Habitat International 43 (2014) 299e308

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Habitat International
journal homepage: www.elsevier.com/locate/habitatint

Redevelopment of urban village in China e A step towards an effective

urban policy? A case study of Liede village in Guangzhou
Ling Hin Li a, *, Jie Lin b, Xin Li b, Fan Wu b
a
Department of Real Estate and Construction, The University of Hong Kong, Pokfulam Road, Hong Kong, China
b
Southern China University of Technology, Guangzhou, China

a r t i c l e i n f o a b s t r a c t

Article history: Urban regeneration is a complicated process as it involves a lot of parties each with different interests
Available online 16 May 2014 and agendas. Regeneration of urban villages is an even more intricate issue in China due to the dual
systems of property rights over urban and rural land. While a lot of attention has been given to the
Keywords: governance structure applied to the regeneration process, this paper tries to analyze the changing
Urban villages ideological foundation for local authorities in China to execute such regeneration in a more efficient and
Urban regeneration
less costly way. By a detailed case study of Liede Village in Guangzhou, we find that local authorities in
Urban governance
China are willing to explore neoliberal approach in coordinating with market forces in the process of
regeneration. The results in this case study are promising as all parties involved got what they wanted
from the regeneration scheme. However, one should not be mistaken that this is a paradigm shift in the
governance ideology. We expect that such progress to take place only in a gradual manner when cir-
cumstances in the market and socio-political environments allow it to proceed further, a situation not
dissimilar with how ships advance gradually in a canal via various locks. We coin this situation in this
paper a “locks analogy”.
Ó 2014 Published by Elsevier Ltd.

Introduction stages, namely urban reconstruction in 1950s, urban revitalization

Cities are highly complex spatial and socio-economic entities
(Ma & Wu, 2005). What makes it interesting to study cities is the
urban dynamic they are constantly evolving within. In the West,
urban development is characterized by two simultaneous pro-
cesses: inner-city decline and urban sprawl. These two processes
are in fact intertwined, as Akundi (2005) asserts that urban sprawl
accelerates the inner-city decline. In the continuous process of ur-
ban sprawl due to population and economic growth, inner-city
areas will undergo a transformation from over-crowdedness to
population exodus due to physical dilapidation of the inner-city
areas. As a consequence, government effort and intervention is
needed to revitalize the inner city aiming at resolving some social
and economic problems. On the other hand, though physically
dilapidated, inner city maintains an appeal over other districts in
terms of physical infrastructure and locational advantage.
According to Zhang (2004), the concept of urban regeneration in
the Western countries has not been fully developed until the 1990s.
The established notion of urban regeneration evolves from four
* Corresponding author. Tel.: þ852 2859 2128; fax: þ852 2559 9457.
E-mail address: lli@hku.hk (L.H. Li).
in 1996s, urban renewal in 1970s, urban redevelopment in 1980s.
Even though there are no clear boundaries among these four stages,
they indeed represent the changing contents and features of urban
regeneration in different eras.
City is a dynamic and complex system, which means spatial,
economic, social and other changes frequently occur together and
interactively. Urban redevelopment (or regeneration) has been a
vital component of the urban development process simply
because cities do tend to age and become obsolete physically and
functionally (and hence economically). In general, city is a notion
of locality and has its characteristics grounded on a historically
specific set of geographic, economic and social environments. On
the other hand, many urban policies implemented within the local
scope are actually initiated as a response to the “uncontrollable
supra-local transformations, such as globalization, the financiali-
zation of capital, the erosion of the national state, and the
intensification of interspatial competition”(Brenner & Theodore,
2002).
Urban redevelopment first took place systematically during the
Industrial Revolution and was a response to the process of urban
transition. Now it is mostly regarded as an urban development
strategy to promote local economy and attract investment.

http://dx.doi.org/10.1016/j.habitatint.2014.03.009
0197-3975/Ó 2014 Published by Elsevier Ltd.
300 L.H. Li et al. / Habitat International 43 (2014) 299e308
In the 1980s and early 1990s, scholars created a variety of con-
cepts to describe and theorize the ongoing deconstruction and
subsequent reconstruction of urban social space, including dein-
dustrialization, reindustrialization, post-Fordism, urban entrepre-
neurialism, et al. These concepts are further supplemented by
“neoliberalism” (Brenner & Theodore, 2005). Neoliberalism, first
gained widespread attention during the late 1970s (Peck, Theodore,
& Brenner, 2009), represents a significant return to the original
axiom of liberalism (Smith, 2002). Neoliberalism, however, is not
advocating unconditional dependence on market mechanism, but
rather active mobilization of both national and local state power in
conjunction with the market (Brenner & Theodore, 2005; Smith,
2002). Studies on neoliberalism emphasize the disciplinary forms
of the state intervention in order to impose market rule and,
thereafter, to manage the consequences of marketization
(Theodore, Peck, & Brenner, 2011, pp. 15e25). It is widely
acknowledged that state intervention is capable of creating the
optimal conditions for market operation (He & Wu, 2009; Peck,
2004; Peck & Tickell, 1994, 2002). In short, neoliberalism gener-
ates a complex reconstitution of stateeeconomy relations in which
state institutions are actively mobilized basing on market regula-
tory arrangements.
