Spatial restructuring and the logic of industrial land redevelopment in urban China: III. A case study of the redevelopment of a central state-owned enterprise in Nanjing

Cities 96 (2020) 102460

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Spatial restructuring and the logic of industrial land redevelopment in urban China: III. A case study of the redevelopment of a central state-owned enterprise in Nanjing

T

Jinlong Gaoa,b,*, Wen Chena a

Key Laboratory of Watershed Geographic Sciences Nanjing Institute of Geography and Limnology, Chinese Academy of Sciences, 73 East Beijing Road, Nanjing 210008, China b Key Laboratory of Coastal Zone Exploitation and Protection, Ministry of Natural Resources, Nanjing 210024, China

ARTICLE INFO

ABSTRACT

Keywords: Urban land redevelopment prisoners’ dilemma pigs’ payoffs Central state-owned enterprises China

Drawing upon the game-theoretical concepts for urban land redevelopment in China, this paper provides further substantiation on, and demonstrates, two major fronts in empirical terms. First, the redevelopment trajectory of industrial land that had been used by a central state-owned enterprise (SOE) was identified and was shown as deadlocked by disputes on the pathway to cooperation between the local government and the original land user. Second, the shifts in the bargains between the pair from the “prisoners’ dilemma” to “pigs’ payoffs,” and then to “neo-pigs’ payoffs” were analyzed, and we showed how industrial land can be redeveloped. Finally, we argued that disputes between the entrepreneuralization of local governments and the politicization of SOEs constitute a potent system of explanatory coordinates that effectively reveal the hidden logic of industrial land redevelopment in urban China. Different from the redevelopment of local SOEs, communications between the user and owner of urban land, as well as the tradeoff of benefits, are key factors in breaking the aforementioned deadlock.

1. Introduction The current stage in human history can plausibly be identified as both a global and an urban era (Storper & Scott, 2016). The proportion of people living in urban areas around the world rose from 33% in 1960 to 54% in 2016 (Liu & Li, 2017). However, accompanying the new era of urbanization, cities across Europe and North America began to suffer from economic decline, dwindling population rates, and space decay (Bartholomae, Woon Nam, & Schoenberg, 2017; Haase, Rink, Grossmann, Bernt, & Mykhnenko, 2014; Hartt, 2018). The modes and consequences of urban redevelopment have thus become areas of major concern for both policymakers and scholars, as well as the public (Audirac, 2017; Bernt et al., 2014; Gao, Chen, & Yuan, 2017). China, as one of the most prosperous urbanized nations in the world, has also recently witnessed profound population losses across 180 shrinking cities (Long & Wu, 2016; Wu, Zhang, Cui, & Cui, 2013). Along with the population shrinkage, manufacturing firms and plants migrated from city centers, abandoning the used industrial land (Gao & Yuan, 2017; Scott, 2019). Given that urban growth, shrinkage, and recovery have experienced a cyclical process throughout history (He, Lee, Zhou, & Wu, 2017), shrinkage is herein considered as a normal development path of a city rather than a short-

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term interruption of growth (Wiechmann & Bontje, 2015; Wu, Xu, & Yeh, 2006). Geographers and planners should therefore pay greater attention to the redevelopment or the renewal of abandoned lands and decayed spaces that operate as vital components of urbanization as covered by the National New-type Urbanization Plan in China (Bai, Shi, & Liu, 2014). In contrast to urban land sprawl, the redevelopment of industrial land in urban centers must necessarily involve a different group of stakeholders for whom new game rules must be set (Lin, 2015; Pizzol et al., 2016). In recent decades, many research projects and initiatives developed a wealth of methods, guidelines, and technologies aimed at supporting industrial land and brownfields redevelopment in Europe (Bartke et al., 2016; Rizzo et al., 2018). However, stakeholders' perceptions differ from country to country (Rizzo et al., 2015). Comprehensive studies providing overviews of stakeholders' perceptions, concerns, and attitudes are still lacking in China. Thus, we designed a fourpart study to deal with both theoretical and empirical aspects of industrial land redevelopment in urban China, which may be an important supplement to the existing literature in the field of urban regeneration and renewal. Paper I laid down some of the theoretical foundations for a comprehensive presentation of the problem (Gao et al., 2017). Paper II applied the theoretical apparatus demonstrated in

Corresponding author. E-mail addresses: [email protected] (J. Gao), [email protected] (W. Chen).

https://doi.org/10.1016/j.cities.2019.102460 Received 2 January 2019; Received in revised form 4 September 2019; Accepted 8 September 2019 Available online 06 November 2019 0264-2751/ © 2019 Elsevier Ltd. All rights reserved.

