Caveat: Many of the following blog posts are pieces of writing that I had come across in the mass media and academic journals...... They are being reproduced here, in whole or in parts, for ease of reference between my students and I...... Relevant pieces of writing had been appropriately referenced and credits and attributions duly declared.  



2015 (



The land hoarding and land inspector dilemma in China: An evolutionary game theoretic perspective



China has experienced considerable economic growth since 1978, which was accompanied by unprecedented growth in urbanization and, more recently, by associated rising urban housing and land banking issues. One such issue is that of land hoarding – where real estate developers purchase land to hold unused in the rising market for a future lucrative sale, often several years later. This practice is outlawed in China, where land use is controlled by increasingly strengthened Government policies and inspectors.

Despite this, land hoarding continues apace, with the main culprits being the developers and inspectors working subversively. This resembles a game between two players – the inspector and the developer – which provides the setting for this paper in developing an evolutionary game theory model to provide insights into dealing with the dilemmas faced by the players. The logic and dilemma of land banking strategy and illegal land banking issues are analysed, along with the land inspector's role from a game theory perspective by determining the replication dynamic mechanism and evolutionary stable strategies under the various conditions that the players face. The major factors influencing the actions of land inspectors, on the other hand, are the costs of inspection, no matter if it is strict or indolent, conflict costs, and income and penalties from corruption. From this, it is shown that, when the net loss for corruption (income from corruption minus the penalties for corruption and cost of strict inspections) is less than the cost of strict inspections, the final evolutionary stable strategy of the inspectors is to carry out indolent inspections. Then, whether penalising developers for hoarding is severe or not, the evolutionary strategy for the developer is to hoard. The implications for land use control mechanisms and associated developer-inspector actions and counteractions are then examined in the light of the model's properties.


China has experienced considerable economic growth since 1978, accompanied by unprecedented growth in urbanization. Land reform began in 1988 with the Chinese government approving legislation by which “the right to use land may be transferred in accordance with law” (Wu, 2001). In the early 1990s, China experienced phenomenal and speculative land development across the country (Wong & Zhao, 1999). For quite a long time since then, China's urban land system has been considered as state-owned and territorial, yet fragmented. The local governments have been made the ‘real landlords’, so as to assert full regulatory control over land use and transactions in order to secure rent revenues (Ding, 2004, Hsing, 2006).

Land use rights are therefore remarkably important to developers and they have to apply to, and obtain approval from, the government authorities (Bao, Chong, Wang, Wang, & Huang, 2012). Land acquisition with land leasing strengthens fiscal conditions for local governments, promotes economic and industrial development, and encourages urban encroachment into rural areas (Hui & Bao, 2013). In this context, the land rush tide is consuming large expanses of arable land across China, resulting in developers forming strategies for the advance acquisition and holding of land before development – a process known as ‘land banking’ (Tu, Pu, Huang, & Jin, 2008).

The effect of such considerations is that many Chinese developers would rather leave land already earmarked for residential purposes undeveloped for many years in anticipation of increased future housing prices (Liu and Ren, 2008, Wang, 2008, Zhang et al., 2009). As a result of hoarding land in this way, many land sites are left idle for speculative land banking purposes, leaving a large quantity of land resources either unoccupied or wasted. Government regulations exist to control land hoarding. These are policed by government employed land inspectors. However, while it is reasonable to assume that real estate developers will, in pursuit of economic interests, hoard land to obtain business opportunities, the extent to which inspectors are necessarily immune from similar considerations is less certain. Under the land inspection system, it is still possible for developers to pursue illegal land hoarding. Consequently, disputes over land often occur between inspectors, whose job is to minimise land hoarding, and developers, who want more land banking. How such issues are resolved, and the complex supervision and anti-supervision relationships involved between land inspectors and developers, is not clear. Also, there is always information asymmetry between the land inspector and the land inspection institution in monitoring land hoarding. With this information asymmetry and other interest-driven issues, land inspectors often encounter moral hazards and corruption risks in the course of their work, which in turn lead to looser regulation and supervision (Wang, 2008).