To understand the neoliberalization of urban space, which can
be conceptualized as neoliberal urbanism, there are two key issues
to be analyzed.
The first one is that neoliberalism is conceived as a modality of
urban governance (Brenner & Theodore, 2005). In many cases,
neoliberal programmes are directly internalized into urban policy re-
gimes such as place-marketing, enterprise and empowerment zones,
urban development corporations and publiceprivate partnership. The
overarching goal of such neoliberal urban policy is to mobilize city
space as an arena both for market-oriented economic growth and for
elite consumption practices (Brenner & Theodore, 2002). In a nutshell,
urban space becomes one of the most profitable sources of investment
and thus every city attempts to attract capital by adopting aggressive
place-making strategies. Indeed, neoliberalism has become the
dominant political and ideological form of capitalist globalization
since mid-1980s (Brenner & Theodore, 2002).
Secondly, in the trend of power decentralization, local govern-
ments can actually become the decision-maker of urban develop-
ment strategies and share responsibilities as well as interests from
urban growth. These contextually specific strategies in turn
generate the path-dependent outcome of neoliberalism (Brenner &
Theodore, 2005). In other words, one of the key characteristics of
neoliberalism is its diversity in terms of administrative or bureau-
cratic form. It consequently has not only prevailed in North
American cities as an approach to interpret urban restructuring, but
also inserted great influence in the urban policies and development
in the emerging countries, such as China (He & Wu, 2009).
Neoliberalism can therefore be utilized to examine the China’s
social-spatial transformation as urban redevelopment in China has
been a prominent field undergoing profound neoliberal shifts (He &
Wu, 2009).
Neoliberalism and China’s urban redevelopment
Neoliberal urban policies are formulated because of the faith in
the market mechanism to provide and satisfy social needs while
rejecting the idea the state may be a better solution (Lange, Skelton,
& Meade, 2010). In urban redevelopment, neoliberalisation
approach is manifested in the adoption of urban development
corporation model by which private developers are taking a more
active role with the help of the semi-government bodies, though
not countries meet with the expected level of success (Dodman,
2008).
Studies on China’s emerging neoliberal urbanism started to
blossom in the last decade (He & Wu, 2009). With the opening up of
the economy in China since the early 1980s, coupled with sustained
economic growth in the 1990s, urban land development has
become an important growth engine in the local economy. Local
authorities in China are becoming more and more aware that
property-led and publiceprivate partnership model is a more
efficient option for urban regeneration in terms of financial burden
as well as socio-political cost (Li & Li, 2007).
Under the new tax-sharing system between the central and
local governments in China, it reassigns revenues only between the
central and the local governments in certain proportion. This per-
mits local governments to retain more revenues through increasing
fiscal income. Fiscal system reform stimulates local governments to
implement capital accumulation projects and promote local eco-
nomic growth. With the steps of decentralization being expedited,
municipal governments are granted with more power as well as
responsibilities to promote urban development. For instance, the
municipal governments are now applying local development stra-
tegies to utilize resources and attract investment, rather than
simply to implement state projects. As a result, urban redevelop-
ment has become more and more an arena for place-making for
local governments. During this reforming process, the authorities
in China began to realize that the old model of socialist planning
mode could not cope with the rapidly changing global economy.
Eventually, a more market-friendly environment needs to be put in
place, and one of the options is neoliberal approach.
Neoliberalism has a central element of market-oriented
approach that corresponds to the series of market-oriented re-
forms in China launched since the ‘open door” policy in the 1970s.
Among these reform policies, land and housing reforms represent
the most profound neoliberal shift in the contemporary political
reform in China, as state land ownership has always been a central
element in the socialist ideology of China. With the advent of a new
land leasing and transfer system initiated by the land use rights
reform in the late 1980s, private real estate investors and de-
velopers, both domestic and abroad, are invited to share profits in
the urban land development and redevelopment projects (espe-
cially when inner areas in the city are involved). In the other word,
the private sector is provided with a new source of capital accu-
mulation, namely, urban land. By opening the urban land market,
local governments have also made a new source of fiscal revenue
and effectively solved the problem of financial deficiency.
Neoliberalism as a political strategy of spatial selectivity is well-
documented (Brenner & Theodore, 2005; Jones & Watkins, 1996).
