Filling the institutional void in rural land markets in Southern China: Is there room for spontaneous change from below?

Deng Xiaoping's market reforms have unleashed an irresistible drive towards urban expansion in China over the last three decades. Yet despite the relentless expansion of urban boundaries and the rapid growth of a property market in China, land transactions that involve the surrender of land leases by Chinese peasants are conducted in an unstable institutional setting. Increasingly, people are questioning the existing regulatory framework for rural land transactions, with the result that an institutional void is threatening to open up. This article focuses on one of the most important spontaneous efforts to fill this void in recent years: the Nanhai land-based shareholding cooperative experiment in southern China. This is a story of institutional change at the grassroots level. The article identifies the source of institutional entrepreneurship, evaluates the dynamics of the insider-driven process, and explains how and why the experiment is failing. An ineffective monitoring mechanism, growing conflict over the allocation of returns, a changing social landscape, and pecuniary temptation all play a role, while the ad hoc nature of the experiment also fails to instill the confidence and stability necessary for long-term investment.