The developers and inspectors, therefore, both face dilemmas. For the developer, this is whether to indulge in illegal land hoarding that may or may not be detected by the inspector, while the dilemma for the inspector is whether to search too deeply for evidence of hoarding in response to some financial inducement from the developer. This clearly resembles a game between two players – the inspector and the developer – and provides the setting for this paper in developing an evolutionary game theory model to provide insights into dealing with the dilemmas involved. The aim is to analyse the logic and dilemma of land banking strategy and illegal land hoarding issues, as well as the land inspector's role from a game theoretic perspective.

The paper is organised as follows. First, is a literature review covering land hoarding and its control measures in several countries worldwide and China in particular. Then evolutionary game theory framework is introduced in terms of the land developer and inspector players, and the assumptions made and payoff functions involved. Next, the replication dynamic mechanism, and the evolutionary stable strategies, are determined under the various conditions that the players may face. Finally, the implications for a land use control mechanism and associated developer-inspector actions and counteractions are examined in the light of the model's properties.




17 July 2020 (


No, landbanking does not cause the housing crisis – here’s why

Landbanking is caused by the current discretionary planning system. A new flexible zoning system will end landbanking and the housing crisis.

Blog post published on 17 July 2020 by Anthony Breach

Our proposal to end the housing crisis by replacing the current planning system with a new flexible zoning approach has attracted lots of attention and debate. One of the most common responses though has been the idea that the planning system is not connected to the housing shortage – instead the problem is “landbanking” by developers.

The logic of this argument is that the housing crisis is caused by housebuilders who are given planning permissions for their sites by planners, but do not then actually build new homes. Supposedly, a million homes remain unbuilt since 2010 because of this speculative behaviour. Furthermore, even when developers do actually build new homes, they slowly build homes to an “absorption rate” that allows them to drip-feed new homes onto the market at high prices.

Unfortunately, this is not the whole story. The reason developers behave this way is the planning system forces them. Landbanking is an artefact of the planning system, and another reason why the current system needs to change.

Our discretionary planning system rations the amount of development and forces developers to hoard land.

To see why this is, consider the scenario in which the landbanking argument is true. There is nothing at fault with the planning system’s institutional design. Developers landbank simply because they are greedy.

In this world, one implication is that the planning system cannot be a bottleneck on the supply of land for development. Acquiring a planning permission is easy and entails minimal or no risk for landowners.

So, small developers and self-builders have straightforward access to land for development. Furthermore, as large developers are landbanking and slowly building to an absorption rate, self-builders – who build their own houses and have no incentive to landbank – should account for a considerable share of new supply.

However, this is not the case. Figure 1 shows that the UK has one of the lowest rates of self-build in the developed world. While only 7 per cent of new homes are self-built or self-commissioned, half are in Australia and Japan, and up to 70 per cent are in Austria.

One of the major reasons self-build is unusually uncommon in the UK is that the discretionary planning systems rations development in an unpredictable way. One in 10 planning applications are rejected, many of which will be applications made in the belief they complied with the local plan.

For potential homeowners this “planning risk” discourages self-building, but developers are forced to pursue a strategic response to manage the uncertainty – land banking.

Developers currently need to reduce planning risk by landbanking

Firms behave in this way when an input they need (land which can be developed) to produce outputs (homes) is rationed by an unpredictable planning system.

Developers in this environment cannot simply buy more land if they need or want to build extra homes. They must acquire a planning permission to undertake lawful development. But getting such a permit is uncertain in our system. The discretion built into the planning system means that proposals can reach an advanced stage before being junked or radically altered by planners or a planning committee.

The solution for firms to minimise this “planning risk” is therefore to apply for more planning permissions than they can actually use. By doing this, they build up a safety buffer which they can dip into if one of their applications for planning permission goes pear-shaped. This landbank (either through existing ownership of the land or option to buy it) means given their equipment and workforce they will always have sites they can be working on.

It is the planning system’s design here which is forcing firms to demand more land they need. If firms could just buy land, get a guaranteed permit, and then start building, they would not need to buy more land than they can actually use. There would be no planning risk which requires a safety buffer.

The same applies to the critique in the Government’s Letwin Review that builders build slowly at an “absorption rate” to make sure local prices do not fall.  But this too is a response to uncertainty in the system.

