Roles of Local Government in Collective Construction Land Redevelopment under Institutional Change: A Case Study of Nanhai, Foshan

After decades of rapid urban expansion, China's urban development has transitioned to focus on the quality improvement of existing spaces. Urban renewal is now a strategic measure crucial for advancing high-level territorial spatial planning and intensive land use. In coastal regions that have experienced rapid urbanization, redeveloping underutilized collective construction land is essential for achieving high-quality urban development. China has experienced a path-dependent institutional change in collective land property rights, typically village-based institutions created by rural collectives. When the government aims to grant legal status to collective construction land by redefining property rights and promoting redevelopment, these informal institutions inevitably pose constraints. This study conducts a theoretical and empirical analysis of the roles, behaviors, and outcomes of local governments in constructing a collective land redevelopment market. First, it explores the relationship between the government and the market under gradual institutional change and how this relationship manifests in the redevelopment of collective construction land. Then, it empirically examines the case of Nanhai District in Foshan City, using data from the "Three Olds Reconstruction" database and a redevelopment project with which the authors are deeply involved. The study investigates the formation mechanisms of collective construction land, changes in land development institutions, constraints on redevelopment, and measures taken by local governments to construct the land redevelopment market. Despite the government's efforts to legitimize collective construction land through titling and market initiation, issues such as land fragmentation, involution of collective land management, and ambiguity in property rights persist, constraining further redevelopment. Local governments play an entrepreneurial role characterized by a negotiated relationship of both cooperation and competition with village collectives, the property rights holders. Cooperation involves the government acting as a 'transaction broker' between village collectives and investors, reducing institutional constraints and transaction costs. Competition arises as village collectives seek to capture land rents. The appreciation in land value, mainly generated by public investment, should benefit the general public. However, village collectives leverage their possession of land rights to "hold-up" the government, forcing compromises in profit-sharing. This capture of public value by village collectives jeopardizes social equity. To enhance collective land redevelopment and balance development efficiency with social justice, the following policy recommendations are proposed: 1) formalizing the government's informal role as a "transaction broker" to lower transaction costs and mitigate negative impacts; and 2) establishing clear standards for profit-sharing among stakeholders and a system for transferring land development rights to ensure equitable profit distribution.