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China Association of Automobile manufacturers2 . As the reform and opening-up policy deepened in China, JMF began upgrading its strategy by cooperating with Suzuki from Japan. JMF initially assimilated the technical specifications of the Suzuki AX-100 motorcycle, imported 200 sets of spare parts and gasoline engines, and then assembled a number of these motorcycles in 1985. This way, JMF trained its own technical team and promoted the localization of technologies. Three years later, JMF successfully assembled some motorcycles with both domestic and imported Suzuki components, and affixed them with the combination trademark of “Jincheng Suzuki” (JS). Through continuous improvements to the degree of technical localization, JMF redesigned a new type of JS-100 based on the classic AX-100. By the end of the 1990s, JMF had designed and manufactured a new JC125 motorcycle, which had independent intellectual property rights and soon became popular in China. In 1992, JMF set up a group company (i.e., Jincheng Group) including 132 member enterprises/plants, to help the core enterprise organize specialized production on a much larger scale and to create more talent and capital resources for research on and design of new products. JMF exported its manufacturing technique to Pakistan in 1993. This was the first such export, and it set the precedent for technology export in China’s motorcycle industry. Thereafter, JMF abandoned its military business and carried out corporatization (i.e., Gongsihua). Echoing the trend in globalization, JMF strengthened its cooperation with several well-known European companies in the field of motorcycle and engine design by jointly developing the advanced JC150T pedal motorcycle. Consequently, both the export volume and the foreign exchange of JMF ranked first in the motorcycle industry throughout the country in the 1990s. The “Jincheng” or JC trademark was also officially recognized by the State Administration for Industry and Commerce of PRC as “China’s Well-known Trademark” in 1999. As business flourished, the land area covered by JMF expanded rapidly to approximately 1 million square meters, with the total number of employees increasing to more than 5000.3 In the course of its development in the past half century, JMF has become not only a national high-tech enterprise, but also the research and manufacturing center of China’s motorcycle industry and the country's technology-related non-aviation product development center. With JMF’s growth, the lack of space for expansion at its original site became one of the major bottlenecks in the route to the company’s development (Zhang, 2007). JMF was located within 2 km of the CBD in the old city and was more suitable for commercial and service industries than for manufacturing. Taking these conditions into account, and under the continuous coordination of the Nanjing Municipal Government, JMF finally arrived at an agreement with the China Aviation Annex Institute to jointly set up an electromechanical hydraulic engineering research center covering an area of 30 ha in the Jiangning Economic and Technological Development Zone in 2001 (Fig. 1, on the right). By 2005, most of JMF's manufacturing sectors and production lines had migrated from the old city to the suburban research center. Considering the potential benefits of redevelopment, JMF arrived at another agreement with the Nanjing Municipal Government to redevelop the industrial land in its original site in the fourth year after its relocation. By this agreement, JMF was allowed to reuse the original land for commercial development with an additional condition that it had to provide some advanced producer services (APS) including finance, trade, media, and exhibitions.4 As we were informed in our