The rational strategy for developers is to build at a slow rate which maintains high prices for their product and avoids swamping the local market with new supply. Crucially, this behaviour is possible because every other competitor faces the same bottleneck on accessing land for development. They are not able to swoop in, buy another piece of land, and quickly build and sell homes for a cheaper price.

Landbanking is a rational response to discretionary planning and a shortage of land – but that can be changed

It is no coincidence that the only part of the UK economy which sees landbanking and absorption rate behaviour from firms is also the only part of the economy where production is controlled by a discretionary planning system. The planning system produces and requires this behaviour from developers.

If a new flexible zoning system were introduced those behaviours would disappear. Not only would it be easier for self-builders, but it would also change the incentives for developers. The rational, profit-maximizing strategy for firms in a system with much greater and more certain access to land is to build as high a quantity of homes as possible, to as high a quality as possible, for as low a price as possible, in places where people want to live. A new flexible zoning system is just the kind of system needed to end landbanking and the housing crisis for good.







9 January 2023 (



The China opportunity illusion

In late 2021, international investors felt a real chill from China: China’s real estate giant, China Evergrande Group, defaulted on interest payments on US$1.2B offshore bonds. The Evergrande trouble was shocking, but it was only the tip of a monstrous China iceberg, toward which the Titanic of international investors are headed. What would follow in 2023 and beyond? Is Taiwan prepared?

In the past forty years, China has been perceived by countless corporates and individuals as the largest gold mine in modern history: cheap land and raw materials, insatiable appetite for goods, lax regulations, and above all, its favourable policies handed out to foreign investors. As a result, a cumulative $1.6 trillion foreign capital has been poured into China as foreign direct investment (FDI) since the 1980s, when China decided to open up its domestic market to the outside world.

Things started to change gradually in the second half of Trump’s administration. The US-Sino trade war initially triggered this change, then accelerated by the rising tension between China and other major developed countries. In parallel, China’s own economic engines began to lose steam rapidly, and warning sirens started to go off increasingly frequently in its financial sector.

China seems to have transformed itself from a land of success to a minefield overnight. How could that happen? And how would this sudden change affect international investors, including those from Taiwan who have high expectations of enviable investment returns in China?

A case study of the rise and fall of Evergrande might shed light on the real danger for international investors behind the trumpeted China opportunities. 

The case of Evergrande drama

A few weeks ago, the suicide of the founder and chairman of Evergrande became big news in China’s internet community.

It would not be a surprise if the “news” turned out to be true. Evergrande, once China’s largest real estate developer by sales volume, has been in a free-fall from grace. Its Hong Kong-listed stock once traded at US$4 at its peak, is now worth less than a dime (as of Dec 9, 2022). Its Chairman Hui Ka Yan’s personal wealth has shrunk from its peak at US$36B in 2019 to US$3B today, according to Forbes’ data. Even this drastically shrunk number is still an overly optimistic estimate for Hui’s remaining fortune, as the government has ordered Hui to use his personal wealth to cover the company’s most urgent debt obligations (e.g. salaries owed to employees, overdue payments to suppliers, domestic loan repayment to financial institutes, etc.).

Hui’s “suicide” turned out to be a show. Hui has used similar tricks to fend off creditors and shore up support from government officials.

Now, international investors ought to be prepared for a harsh reality: the possible loss of entire investments in Evergrande and China’s business entities might soon become an inconvenient consequence of China’s economic downturn.

Evergrande’s US$1.2B offshore debts account for merely one per cent of its total debt liabilities. Its enormous debts, which stood at approximately US$300B equivalent at the end of 2021, are mainly domestic, with only US$20B owed to international investors. To tame Evergrande’s debt beast, the Chinese government has sent a 7-person team to the company to direct its debt restructuring.

The government’s chief goal is to avoid social instabilities stemming from Evergrande’s operational and financial failure. Foreign creditors are not even on the government’s list of concerns because as long as foreign investors still rely on profiting from China’s economy, they would not make a noise, let alone cause a social disturbance. International rating agencies had conveniently chosen to turn a blind eye to Evergrande’s financial troubles, which started to surface long before its December 2021 defaults on offshore bonds. And even if international investment firms want to protect their investors’ rights, there is little they can do other than complain. The Chinese government has habitually been good at ignoring those complaints coming from overseas investors.

