Winners and losers: The political economy of Chinese urban housing reform

This dissertation attempts to solve the puzzle why socially beneficial policies have experienced stagnation and even non-adoption in urban housing reform. I seek to answer questions such as these: Why did the Chinese government want to initiate urban housing reform? Why did it moved so slowly? What went wrong in the urban housing reform process? What were the obstacles of the reform?; The argument I make highlights and emphasizes the political aspect of the reform. First, using social contract theory, I argue that social stability and its political legitimacy in China are largely achieved by an implicit social contract between the CCP and society. Any reform that could result in decline of welfare in the short term will be cautiously avoided. Second, maintaining social equality is another source of political legitimacy in socialist countries because social inequality is regarded as the defining evil of capitalism and elimination of social inequality has been claimed to be the most important advantage of socialism. Third, like all the reforms, vested interests are powerful obstacles because reform does not affect all groups in the same way. Former redistributors, bureaucrats, party cadres, and managers, who had power to allocate resources, will suffer relative loss in the long run because the value of their political capital accumulated through prior experience as cadre is likely to diminish.; The conclusion of this dissertation is that the rational calculations by politicians, bureaucrats, and constituents do not necessarily converge. That is why we observe delayed and stagnated socially beneficial policy. At the same time, the reform of housing and other social policies in China also allow us sufficient room for optimism since we have not observed a single case where a policy has been reversed or it has not been stagnant for a long period of time. In the long run, it is in the Chinese leadership's interests to push forward the reform.