Developmental state, property‐led growth and property investment risks in China

Purpose - This paper aims to apply the developmental state theory to examine the institutional arrangements that support the widespread adoption of the property‐led urban economic growth model and generate risks on property investment in Chinese cities. Design/methodology/approach - This paper conducts institutional analysis on the behaviour of the Chinese state and examines results from major interview programmes and field investigations on six cities in China. Findings - The Chinese state deviates from other developmental states and is polymorphous, i.e. lacking an effective central state to maintain the standard of governance and regulate the behaviour of local states. The weak central state is responsible for failures to implement national policies on land supply and housing price inflation, to nurture the development of professions like valuation, and to formulate policy on commercial property. The local states, on the other hand, intensify risks in property investment by poor plan making and implementation that create chaos in urban development and intensive competition among projects, and by poor data services and legal support for market operations. Such risks, however, seem to be played down by Chinese property professionals. Research limitations/implications - This paper uses the summarised opinions of interviewees who have varied expertise on different issues in China. Further research could be conducted on a number of fronts, say risk perception by different professions such as valuers or investors. Originality/value - This is the first paper to apply developmental state theory to examine the roles the Chinese central and local governments play in using the property‐led growth model on the generation and intensification of property investment risks.