Reform of the Construction Land System

In his book “A Treatise of Taxes and Contributions,” the British classical political economist William Petty argued that “land is the mother of all wealth.” Land is the most basic form of natural resources and an important factor of production. As analyzed in the previous chapter, the insufficient land supply and the excessively long supply cycle tend to impose significant constraints on development. In this chapter, by reviewing the history of land systems both in China and abroad, the author expect to demonstrate that the constraints imposed on development by limited land supply are quite ubiquitous in many countries. In China, the increasing time and transaction costs for investors to obtain land for construction can be explained by two major factors. The first is the increasing number of transaction modules and the second is the growing complexity of transaction rules within each module. The overly complicated system of land administration is directly responsible for the exorbitant transaction costs for acquiring land for the construction purpose, which in turn creates constraints on land supply that directly hinders investment in fixed assets. Such constraints constitute what might be called hard constraints on China’s economic development.