Many economic analysts argued that Evergrande is too big to be let fall and that the Chinese government would eventually through it a buoy. But the Chinese government has its hands tied with its own deeds already.

At multiple levels, the Chinese government struggles to make up for the shortfall of revenues after three years of pandemic mismanagement and the consequent nationwide economic idling. But unfortunately, there is simply no spare fund for a private company which has been equally mal-managed and whose final collapse is only a matter of time.

Even if the government did have the financial resources, an Evergrande rescue would encourage hundreds or even thousands of Evergrande-in-the-making to follow suit, i.e., borrow to expand and default to be rescued. Saving Evergrande means the government would be left high and dry in no time.

The only hope for international investors to recuperate their investments in Evergrande (and the like) is to trade in the offshore debts for the company’s stake in its overseas assets, such as its electric vehicle plant and property management arms, as pushed by Evergrande’s debt-restructuring team. But the problem with this solution is that the offshore assets offered are worth only a fraction of the debts owed, even on paper. The real value of these overseas assets could be much smaller. Moreover, as a proof of concept, the EV unit that Evergrande offered to its international creditors as compensation for the defaulted bonds was just shut down due to a lack of viability. Trading one dead investment for another would be of little relief to international investors’ loss other than sowing new disappointments.

Evergrande indicates a much bigger problem 

Evergrande is not the only Chinese entity that has defaulted on offshore debts, nor is China’s real estate section the only minefield in which international investors have been trapped.

With Evergrande’s debt perspectives in the background, it would be easier to foresee and understand the fate of the international capital that has been poured into other Chinese entities, which very likely share the same expand-with-borrowed-money growth protocol and defer-until-default debt dealing manual with the fallen Evegrande.

As of early December 2021, when Evergrande was brought under the spotlight after its high-profile defaults on US$1.9B offshore bonds, China’s corporate borrowers had already defaulted on more than US$10B overseas bonds in that year alone, with two-thirds (64%) of the non-repayments coming from firms outside of the red-flagged real estate sector, a 2021 report showed.

If China’s offshore defaults looked bad in 2021, the situation in 2022 is getting much worse and deteriorating at an alarming pace. During the first half of this year, 85% of China’s bond defaults were on overseas debts, as reported by Bloomberg. These offshore defaults are just the sound of a siren announcing the arrival of a tsunami that would wipe out everything that international investors have put into China’s corporates and institutes if China’s economic conditions and relationships with major economies fail to improve.

China’s outstanding offshore bonds stood at approximately US$870B at the beginning of this year, about 80 times of China’s 2021 offshore default tally. In light of the increasing offshore defaults on corporate bonds, the Chinese government urged companies to take necessary measures to “optimize foreign debt structure”. The core of these instructions is “debt rollover,” i.e., replacing the soon-to-be-defaulted debts with new debts. This tactic has been deceitfully deployed in China’s domestic debt market for decades.

Because China’s offshore bonds fall collectively into the junk category when they are issued, there is little incentive for China’s offshore bond issuers to nourish the already rock-bottomed rating by fulfilling their debt obligations once the badly needed money has been raised. Even a pretentious rollover attempt would seem to be a worthless use of time and resources.

These borrow-first default-later corporate attitudes towards offshore debt obligations are bad, but the fundamental drive underneath is much scarier. Chinese government might see those offshore debt obligations as a direct threat to its foreign reserves stability.

Although China has the largest foreign reserves in the world, which stand at a little over US$3T at present, more than half (US$1.6T) of it is from foreign direct investments (FDI), which will need to be paid out when foreign investments decide to leave China, as many are doing recently.

On the other hand, China’s imports need for crucial materials (petroleum, computer chips and data processors, iron ores, animal feeds etc.) to maintain a minimum level of economic activities would cost between US$600B and US$700B annually. Moreover, if the US$870B outstanding offshore corporate debts are to be fully serviced, China would have only US$500B worth of foreign reserves left at its disposal, not even enough to cover ten months of China’s import needs.

With its foreign reserves coffer shrinking due to the slowdown of export activities, offshore debt repayments would definitely be regarded as a waste of foreign reserves.

That is why the Chinese government actively encourages Chinese firms to roll over their overseas debts and probably even quietly encourages defaulting on offshore debts.

