDRs by highlighting different dynamics in a developing country. TDR should be an attractive option for developing countries that are under high pressure for growth.