Hence, neoliberal political strategies go hand-in-hand with spatial
organization (as well as re-organization) in modern cities. Urban
regeneration which manifests one vital form of urban spatial
restructuring therefore has a significant relationship with neoliber-
alism. Nevertheless, given the state-ownership of land in urban
China and collective’s ownership of land in rural China, market
mechanism in this land economy is still working under the heavy
shadow of the state. If neoliberal urban strategies are to be deployed
to effectuate regeneration of inner areas in the city, more effort is
needed from all parties involved in order for the market mechanism
to take charge. This is even more problematic when the regeneration
scheme covers urban villages in the city with the dual land owner-
ship of urban and rural land intertwined with each other. In this
paper, we will examine such an interesting spatial phenomenon of
urban village regeneration in Guangzhou, and assess whether the
outcomes of this case represent a plausible step of urban policies in
China moving towards neoliberalism. Though this paper only ex-
amines one case, the information obtained is very substantial, and
case study approach as an analytical tool is not without merits (Yin,
2009).
 L.H. Li et al. / Habitat International 43 (2014) 299e308
Urban village redevelopment in Guangzhou
The Pearl River Delta (PRD) region is one of the most prosperous
metropolitan regions in China as a result of production globaliza-
tion. It is certainly the driving force in Southern China. Local gov-
ernments in each major city in this region have devoted
tremendous efforts in collaborating and competing with each other
in creating pro-development environment. Consequently, high
speed industrialization and urbanization led to the loss of valuable
agricultural land (Wu, 2004; Yeh & Li, 1999). This sowed the seeds
for what is subsequently and commonly known as the problem of
urban villages.
Guangzhou is the capital city of Guangdong Province as well as
the most important industrial city in the PRD region. It has a long
history of industrialization and the urban development. Guangz-
hou’s urban development has gone through several phases char-
acterized by different goals. According to the statistical data of the
Guangzhou Urban Planning Bureau, the total built-up area has
increased from 170 km2 in 1980, 266 km2 in 1997 to 990 km2 in
2011.1
As the population increased, it generated more pressure on
housing in the inner city. In view of this growing demand for more
living space in the urban area, the government and developers
quickly formed an alliance to seek opportunities to redevelop the
inner city for profit. In Guangzhou, 4481.7 ha of land in its central
areas (Dongshan, Yuexiu, Liwan and Haizhu districts) has been
channeled into the land market for redevelopment during the
period of 1992e1999 (Liu, 2009). Urban land market started to be
structured, therefore, at the same time.
Amidst this period of high speed urbanization and land rede-
velopment, an urban problem arises that is very unique to China. In
China, land ownership in urban cities belongs to the state, and such
land is commonly known as state land. In rural areas, land belongs
to farmers’ collectives, collective’s land. After the urban land reform
has commenced in the late 1980s, the state and local governments
have been given the power to lease the use rights of urban state
land for real estate development projects. But this power does not
extend to collective’s land. To develop such collective’s land or to
lease out collective’s land for non-agricultural purposes, local
governments have to requisition the land from the farmers’ col-
lective with compensation first. When city encroachment becomes
more and more intensified, the urbanerural boundary becomes
more and more blurred. At the same time, building land on such
collective’s land also become more and more expensive in terms of
compensation. This leads to an interesting phenomenon that when
the city government is trying to requisition collectives’ land, they
will choose farmland over building land on such collective’s land
for a lower compensation standard. This is because compensation
for agricultural land is based on the value of agricultural output on
land, whereas building land is compensated on the basis of prop-
erty value. Once such agricultural land is converted into state land
for redevelopment, this leaves some islands of collectives’ building
land in the middle of the regenerated urban districts. This produces
a unique urban spatial phenomenon known as “urban village” (or
chengzhongcun in Chinese).
Urban villages sprawl over various rapidly urbanized cities in
China like mushroom after the rain, especially in Southern China.
Due to the lack of control in building quality inside these urban
villages, a lot of local governments is keen to find ways to remove
and redevelop them. This unique process of urban village trans-
formation in turn attracts a lot of academic interests in areas of
impacts on urban migrants (Lin, de Meulder, & Wang, 2011),
1
http://www.upo.gov.cn/pages/zwgk/tjsj/zxtj/2012/6799.shtml.
301
interplay of various actors in the process of regeneration (Lin, de
Meulder, & Wang, 2012), as well as neighborhood attachment
(Zhu, Breitung, & Li, 2012). In this paper, we would like to
contribute to this wealth of literature by examining in detail the
regeneration process of one of these urban villages in Guangzhou,
namely Liede Village, and to assess the role of the market mecha-
nism in this interesting process. Liede Village lies at the southern
part of Zhujiang New Town, which has been planned as the second
CBD of Guangzhou, this puts Liede Village on a rather strategic
location in the overall urban development of Guangzhou (Fig. 1).
Liede is an 800-year-old village with a population of residents of
nearly 18,000 before the redevelopment, of which only 7865 were
the original local villagers (3167 households) and around 10,000
migrants from outside looking for cheap rental housing. The old
village site covers an area of 336,000 m2 with a gross built-up floor
area reaching 686,200 m2 before the redevelopment. The site falls
within the administration of Tianhe District Authority.
