Work unit and private community in the evolution of urban planning in contemporary China

Built on theories about the hold-up problem in New Institutional Economics, this article analyzes the evolution of urban planning in contemporary China from an institutional perspective. In particular, it focuses on two phenomena: work unit in the planned economy and the large-scale growth of private communities in the market economy. I argue that the hold-up problem in urban land use still exists in a planned economy and asks for the integration of de facto property owner and local public goods provider. Land use control was thus mostly conducted by the work unit. Urban planning in contemporary China has always been planning for government rather than for the public. This leads to great uncertainty in land use and, consequently, the hold-up problem. Widespread emergence of private communities in the Chinese city is the response of the market to the hold-up problem that arises from the nature of Chinese governmental planning.