LAUSR

Abstract In the past decade, with the rise of private investment in urban development in China, there has been a profound transformation from government-led to market-led urban growth. These changes have created a boom in private city operators who have become involved in large-scale urban development and established long-term close public-private partnerships with local governments, integrating and optimizing all of the resources in a city or region. In this new business environment, China Fortune Land Development Co., Ltd. (CFLD) has undoubtedly been the earliest and most successful private city operator. This study uses the framework of transaction costs to analyze the CFLD model in detail, using the case of Gu'An New Industry City. We illustrate how it has reduced the principal-principal problem, the firm hold-up problem, and the government-led hold-up problem, the three types of transaction costs inherent in public-private partnerships, by improving the contractual structure. We believe it will become a far-reaching institutional innovation as an alternative to the land finance system to promote urbanization in contemporary China and beyond.