Prior to the redevelopment, the old Liede Village was regarded
as dirty and chaotic, basically the standard image most other urban
villages have. There were narrow streets, back-to-back residential
buildings built without following the proper regulations, mixed use
of street level retail activities and densely-built residential build-
ings on the top of these shops. In addition to the poor physical
environment, the neighborhood was infested with serious prob-
lems of illegal construction, lack of fire protection measures, unsafe
and insecure environment and bad sanitary conditions (Fig. 2).
In the past, Liede villagers made their livelihoods on farming by
making use of the geographical advantages of possessing fertile
land and sufficient water supply. The old life style in Liede village
came to an end when the agriculture-based livelihood was termi-
nated because of large-scale land requisition of farming land star-
ted in the 1990s. However, the collective economy actually
embraced more prosperous development by turning into second-
ary and tertiary industry. It was not until 1994 when all the farming
land under the Liede collective-ownership was requisitioned by the
government for urban development. Then the village collective
obtained a large amount of capital compensation and used it to
build a Household Furniture Mall in the Zhujiang New Town as the
collective property. The collective economy has been able to
maintain a sustainable development from the successful invest-
ment in the sequential projects nearby.
Given Liede’s current condition as an urban village surrounded
by urban state land, the government of Tianhe District began to
consider plans to integrate Liede village into the urban system in
2002. Due to the relative stable economic base as well as high land
value in the Tianhe district, it became more and more costly for the
government to requisition the remaining building land on Liede
village. Negotiation for redevelopment under the conventional
model did not lead to any fruitful outcomes until a more collabo-
rative, market-based model was put on table. Instead of adopting a
conventional top-down approach forcing an agreement with the
collective, the municipal government tried a new model of allowing
the collective to work out a market solution with the developers
directly, while working in the background to facilitate the rede-
velopment scheme. Consequently, the Liede village regeneration
model has been regarded as one of the successful cases of urban
village redevelopment in China (Fig. 3).
Fundamentally, Liede villagers are handsomely compensated in
cash as well as in kind and their livelihoods have been greatly
improved. The sudden increase of wealth in terms of real estate
portfolio among ordinary villagers has elevated the socio-economic
status of the villagers substantially in the society. A lot of city
dwellers in other parts of Guangzhou even try to establish personal
network with these villagers for various purposes, among them
marrying into the village is a popular one!
302 L.H. Li et al. / Habitat International 43 (2014) 299e308

Fig. 1. Location of Liede village. Adapted from Guangzhou travel, Wikipedia, http://www.travelchinaguide.com/map/guangzhou/.

More importantly, the redevelopment of Liede Village signifies a
feasible model of sustainable regeneration of urban village in China
without much direct involvement and control from the municipal
government. It is a sustainable model because villages were not just
given cash compensation and then dispersed to other region of the
city to pave way for a gentrified neighborhood for the middle class
households. It is sustainable because the regeneration model allows
sustained economic gains to be enjoyed by the villagers while the
physical environment is being regenerated on one hand, and the
social and cultural ties among villagers to be kept intact after the
regeneration on the other. In the followings, we will examine the
progress of this redevelopment project.

Fig. 2. Images of Liede village before redevelopment.

Sources: http://gd.qq.com/a/20120719/000645.htm (Left), http://news.sina.com.cn/c/2007-05-09/150911784557s.shtml (Right).
 L.H. Li et al. / Habitat International 43 (2014) 299e308
Fig. 3. Successful transformation of Liede village in Guangzhou.
Data source: http://www.gzuro.gov.cn/azcg/45/315.html.
Rationalization of land use for sustained economic growth
The overall village site is divided into three functional sub-areas.
The one locating in the northewest of the village area is transferred
to the developers for developing commercial, offices and com-
modity apartments. This area thus becomes state land and enters
into the free market mechanism under the land management sys-
tem in China. The other two plots in the east and southewest are
reconstructed by the village collective of Liede for residential and
commercial uses respectively, in accordance with the urban pattern
of space distribution (See Fig. 4). The plots information is listed in
Table 1.
The Eastern Plot is mainly developed into replacement housing
units with 37 buildings totaling over 6000 apartment units of
various sizes for villagers to move back after the redevelopment. In
addition to residential buildings, essential municipal facilities, such
as schools and markets, adding up to a total area of 687,000 m2
have been built. These facilities have been turned over to the
relevant government departments for administration after
construction.
The Southewest Plot is assigned to the Liede Economic Devel-
opment Company (LEDC) as collective property. It is planned to
303
develop a five-star hotel and a 23-floor office building, which will
ensure long-term profits for villagers. The project is still under
construction at the time of writing. The LEDC takes the re-
sponsibility to construct the façade of the hotel and has decided to
lease the hotel building to a professional company of hotel
administration to run the hotel. The expected cost of construction is
900 million RMB and the annual revenue is estimated to be 100
million RMB. Office property will be managed by the LEDC for long-
term rental income.
