Transition towards urban sustainability through socially integrative cities in the EU and in China

Land banking system

1. Purpose(s)

Land banking system is a prevailing instrument of urban land management in China that aims at better regulating and balancing the supply-demand relationship within urban construction land market, and to enhance the urban land value through providing clear land with some basic infrastructure on it. It is also regarded as an effective tool for increasing the municipal off-budget by selling the banked land to the market. Local and municipal governments in China like to bank or pre-develop the planned land area and arrange land acquired through recovery, acquisition, expropriation or other means to form a primary land market (Ming-Chao, 2017). The land banking practice is mainly taking place in urban renewal and urban redevelopment process in China, in which many small plots of land are generated through relocation of original residents in the run down urban areas. It is also applied for relatively large pieces of land through relocation of distressed state owned enterprises in the downtown areas. By land banking and accumulation of small land plots, a fairly large land area can be formed and sold in the primary land market for a large scale gentrification development or a special dedicated  development usually for an affordable housing project with high density and diversified population. In the latter situation, a more socially inclusive community can be created.     

Key Words: Land development, steering instrument, legal spatial planning, planning approaches, Europe

2. Relevance and Impact

Through continuously strengthening the monopoly of primary land market, city governments can obtain and collect more substantial off-budget through selling the banked land for their local development needs, mainly for building modern urban infrastructure.

The practice of this instrument in China for more than two decades proved its positive effect in promoting fast urban development, although the application of this instrument experienced a progressive updating in its implementation for better aligning with the new or different situations in various cities. Discussions in the project showed, that the challenge of this instrument is how to balance the power in decision making for a better urban land use pattern and management mechanism.

The practice of land banking in China was regulated relatively late. The policy of “Regulations on Management of Land Banking”, jointly made by Ministry of Land and Resources, Ministry of Finance and People's Bank of China, was issued in 2007 (Huang and Chan, 2018). Land banking mechanisms in China are mainly involved in four stages as shown in the figure 1 (LUR =land use rights).

Land banking in urban China is usually conducted by a special office named as Land Banking Centre, which is responsible for collecting and storing the acquired land for redevelopement. To determine the land price for auction, a land price mapping from an informal planning will be carried out to set a land price for each parcel of urban area as a baseline or benchmark for starting the land bidding process. The baseline land price is dependent on a comprehensive analysis of existing land prices and the future land value. Location, accessibility and function of the land parcel are the three most important factors for land price formation. Acquired land is usually categorized by its type of anticipated functional use in a land banking system. The land value assessment for each functional zone can be conducted either by a government agency or by a third party. Commercial areas for business or commercial residental use will be auctioned through a public bidding process so that the land price can be maximized and more promising developers can be chosen. 

The urban land devlopment usually follows the auction and is based on detailed planning and design, which includes the designation of FAR (Floor Area Ratio) for the land parcels and other parameters such as height limitation and proportion of public land use. Once an adjustment of urban land use function is needed, a negotiation mechanism will be required between developer and government urban planning agency. For example, the designated FAR in the detailed plan usually cannot be altered by the winning developer according to the planning regulations. However, in some cases, particular when the TOD typ development (transit-oriented development) is required and a more rational and attractive design is proposed by the developer,  the designated FAR in the plan could be negotiated and changed although the newly proposed FAR still needs to be legally approved by the relevant government agency before it is implemented.

3. Strenghts

By aggregating and acquisition of pocket land, a large scale of urban development can be carried out and help the city to have a better land arrangement and allocation for a more rational development with a well alignment with its urban planning.

By land bidding process, more promising developers with better record in performance can be selected by setting up better criteria for selecting investors.

By setting up certain prerequisites for developing certain functional areas, a more socially inclusive community building can be encouraged and constructed, addressing certain deprived social groups.

4. Weaknesses

By chasing the highest price in land bidding process, irrational high prices of housing can be generated and occur.

In land acquisition, compensation fees paid by the government are sometimes regarded as not sufficient by the farmland owners in the case of urban expansion or by urban dwellers in case of relocation/resettlement.

5. Good practice examples

Most large cities in China have good land banking systems and are generally successful in applying the instrument. Among them, Chongqing, Chengdu, Shenzhen, Shanghai, Beijing, Hangzhou and Wuhan are good examples in this regard in terms of encouraging the integration of urban-rural development in their metropolitan region and improving the restructuring of urban land use functions in the urban core area.   

6. References

MING‐CHAO, L.I. 2017. Review of Urban Land Expropriation, Reserve, Transfer and Management
Reform of China, West Forum (2017).

HUANG, D.; CHAN, R.C.K. 2018. On ‘Land Finance’ in urban China: Theory and practice. In: Habitat
International 75 (2018) 96‐104, DOI:

7. Author(s) of the article

Jianming Cai