International investors should be prepared for the worst outcome from China’s adventures

China’s Evergrande and the like are deploying the defer-and-default tactic on their offshore debt obligations. The Chinese government shrugs off the looming danger of complete investment loss that international creditors face. For overseas investors, the good ole China dream once trumpeted by high return on investment in China projects is now all but broken. The interest-for-capital trap has worked perfectly as intended for China and its corporate subordinates that have been hunting overseas for easy money with sweet promises.

While the international creditors are thrilled to find the too-good-to-be-true high returns for their investment in China, the Chinese government and corporates have already booked the incoming capital as their own fortune.

After this US$870B offshore corporate bonds, China has another US$800B sovereign bonds waiting in line for default.

What do all these mean to investors from Taiwan?

The pretty picture first. Taiwan’s investors have extremely limited exposure to China’s offshore debts, overall notorious corporate debts, or sovereign debts. So, China’s defaults on debts would not have much direct negative impact on Taiwan.

Now the ugly one. Taiwan has allowed its outbound foreign direct investment (FDI) capital to be heavily concentrated in China without sufficient diversification. This could make Taiwan very vulnerable to China economically and politically.

Taiwan is among the largest source nations of China’s inbound FDI, with a cumulative value of US$144 billion as of 2014 and another US$54 billion between 2015 and 2021. Taiwan’s estimated FDI in China accounts for more than one-tenth of China’s outstanding US$1.6 trillion inbound FDI (as of 2017).

Worse still, Taiwan’s FDI has been alarmingly concentrated in China, as compared with three other major sources of China’s FDI (i.e., EU, USA, and Japan). Taiwan’s FDI in China accounted for nearly 60% of its total outbound FDI as of 2014, with the highest level being over 80% in 2010.

The gravest but overlooked danger facing Taiwan’s enormous investment in China is that Taiwan is the only major foreign investor in China without diplomatic status recognized by China and most of the world. This leaves Taiwan’s investment unprotected by international laws should disputes or abuses arise.

The above economic vulnerabilities could make Taiwan’s FDI an easy target of China’s hostage policy, leading to political compromises that would put Taiwan’s national security in danger.

As long as China remains a rogue, totalitarian state, the only safe path for Taiwan’s outbound FDI and Taiwan’s overall national integrity is to tame the craving for “easy fortune” in China and seek new opportunities. The New Southbound Policy (2014), a continuation of the previous Go South Policy (1999), is an exemplary roadmap to follow.

It is time for the international investment club to cut losses in China and run for cover before China’s Lehman Brothers lash out its strikes.

Daniel Jia is the founder of consulting firm DJ Integral Services. He writes analytical reports on public-related matters, focusing on China-related cultural and political issues. There is no conflict of interest to be disclosed.







4 APR, 10:41 (




Global de-dollarization inevitable, expert says


The freeze of dollar-denominated assets of the Bank of Russia amid the special military operation in Ukraine was the next step in "converting the dollar into the weapon," observer and geopolitical expert Renaud Girard noted

PARIS, April 4. /TASS/. The rejection of the dollar in global economic relations is an irreversible process explained in particular by its use as an instrument of pressure for other countries, observer and geopolitical expert Renaud Girard said in his op-ed in Le Figaro.

"Having turned their currency into an instrument of political pressure on other countries, the US unwittingly started a global movement to overthrow the dollar," the expert said. "The complete de-dollarization will not take place in an instant but this is obviously the irreversible movement," Girard noted.

The expert cited the situation when BNP Paribas had to pay $9 bln fine to the US in 2014 for "financing exports from Cuba, Sudan and Iran on lawful grounds, in accordance with European and French laws, although these three countries were under the US embargo." The US justice system decided that the case was in its competence because transactions were made via the account of BNP Paribas in New York.

"This is how the Americans imposed their law on other countries of the planet. European companies had to subdue," the expert said.

The freeze of dollar-denominated assets of the Bank of Russia amid the special military operation in Ukraine was the next step in "converting the dollar into the weapon," Girard noted. Certain countries started reducing trade operations in the US currency because of that. "BRICS countries are planning to create their own currency to finance their trade. China has already developed its electronic system of interbank payments. It is an alternative to the SWIFT system controlled by the West," the analyst added.

© 2018 Company Inc. All rights reserved.