The Northewest Plot has been sold to the developers for raising
redevelopment fund. The site will be turned into an integrated real
estate complex. The plot ratio granted by the government is within
the range of 6e7, which is higher than the normal standard, so that
the developers are able to make a reasonable profit given the
substantially higher land price covering the compensation fee.
Transportation
The transportation in the village area has been integrated into
the urban transportation system in the city after the redevelop-
ment. There are six main roads passing through the village areas.
They are Huangcheng Ave, Linjiang Ave, Xingmin Road, Xing’an
304 L.H. Li et al. / Habitat International 43 (2014) 299e308
Fig. 4. Land use pattern of Liede village area after redevelopment.
Source: Liede Redevelopment Planning by Architectural Design & Research Institute of Guangdong Province.
Road, Haiming Road, Haiyue Road in eastewest direction and Liede
Ave, Xiancun Ave, Xingguo Road, Haiwen Road in southenorth
direction. The Liede Bridge, which was opened to traffic in 2009 as
one of the main bridges over the Pearl River, is linked to the Liede
Ave. This makes Liede village straightly connected to the south of
the river. There is a MTR station named Liede Station located in the
northern border (Huacheng Ave) of the area. For bus station, there
are five bus stations with more 20 lines connecting the village (see
Fig. 5).
Conservation
For the whole site, the improvement of the physical environ-
ment can be demonstrated by some conservation performance
indices. The first one is the density ratio decreasing from 60% to
28.1%. The green ratio on the other hand increases from 5% to 30%,
representing more than 10,000 m2 of green area.
The Liede redevelopment project has featured the preservation
of historic and cultural heritages. The tradition of dragon boat
performance and competition in Dragon Boat Festival is an
important part of the local custom. Hence, after the redevelopment,
Liede Stream and Cigu Pond are cleaned up and beautified to hold
the festive activities. Another Chinese tradition is to pay respect to
the ancestors under the same surname. In the Liede redevelop-
ment, construction of five ancestor halls in the original style and
made into a cultural center of Liede fulfills this. Prior to the rede-
velopment, Liede villagers, especially the elderly, enjoyed sitting
outside their houses and playing cards, chess, and so on and so
forth. Now they can still keep their life style in the well-designed
Table 1
Plot information.
Plot ratio Net land Total construction
area (m2) area (m2)
Northewest Plot 6e7 93,928 563,568e657,496
East Plot 5.2 127,883 664,991
Southewest Plot 5.3 32,446 172,000
open space such as the Liede Cultural Square and the village cen-
ter park. In this way, social capital in the form of personal network
among villagers is preserved.
The infrastructure construction has dramatically facilitated the
villagers and other residents living in the Liede area. As a result, the
redeveloped area is able to integrate into the urban system in the
aspect of infrastructure and living services.
Property right conversion
In the process of urban village redevelopment, property rights
reassignment has been a central concern of the government in
addition to improving the urban physical environment. In China,
the central government is the ultimate owner of urban land even
after 1998 when the Land Administration Law allows land use
rights to be transferrable in the market. Parallel to state’s owner-
ship, the collective is the owner of rural land on behalf of the
farmers.
In order to make use of such land for urban development, in the
Liede case, the state converted land ownership on the portion
surrendered by the collective, and turned it from collective-owned
into state-owned, while the village committee retained the land
use rights over the land still under the collective after redevelop-
ment. Even though the resettlement apartments are assigned to the
Liede villagers, their rights are not alienable immediately, which
means that they cannot capitalize their assets through housing sale
like general commodity house. In this respect, therefore, the
municipal government made a compromise with the Liede collec-
tive to allow a semi-conversion to take place in order to facilitate
the whole redevelopment process.
Villager compensation and livelihood
Generous compensation to the villagers in kind, namely
replacement housing units, is made on the basis of equivalent floor
area entitled by individual villagers before the redevelopment. The
floor area of replacement apartments received by a household is
determined by the site area of previous housing plots with de jure
property right and its legal floor area. Generally speaking, village
 L.H. Li et al. / Habitat International 43 (2014) 299e308
Fig. 5. Transportation map of Liede area.
housings are allowed to build no more than four floors, which
means floors above the fourth floor are regarded as illegal con-
structions by Guangzhou government and will not be compensated
under redevelopment schemes.
Legal floor area is the area of household housing plot multiplied
by the actual floor height (in terms of number of stories), with a
maximum limit of four. In the other word, if it was less than two
floors before, the villager can request for two more floors in the
replacement units, provided he pays a 3500 RMB per m2 fee for the
additional area. On the other hand, they can also choose to give up
that marginal area and to receive a compensation of 1000 RMB per
m2 from the collective company.
For instance, if a villager has 50 m2 of housing plot and he owns
three floors plus another 8 m2 of stairwell area before the rede-
velopment, his legal ownership before redevelopment is 158 m2.
