The Political Economy of China’s Housing Boom

53 Pages Posted: 28 Jun 2022 Last revised: 22 Mar 2023

See all articles by Xu Lu

Xu Lu

University of Washington - Michael G. Foster School of Business

Adam Zhang

Stanford University

Date Written: August 1, 2019

Abstract

This paper identifies the contribution of the Chinese Communist Party's performance-based promotion system to the country's real estate boom from 2003 to 2015. City-level leaders prioritizing economic growth allocate land at discounted prices to industrial firms rather than housing developers. Our analysis reveals that personal connections with provincial superiors are crucial for promotion and hence affect local land and housing supply. When city leaders share the same hometown as newly appointed provincial leaders, all else equal, their chances of promotion increase by 60%, this reduces the need for performance-based land discounts, resulting in lower growth in residential land and housing prices. Our findings indicate that cities with leaders who share the same birthplace as provincial leaders experience a significantly higher supply of residential land, and housing price growth rates are also 5% lower in these cities.

Keywords: Political economy, China, housing, land policy

JEL Classification: R31, P48, O18, R38, R33

Suggested Citation

Lu, Xu and Zhang, Adam, The Political Economy of China’s Housing Boom (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=4137803 or http://dx.doi.org/10.2139/ssrn.4137803

Xu Lu

University of Washington - Michael G. Foster School of Business ( email )

Seattle, WA 98195
United States

Adam Zhang (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

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