Conference Agenda

In February 2021, the Ministry of Natural Resources of the People’s Republic of China announced the “Centralized Land Supply” policy to be implemented in 22 pilot cites. These pilot cities were required to announce well in advance plans of land auctions and to hold no more than three auctions each year for residential land. Aiming to increase the transparency of land auctions and to guide rational market competition, the purpose of the policy is to stabilize expectations of real estate developers and therefore to stabilize land price fluctuations and safeguard stable development of the housing market. This paper use data from the 22 pilot cities and 44 non-pilot cities, and employ difference-in-difference estimations and moderating effect analysis to test the effects of the policy. We find that, residential land prices have been rising after the policy was implemented; the impact of the policy on the land market in first-tier cities, that is Beijing, Shanghai, Guangzhou and Shenzhen, is greater than in other cities; joint bidders have an advantage over single bidders in the market, and they are more likely to get land; state-owned real estate developers are more likely to get land and offer higher prices.

In this paper, we exploit the close interactions between the land and housing market in China and study the decisions of real-estate developers in the land market auctions and its implications. We first establish that the land auction outcomes exhibit significant spillover effects on housing markets by exploring the exact timing of the auction. We find that a land auction price growing twice as fast as the local housing price trend leads to an 8.3 percent increase in local housing price. The spillover effect shows strong momentum, lasting four months after the auction, after which the local housing price began adjusting downwards. Using a matched dataset of developers’ stock of land and land auction outcomes, we show that developers adjust their auction strategy in the land market in response to the spillover effects. Developers with land stock nearby the land auctioned bid 3.8 percent higher. This response to the spillover effects is more pronounced in cities where housing prices are not regulated.

We investigate whether and how political connections penetrate through headquarter-subsidiary relationships. Our results show that even though the headquarters of politically connected listed firms pay comparable land prices as other firms, their subsidiaries pay 12.1-13.2% less. The price discount, driven by corruption, is exacerbated when the land is for commercial or residential use and is disposed of through informationally opaque supply methods. The anti-corruption campaign has successfully mitigated such price distortions. Our findings also show that better legal protection and private sector development are crucial for fair markets.

This paper studies the housing bubble characteristics and the heterogeneous response of different types of bubbles when facing monetary policy surprises in China. Through a conceptual framework allowing for bounded rationality, two distant bubble types, i.e., textit{rational} and textit{naive} bubbles, formed by speculative and extrapolative beliefs are respectively identified. Exogenous monetary policy shock is captured by estimating an endogenously switching rule that accommodates institutional facts in China. Using a quarterly panel dataset covering major China's cities, our results show that both the magnitude and type of housing bubbles evolve across locations over time, while bubbles in urban China are mostly dominated by the rational type. Tightening monetary policy exerts a containing role in rational housing bubbles while its role in naive bubbles is less significant. Housing interventions with Chinese characteristics such as home purchase restrictions and land provision also exhibit distinct impacts on different bubble types. Our results confirm effectiveness of contractionary monetary policy and purchase restrictions in combating China's housing bubbles thanks to nationwide dominance of the rational bubble type. We further advance a theoretical discussion of our empirical findings.