This chapter explores how China's Link Policy has addressed this encroachment of rural land through densification of rural housing in China's rapid urbanisation process. China's unprecedented urban development can be attributed to its two institutional designs: the land use rights system and land acquisition. The dominant role of local government in rural land acquisition and land use rights transactions leads to the absence of full market-based compensation for rural land. Potential land revenue from land use rights transfer has become a strong incentive for local government to expand the urban area by expropriating rural land. Rural land in China is owned by the socialist rural collectives which are prohibited from selling land to other users. Rural land acquisition is the only type of land ownership transaction in China. The separation of land use rights and land ownership not only improved land use efficiency and enhanced land management, but also generated the land markets in China.