Industrial Policy and Spatial Arrangement of Land Leasing in China

In China, the government plays an important role in allocation of land resources, but there is still insufficient understanding of how the government determines spatial allocation of land supply. This paper reveals the Chinese local government’s arrangement strategy of land resources by exploring spatial response of land leasing to the industrial policy. It turns out that, due to competition among local governments, the spatial arrangement of land leasing will be guided by industrial policy. Driven by winning the intergovernmental competition, local government is inspired to achieve better economic performance by implementing the strategy of maximizing land revenue as well as market segmentation. Specifically, prefectural government will place policy favored industries in municipal district or location closer to prefecture-level city center. First, allocating policy favored industries the land adjacent to the city center or municipal district will help increase fiscal revenue and economic output. Second, by assigning policy favored industries far from the administrative boundary, local government can reduce the spatial spillovers on other regions to affect the balance of advantage in intergovernmental competition