Under the compensation package, his legal entitlement is a
maximum floor area of 200 m2, or the equivalence of the gross floor
area of four floors, provided that he pays 3500 RMB per m2 for the
extra area of 42 m2 (50 m2 minus the stairwell area of 8 m2).
Alternatively, he can choose two apartments with sizes of 120 m2
and 75 m2 respectively, making his entitlement after redevelop-
ment of 195 m2. In such case, he needs to pay for the extra area of
37 m2 (which is the difference between his new entitlement of
195 m2 and his legal ownership before the redevelopment). In
addition, since he forfeits 5 m2 of the maximum entitlement, he
will receive a compensation at 1000 RMB per m2 from the collective
company, or 5000 RMB. In this way, a very flexible market mech-
anism has been created to allow different households to opt for
different compensation package for various needs.
More interestingly, the LEDC has further inserted a market
element in the design of the replacement apartment units for the
benefits of the villagers. Knowing that most villagers may rent out
extra floor space to non-villagers for rental income, the LEDC re-
quests 14 types of apartments with different sizes to be built to
meet the villagers’ needs. Hence, around 60% of the replacement
apartments have an area of 75 m2 or smaller, so that most villagers
are able to receive two separated units if they want as their total
compensation package (as elaborated in the example above). Most
of the village households (around 88.5%) have obtained
305
replacement apartments with a total floor area of over 100 m2. The
household that received the largest floor area of resettlement
apartment has got a total area of 1700 m2! Among the total 6000
resettlement apartments, only one third of them are self-occupied
by villagers, while the other 4000 apartments are rented out for
income.
In addition, the villagers are able to gain subsidies for tempo-
rarily moving out of the village during the construction of reset-
tlement housing with a standard ranging from 30 to 50 RMB per m2
per month.
In addition to such rental income, villagers also receive stock
dividends from the LEDC, and a small amount of working salary
(Liu, He, Wu, & Webster, 2010). The Liede redevelopment project
has attracted widely public attention because the local government
innovatively made great concessions such that villagers are allowed
to enjoy a long-term share of the urban land value uplift created by
urbanization, instead of being dismissed by an one-off
compensation.
The value of resettlement housings has a capital value increase
to 30,000 RMB per m2 at the time of writing, over 7 times compared
to the value prior to the redevelopment of 4000 RMB per m2. The
rental value of resettlement housings has been continuously going
up since the construction completed in 2010. The rental value of
former village houses was about 10e15 RMB at most per m2 per
month before redevelopment. After redevelopment, it jumped to
35 RMB per m2 monthly in 2010 and reached the level of 50 RMB
per m2 monthly in the end of 2012.
Before the redevelopment, rental income collected from retail
stores was below 3 million RMB per year. Now the LEDC managed
more than 30,000 m2 of stores making 7e10 million RMB of rental
income every year. The total collective incomes reached 500 million
RMB in 2012, which is a tremendous increase from 100 million RMB
before the redevelopment project. The redevelopment made LEDC
the highest income-generating rural collective’s enterprises in
Tianhe District of Guangzhou. The annual dividend of the collective
economy as a result has increased from RMB 5000 per capita to
RMB 30,000 per capita. In general, the annual individual income of
Liede villager has gone up to 90,000 RMB after redevelopment
while it was around 25,000 RMB before.
306 L.H. Li et al. / Habitat International 43 (2014) 299e308
Government tax revenue
Unlike conventional renewal projects, the municipal govern-
ment did not get the land value of the site sold through the market
system. Instead, the local government aims at the long-term rev-
enue from an improved neighborhood. Eventually, it has been able
to collect both one-off and continual taxes from the commercial
and retail developments in the Liede project. While we do not have
the actual figures on the tax revenue, the main tax items and their
rates are shown in Table 2 to illustrate the width of income sources
from this redevelopment project.
Neoliberal approach of regenerating Liede village
The Liede Project is basically a wholesale redevelopment of the
whole urban village. To achieve this massage redevelopment
project, a well-oiled machinery needs to be put in place. In this
respect, the village committee took a leading role in this three-way
partnership (village-developer-government), which is very
different from the standard practices in redeveloping urban villages
in the city.
This collective-led approach is explored and preferred in this
case because the conventional wisdom of direct heavy government
involvement in regenerating urban villages seems to have met with
more and more resistance from the local villagers (Li & Li, 2011).
This means an increasing political and time cost for the city gov-
ernment to solve this urban problem if they choose to take the lead
in converting the collective’s land into state land before the rede-
velopment. In the case of Liede, we find that the municipal gov-
ernment allows the village committee to take the steering wheel to
decide on major milestones of the redevelopment of Liede
including such issues as demolishment arrangement, compensa-
tion scheme and reconstruction plan, with an objective of effectu-
ating the whole process.