Paper I to an empirical enquiry into the redevelopment of a local stateowned enterprise (SOE) (Gao, Chen, & Liu, 2018). This paper is the third in the series and carries forward the main thrust of these analyses. It is concerned with the spatial transition and redevelopment trajectory of a central SOE in the city center of Nanjing. Given that the power relations of central and local SOEs are very different from each other (Qiu & Xu, 2017), the study is of interest as another specific exemplification of the theoretical constructs put forward in Paper I, and as a means of extending the empirical insights gleaned in Paper II. We proposed three game-theoretic models to demystify the logic of industrial land redevelopment in Paper I, and argued that the carrot-and-stick strategy adopted by the local government can interpret the redevelopment of local SOEs in Chinese cities in Paper II. The redevelopment of central SOEs usually involves not only the relationships between the local government and enterprises, but also that between the central state and local authorities (Zhang, Chen, & Tochen, 2016). This makes the interactions between stakeholders far more complex than those presented in Paper II. This paper adds considerably to the earlier work in this domain. With these introductory remarks in mind, we now proceed with the following agenda. The first part provides a brief description of the main developments and transition processes of the study enterprise employed herewith. Thereafter, we cursorily review the costs and benefits of related stakeholders confronting the redevelopment of the case enterprise, and highlight their behavioral logics. This is followed by a systematic analysis of the trajectory of redevelopment with the help of a game-theoretic approach. Finally, we discuss the appropriateness of the theoretical construct proposed in Paper I, and make a broad synthesis by showing how the various processes that have been investigated are combined to drive the redevelopment of industrial land and the restructuring of spaces in urban China. 2. Spatial transition: a brief introduction to the case As a coeval of the People’s Republic of China (PRC), the enterprise we investigated through a case study was a military plant that migrated from Shanghai in 1950 and was renamed Jincheng Machinery Factory (JMF). As Fig. 1 (on the left) shows, the factory is located in the southeastern part of the old city, two kilometers from the CBD – Xinjiekou, and covers an area of 39.5 ha. It is surrounded by four roads, including two traffic trunks (i.e., East Zhongshan Road and East Inner Ring). Being an SOE under the direct control of the central state of China, JMF majored in repairing aircrafts and engines in its early stages. From 1958 onward, JMF gradually changed its main and primary business to the manufacturing of airborne equipment. By the end of the 1970s, the central military commission of PRC put forward a guideline for “keeping the military business and expanding the civilian ones,” which encouraged the manufacturing of civilian products in military firms or plants, and consequently promoted the transition of JMF from a solely military enterprise to a dual-use one. Following the manufacture of aviation hydraulic pumps, hydraulic motors, air compressors, and other aviation hydraulic pneumatic products by JMF, the company managers also decided to develop motorcycles for the civilian market. In 1979, following a cursory study of the Japanese Honda prototype, and with the help of 52 professional collaboration plants, JMF successfully manufactured the first 100 prototypes of the CJ-70 motorcycle, which was very suitable for urban driving. After a road test of 1000 km and a durability test of 15,000 km, the prototype successfully secured national identification in 1981 and was put into mass production. JMF then became the first enterprise with a national qualification certification in this industry.1 Thereafter, JMF developed a series of motorcycles and finally became 1 of 19 motorcycle manufacturers identified by the motorcycle section of the

2 Source: Nanjing Chronicles of Machinery Industry, Chapter VIII, Section III (electronic version in Chinese). http://d.wanfangdata.com.cn/ LocalChronicleItem/7556416 3 Source: http://www.jcmtxs.com/pictext.asp?parentid=105&lp=2<t=10 &count=2 (accessed on 04/25/2016). 4 Source: Interviews with an officer from Nanjing Urban Planning Bureau and a journalist from Xinhua Daily on 01/07/2016 and 09/25/2017 respectively.

1 Source: Nanjing Chronicles (Part V), Chapter III (electronic version in Chinese). http://221.226.86.187:8080/webpic/njdfz/UpLoadFile/html/sz5_7/ fif.html

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Fig. 1. The locations of JMF (left) and its new branch (right). Note: OCC denotes the old city center of Nanjing, CBD means the central business district. Source: Sketched from the photo by the first author.

Fig. 2. Remote sensing image (left) and detailed plan for land use (right) of JMF. Source: Sketched from Google Map (accessed on 08/23/2017) and Revision of the Regulatory Detailed Plan of Parcel #Mca030–20 (AVIC Technology Community) in Baixia District of Nanjing Old City.

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Fig. 3. Evolution trajectory of JMF in the city center from 1950 to 2012.

areas by revitalizing the vacant and abandoned industrial lands (Lin, 2015). In summary, the local government holds the ownership of urban land and controls the redevelopment of industrial land; while JMF actually holds the land use right and affects the redevelopment process (Gao et al., 2018). Thus, the distribution of benefits generated from industrial land redevelopment comprises the root of the games between the local government and the original land user on the one hand, and provides a convenient point for their cooperation on the other. Second, any decisions made by one stakeholder based on maximizing its benefits would have a significant impact on those of its counterparts in a dynamic game. In this case, neither the local government nor JMF can focus only on the benefit without taking the cost of redevelopment into consideration. As reported in Table 1, the potential benefits for the local government include the transformation of the local economy through industrial upgrading, the improvement of competitiveness with the improvement of the urban image along the east inner ring in the old city,5 and the relief of traffic congestion on the ring road.6 On the other hand, the government must pay the cost of redevelopment, which at least covers the construction of infrastructure after the migration of JMF and the compensation for relocation (e.g., tax concessions for JMF and supplying industrial land to the new factory of JMF at a negotiated low price). Turning to the land user, namely JMF, the potential benefits mainly include the expansion of space in the suburbs for its further development, new investment from the flagship project of Aviation Science City of China,7 and the increase in the land value at its original site. JMF will bear all expenses, including the increase in commuting costs, the change of the firm organization, and the loss of some fixed assets. Taking all these factors into consideration, we argue that the balance between the costs and benefits of land redevelopment is a major concern for stakeholders and functions as the basic driver of their interactions.

