ABSTRACT
In China's socialist market economy, the decision about where to build is resolved, not surprisingly, by a combination of private profit motive and government inducement or compulsion. The profit motive of real estate developers requires no explanation and seems to cross international cultural barriers with little need for translation. In the first days of Shanghai's modern real estate market, potential real estate developers could become involved in the planning process even earlier. The central and municipal governments have also used tax policy and interest rate adjustments as a means of controlling the level of expansion of the real estate market more broadly. These municipal and provincial governments profit greatly from the initial transfer of land use rights and continue to benefit by imposing taxes on subsequent property transfers and income taxes on businesses that operate on this land. Developers seek to buy land use rights and then build structures on that land in locations that will be profitable.
