China Overhauls Land Reserve System in Landmark Reform

China has announced a fundamental restructuring of its 25-year-old land reserve system, marking a paradigm shift from a land-centric economic model to an integrated approach that balances economic growth, social welfare, and ecological protection. The reform, outlined in the “Opinions on Improving the Natural Resource Asset Management System” issued by the Communist Party Central Committee and the State Council, represents the most significant overhaul of China’s natural resource governance in decades.

Vice Minister of Natural Resources Zhang Wentong unveiled the policy details at a State Council Information Office press conference in Beijing on July 14, describing a transformation that will reshape how China manages its land, forests, minerals, and other natural assets as the country transitions from rapid urbanization to an era of urban renewal and quality improvement.

The End of the ‘City Management’ Era

China’s land reserve system was established in 2001 through State Council pilot programs in select provinces and cities. For a quarter-century, it operated under what officials now call the “city management” (经营城市) model, where local governments acquired land at below-market rates, developed infrastructure, and sold or leased land-use rights to finance urban expansion.

“Land reserves were once called ‘city management,’ with the focus concentrated on the land itself, individual plots, and the rapid realization of the land’s economic value, especially its immediate value,” Zhang Wentong explained at the press conference.

This model was instrumental in China’s four-decade urban transformation, helping cities expand at unprecedented speed. However, with China’s urbanization rate now exceeding 66%, the era of large-scale greenfield development is giving way to what policymakers call the “stock era” — a period focused on urban renewal, brownfield redevelopment, and quality-of-life improvements.

Three Fundamental Transformations

The reform introduces three paradigm shifts in how natural resources are managed, as detailed in the official policy document published on July 13.

First, a broadening of resource scope. The system is expanding from land-only reserves to encompass multiple resource types including forests and minerals. “From focusing on land resource reserves in the past, we are shifting toward multiple types including land, forests, and minerals, promoting both economic development and ecological civilization construction,” Zhang said.

Second, a change in spatial scale. Instead of managing individual land parcels in isolation, the new approach will coordinate resource combinations at the district and regional level, enabling more systematic improvements to living environments.

Third, a redefinition of value. The system is moving from a singular pursuit of economic value to a “systematic pursuit of economic value, social value, and ecological value,” according to the vice minister. The ultimate goal is achieving what officials describe as the “high integration of production, living, and ecology” — providing more jobs, better living environments, and improved infrastructure.

Key Policy Innovations

The 7,000-character policy document introduces several groundbreaking mechanisms. Among the most significant is the exploration of “comprehensive resource collection and storage” (自然资源资产综合收储), which expands the traditional land reserve model to include forests, minerals, and other natural assets. The document also proposes “multi-element resource portfolio allocation” (多要素自然资源资产组合配置), allowing different resource types within a specific area to be allocated to a single user as a combined package.

In a development that has drawn international attention, the policy establishes a legal framework for uninhabited islands. The South China Morning Post reported that the document proposes to “standardise and efficiently” register real assets for uninhabited island usage rights, potentially enabling commercial development of thousands of islets, many rich in minerals and fresh water.

Liang Yan, a professor of economics at Willamette University in the United States, told SCMP that Chinese officials aim to clarify the legal status of the islands and improve their management system so they can be “commercialised.”

Other notable provisions include the exploration of separate deep underground space construction land use rights, the promotion of state-owned agricultural land use rights, and comprehensive reform of paid use systems for natural resources including competitive auctioning of mining rights.

Implications for Local Government Finance and Real Estate

The reform carries significant implications for China’s economic landscape. Local governments have long relied on land sales as a primary revenue source, with land-transfer fees accounting for a substantial portion of fiscal income. The shift toward a multi-resource, quality-oriented model may accelerate the transition to alternative revenue mechanisms, including property taxes.

In the real estate sector, the move from rapid land supply to quality-oriented development could moderate new housing supply in favor of urban renewal projects. Cities like Shanghai, Hangzhou, and Wuhan were cited at the press conference as examples where land reserves have already facilitated urban renewal — transforming dilapidated neighborhoods and enabling industrial-to-service sector transitions.

Timeline and Implementation

The policy document sets ambitious targets: a more robust natural resource asset management system by 2030, with a fully established and smoothly operating system by 2035. The reform is part of a broader agenda set by the Third Plenary Session of the 20th CPC Central Committee, which identified improving natural resource asset management as a key reform task.

As China navigates this transition from an era of breakneck expansion to one of sustainable quality, the restructuring of its land reserve system represents more than a technical policy adjustment — it signals a fundamental rethinking of the relationship between economic development, social welfare, and environmental stewardship.

The coming years will reveal how these ambitious reforms translate into practice, particularly regarding the management of local government finances during the transition period and the practical implementation of comprehensive resource storage mechanisms across China’s diverse regions.