From a neoliberal strategic point of view, the municipal gov-
ernment decentralizes the decision-making power to the rural
collective. It is a neoliberal governance approach on the part of the
Guangzhou municipal government to retreat from the complex and
conflicting process of urban village redevelopment as well as the
financial difficulties. This neoliberal approach also signifies an
important change in the urban land management system in China.
As an urban redevelopment experiment, the village collective of
Liede is allowed to handle land transaction issue directly with the
developers so as to finance the redevelopment construction,
instead of waiting for their collective’s land to be converted into
state land ownership first. This represents a very significant step
towards a possible option of merging the dealing with the dual land
management problem in China. In the Liede case, rural non-
agricultural land is being converted into urban land in the
absence of government intervention, which is distinguished from
the previous land requisition model explained in the above.
Table 2
Major tax items and rate involved in the redevelopment.
Items Taxation basis
Business tax Turnover
Urban maintenance and Commodity turnover tax
construction tax
Education supplementary tax Commodity turnover tax
Local education supplementary tax Commodity turnover tax
Price adjustment fund Commodity turnover tax
Embankment protection fee Pre-tax income
Enterprise income tax Taxable income
Land appreciation tax Added value of property
Data source: Tax Bureau of Guangzhou.
Under this hands-off approach, the municipal government
transfers their control to the rural collective, with an expectation
that the village collective will rely more on the market mechanism
as a means to achieve the ends of urban regeneration objectives.
The collective eventually forms a village committee to carry out the
task in a corporation manner.
In 2002, the village collective of Liede established a sharehold-
ing company called Liede Economic Development Company (LEDC) to
manage the collective property and business with respect to the
overall redevelopment plan. LEDC is collectively owned by all vil-
lagers who are all shareholders of it and are all eligible to share
dividends from the earnings of LEDC. In this way, the collective
hopes that the benefits coming from the redevelopment will
become more sustainable than an outright distribution of
compensation from selling their land.
LEDC was set up to represent the villager’s interests in this
project. But more importantly, it was set up as a sustainable tool to
keep a long-term inflow of income for the villagers after the
redevelopment. In the redevelopment of other urban villages, it
was found that the sudden landing of huge compensation cash on
villagers did not do them any good. Most villagers in these cases
found that their new found wealth drained out from their bank
account much faster than they earned it. Learning from these ex-
periences, the head of Liede village thought that the best way to
proceed with the redevelopment is to create a sustainable ma-
chinery from the proceeds of selling their land that will keep them
constant and long-term benefits. In addition, this special corporate
structure allows the villagers a united front when negotiating with
outside parties, and the most notable achievement was the nego-
tiation with the government in expediting the official procedures
and all kinds of paperwork and approval.
Using LEDC as a vehicle, the village committee of Liede managed
to assume the role of both the organizer and coordinator for the
initial stage of the redevelopment project that involves demolition,
compensation and resettlement. These tasks in the past would have
taken a long time to settle between the government/developer and
individual households. From the previous experience of urban
village redevelopment, the compensation issues have been the
most troublesome and sensitive part of land requisition process and
frequently led to social conflicts. In the Liede case, however, the
negotiation of compensation settlement has been less conflicting
and a satisfactory agreement was reached within a comparative a
relatively short time. This is because the board members LEDC were
selected among the villagers, and usually the well-respected
members with the most established social network in the village
were selected, who have enough representation of the best in-
terests for other villagers. In this way, negotiation with the gov-
ernment resembles that of labor union, but simpler and less time-
consuming. For example, the compensation package gained by the
villagers was given by the village collective (the LEDC). The de-
velopers did not involve in any of the resettlement housing issues,
namely demolishment, compensation, reconstruction. The LEDC
was also responsible for the re-allocation of the completed new
flats to the villagers on a random draw basis. So there was no extra
effort and time needed on the part of the government and devel-
Rate (%) oper to negotiate with individual household on such issues as floor
5 height and orientation of the new flats, which could be chaotic and
7 disastrous.
In May 2007, LEDC commenced the redevelopment project and
3
in October, it started with demolishing the old village buildings.
2
1 Within 3 months, LEDC succeeded in motivating over 3000
0.1 households of villagers to move out of their old village buildings to
25 pave way for the redevelopment project. For the vast majority of
30e60 households, they temporarily settled in the nearby urban villages or
stayed with their relatives elsewhere voluntarily. The relative
 L.H. Li et al. / Habitat International 43 (2014) 299e308
smooth and successful process of redevelopment in the Liede case
is well-documented (Lin et al., 2011). What seemed to have played
an instrumental role in this smooth process is the willingness of the
government to allow a three-way partnership led by the village
collective to develop and take charge of the redevelopment.
The most notable change in the redevelopment model of Liede
village compared with other previous attempts on redeveloping
village is the deliberate low key character of the government in the
whole process. Land-related revenue has been a main source of
fiscal income, as estimated by Ding (2007) that land-related reve-
nue could account for as much as 60% of total fiscal income in some
cities. In the Liede case, the Guangzhou municipal government
forfeited this revenue from urban land value in return for the full
cooperation of the village collective. This represents a possible
switch towards a neoliberal view on urban land development in
China from the previous one which regards that the government
alone had the right to the betterment (Zhao & Webster, 2011).
