Impact of Chinese Local Government‐led Construction Land Supply Strategies on Urban Innovation and its Spatiotemporal Differences

• Published date: 01 September 2023
• Author: Jian Wang,Shangui Peng,Siqi Yan,Guancheng Guo,Qun Wu
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/cwe.12498

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 161–189, Vol. 31, No. 5, 2023 161

Impact of Chinese Local Government-led

Construction Land Supply Strategies on Urban

Innovation and its Spatiotemporal Diff erences

Jian Wang, Shangui Peng, Siqi Yan, Guancheng Guo, Qun Wu*

Abstract

This study constructs a theoretical framework to analyze the impact of local government-

led construction land supply (LGCLS) strategies on urban innovation. It uses data

related to 265 cities in China from 2005 to 2019 for empirical analysis. Its conclusions

are as follows. For development stage differences, the impact of LGCLS strategies on

urban innovation exhibited an inverted U shape with economic growth. The inflection

point occurred when the per capita GDP equaled approximately RMB23,101 in 2008.

For regional diff erences, the infl ection point in eastern China is higher and earlier than

that in central and western China; before the infl ection point, the positive infl uence was

more obvious in the central and western regions, whereas after the infl ection point, the

negative infl uence was more obvious in the eastern region. For the eastern Yangtze River

Delta urban agglomerations and the northwestern resource-based urban agglomerations

with relatively high per capita GDP, the negative impact of LGCLS strategies on urban

innovation occurred earlier and showed spatial agglomeration characteristics.

Keywords: construction land supply, development stage differences, land economy,

regional diff erences, urban innovation

JEL codes: O18, Q24, Q28, R11

I. Introduction

China’s economy has grown rapidly during the past three decades. During this period,

the local government-led construction land supply (LGCLS) model has played a pivotal

*Jian Wang, Post-doctoral Researcher, College of Public Administration, Nanjing Agricultural University, China.

Email: t2020113@njau.edu.cn; Shangui Peng, Associate Professor, School of Economics and Management,

Shandong Agricultural University, China. Email: pengshangui@163.com; Siqi Yan, Associate Professor, College

of Public Administration, Nanjing Agricultural University, China. Email: yansiqi@njau.edu.cn; Guancheng Guo,

Professor, College of Public Administration, Nanjing Agricultural University, China. Email: ggc@njau.edu.cn;

Qun Wu (corresponding author), Professor, China Resources, Environment and Development Academy, Nanjing

Agricultural University, China. Email: 2016209018@njau.edu.cn. This research was supported fi nancially by the

Humanities and Social Sciences Foundation of Ministry of Education of China (No. 22YJC630132), the Natural

Science Foundation of Jiangsu Province (No. BK20221026), the National Natural Science Foundation of China

(No. 42101272), and the Natural Science Foundation of Shandong Province (No. ZR2021QD085).

Jian Wang et al. / 161–189, Vol. 31, No. 5, 2023

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

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role (Wang et al., 2020). Many researchers have even described the development model

of this stage as a “land-based development” (yidimoufazhan) model and have defi ned the

model of local government intervention in construction land supply (CLS) as an LGCLS

strategy (Huang and Du, 2017; Liu and Geng, 2019). Specifi cally, through special land

systems, Chinese local governments monopolize the supply of all new construction

land needed for local economic development (Wang et al., 2020). On the one hand,

local governments attract capital inflows and promote local economic development

through the large-scale low-priced supply of industrial land (Huang et al., 2017).

On the other hand, they increase extrabudgetary revenue by obtaining substantial land

transfer revenue through the high-priced supply of residential and commercial land

(Liu and Geng, 2019).

In the initial stages, these strategies promoted large-scale and rapid economic

development (Li et al., 2008; Tao et al., 2010). However, as China’s economy enteres

a new stage, the goal of economic development changes to quality from quantity, the

marginal benefi ts of LGCLS strategies have decreased gradually, and negative impacts

have begun to emerge (Wang et al., 2020). For example, the relatively low price of

industrial land has reduced costs and has made enterprises less willing to improve

production efficiency through innovation, resulting in a dependence on low-end,

extensive development (Chen et al., 2018); the relatively high price of residential and

commercial land has benefited the real estate market, not only leading to the flow of

manufacturing capital into the real estate industry for profi t but also further increasing

housing prices and inhibiting the concentration of labor and talent (Wang and Hou, 2021).

Innovation is key to achieving high-quality economic growth (Boons et al., 2013;

Acemoglu et al., 2016), so it is necessary to investigate the impact of LGCLS strategies

which once drove China’s high-speed economic growth, on urban innovation and to

explore whether these strategies can continue to support China’s innovation-driven

development strategies. Existing studies lack a direct focus on the impact of CLS on

urban innovation but can provide insights to explore the relationship between the two.

In terms of LGCLS, some studies have analyzed the socioeconomic impacts of LGCLS.

For example, it increases fi scal revenue and promotes economic development but leads

to problems, such as high housing prices, land-structure imbalances, an inadequate

supply of public services, and increased pollution (Tao et al., 2010; Du and Li, 2021). In

terms of factors infl uencing urban innovation, some mature theories reveal the decisive

role of factors, such as talent and capital on urban innovation (Acemoglu et al., 2016).

Studies have also analyzed factors that infl uence urban innovation from the micro, meso,

and macro perspectives, including enterprise, market, policy, and regulation factors

(Fu and Mu, 2014; Tian et al., 2021).