In all the previous attempts to redevelop urban villages, one of the
main policy goals of is to convert rural land into urban land and in so
doing will legally reallocate property rights on the rural land when
such land is converted back into the state land system after the
renewal. In the Liede redevelopment project, however, this objective
is adjusted a little. This adjustment was necessary as the collective,
especially the leader, requested that all villagers should remain a
coherent entity after the renewal. To achieve this, the LEDC requested
that the residential towers to be returned to the villagers were to be
grouped in a specific corner of the redevelopment site and property
rights for all these replacement residential housing units would
remain as collective’s property rights. The Guangzhou municipal
government formally converted the collective-owned land in the rest
of the renewal site (mainly the Northewest plot) into state-owned
land, with property rights on such portion being converted to mar-
ket land use right to facilitate real estate development. The conver-
sion into full market-based developable land takes two steps: firstly,
the plot was returned to the Land Development Center under the
Guangzhou government and converted into state land in accordance
with the legislation. Secondly, it was released by the Land Develop-
ment Center for public auction. At this stage, the government
maintained the role of market regulator by examining developers’
qualification for bidding the plot and setting a reserve price for the
Northewest Plot for auction. What is interesting is the fact that
though this site was to be auctioned by the government, the total
payment was eventually transferred to the LEDC as part of the
agreement between the government and the LEDC.
Conclusion
Urban regeneration requires a complex machinery to achieve an
outcome that would be applauded by most, if not all, players
involved in the politics of urban space utilization. In China, this
issue is further complicated by the dual-property rights system that
governs urban and rural land with two sets of institutional
framework. This dual-property rights system eventually created
the problem of urban villages in some cities, especially in Southern
China, for reasons explained above. Because of the complicated
property rights arrangement, most of the regeneration attempts
saw a strong presence of government involvement, and conse-
quently they usually ended with confrontational outcomes or
extended period of negotiation. While most of the local govern-
ments are still in the process of finding the optimal governance
structure to deal with this problem, this paper explains that in
addition to the search for an effective governance model for the
regeneration, the willingness of the state/local governments to rely
on market solution also accounts for the success of a smooth
redevelopment of these urban villages. The detailed analysis of the
307
Liede Village redevelopment indicates that some local authorities
in China are realizing the potential benefits of neoliberal urban
approach when dealing with the problem of urban villages. By
active mobilization of local state power behind the curtain in
conjunction with the market forces, the Guangzhou government
attempted a different approach in handling the Liede Village
redevelopment by decentralizing the power and even immediate
financial return to the rural collective which owns the village
within the current governance structure. In return, the authority is
able to enjoy the outcome of clearing a major urban village in
Guangzhou at negligible social and political costs, and obtain long-
term financial gains in terms of business tax income from the real
estate project as well as urban space for infrastructure develop-
ment for the city. More importantly, the municipal government is
able to convert a majority portion of the original Liede Village from
collective’s ownership into the market mechanism under state land
ownership, without having to requisition the land.
However, we cannot find evidence that this resembles a com-
plete neoliberal approach as the control was basically transferred to
the Liede collective when they were designing the redevelopment
project with the developer, not to the market mechanism. Although
the collective created a mechanism to allow the benefits to become
sustainable by converting part of the compensation into commercial
real estate project, thus making urban space an engine for sustained
economic growth, the collective maintains their ownership over the
portion of land they are re-allocated after the redevelopment. This
defeats a major objective of redeveloping urban village.
We need to emphasize that the Liede case has its unique char-
acteristics that allow the municipal government to try this
neoliberal attempt, and it may not represent an immediate para-
digm shift in urban redevelopment politics in China. We however,
see that this case allows local governments as well as collectives to
experiment neoliberalism in urban policies in a gradual step-by-
step manner. Here, we propose a premise that a “locks analogy”
is being followed for the urban governance structure to move to-
wards a true neoliberal state. Locks are the sessions in a canal
system that allow ships to sail into one session first and then the
gates are locked with water pumped in or out so that the water
level matches the next session. Locks thus allow ships to pass
through the canal and to move slowly but progressively. This is the
situation in China that reform takes place in layers, sometimes with
dual market, such that alignment with market mechanism pro-
gresses in a slow but steady way. Based on this case study, we see
that the “locks analogy” works well by allowing property rights
over urban villages to be delineated properly and gradually ac-
cording to market rules, when conditions permit. We expect an
increasing role of the market forces to take place in the economic
system in China after the differential in various levels in the socio-
political system is balanced eventually in the future. One sign of
this gradual movement advancing upstream is the recent decision
in the Third Plenary Session of the 11th Central Committee of the
Communist Party of China in November 2013 to allow collective’s
land to be marketable in the open market.
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