fieldwork, the redevelopment project covered a construction area of 1.2 million square meters with a total investment of 20 billion yuan (about US$ 2.9 billion), and it is all set to be the first top research and development center with aviation technology as its core in mainland China. As mapped in Fig. 2, the block is divided into four parts by two planning roads (i.e., Jincheng and Aviation Roads). To date, the project is still under construction, and JMF had completed a full life cycle in the city center by 2012 (Fig. 3). Taking the long journey (2001–2012) of firm migration and space transformation into consideration, we argue that the real track may be more complex. Thus, the next puzzle is to understand what may account for the redevelopment of JMF and why the journey took so long. 3. Stakeholders in the redevelopment process and their behavioral logic The redevelopment of industrial land in this case mainly involves two direct participants: JMF and the Nanjing Municipal Government. JMF plays the role of the original land user, whose main interest is either to obtain more subsidies and compensation (in both political and economic terms) or to share more benefits, with the help of the advantages of holding the original urban land use right and acting as the spokesperson of central interest. As the main supplier of social public resources and the spokesperson of local interest, the Nanjing Municipal Government plays an important role as a supervisor in the redevelopment process, focusing on the effective use of urban land and long-term sustainable development (Lin, Hao, & Geertman, 2015). Given that JMF was designed as a compound, with both the workplace and the housing unit together within one complex like other closed work-units (Danwei) in China (Gao & Yuan, 2017; Hu, 2015), the impacts of industrial land redevelopment on the interaction between residents inside and outside the block can be ignored. Coincidently, the migration of production lines and departments has not resulted in unemployment for the employees of JMF. Thus, in the following analysis, we can focus only on the bargain between JMF as the original land user and the local government as the landowner. In the first place, major concerns of JMF are to keep its interests in hand (i.e., urban land use right), to share the benefit of the increase in land value, to obtain more space and better opportunities for development by migration, and to achieve sustainable development through industrial upgrading. As the other participant in land redevelopment, the local government plays the additional roles of supervisor and manager, which makes its major concerns very different from those of the original land user. The key point for the local government is to strike a balance among the social, environmental, and political benefits, rather than to merely maximize economic profits (Zhai & Ng, 2013). In other words, local governments prefer to upgrade the industries and to promote urban transition while also getting tax and land transfer incomes, maintaining social justice, and improving the image of urban

4. Trajectory of land redevelopment: from “prisoners’ dilemma” to “(neo-)pigs’ payoffs” As discussed above, JMF faced a development bottleneck at its original site, with limited space for expansion. The local government experienced traffic jams and a decline in the availability of space along the east inner ring with the huge manufacturing SOE located in the city center. Both stakeholders in this case would benefit considerably from the migration of JMF. Nevertheless, the process of cooperation between 5 Source: http://news.sina.com.cn/o/2013-04-29/064226984549.shtml (accessed on 04/09/2016). 6 Source: http://news.longhoo.net/nj/njxw/content/2013-04/29/content_ 10656485.htm (accessed on 10/31/2017), and http://www.js.chinanews. com/2003-11-18/1/30927.html (accessed on 10/31/2017). 7 Source: https://baijiahao.baidu.com/s?id=1569903574375234&wfr= spider&for=pc (accessed on 02/03/2018).

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Cities 96 (2020) 102460 Land transfer fee, commute cost for daily work in the suburb, change of the enterprise organization, fixed asset depreciation, etc. Lager production space, better opportunity for reinvestment, compensation of relocation, etc.

Table 2 Prisoners' dilemma payoffs matrix before the bargaining. JMF

Local government

Decision

Renewal (cooperates)

Not renewal (defects)

Renewal (cooperates) Not renewal (defects)

(B/2-C/2，B/2-C/ 2) (B/2-C，B/2)

(B/2，B/2-C) (0，0)

Note: Numbers in the front are benefits of the JMF, and the behind ones belong to local government. B denotes the benefit of urban renewal, and C denotes the cost. Here, we assume that the cost for one actor would increase and be larger than half of the benefit without the cooperation of the other.

them in respect of redevelopment was still difficult. In line with the two steps of firm migration and space transformation of local SOEs (Gao et al., 2018), we also view the trajectory of the redevelopment of JMF hereafter through the lens of the stakeholders’ behavioral logics. 4.1. From “prisoners’ dilemma” to “pigs’ payoffs” Given that JMF had been a military factory and is now a central SOE, its exchange of information with the local government was not as great as that of the local SOEs (Eaton & Kostka, 2017; Leutert, 2018). As a result, information between the pair was not symmetrical when JMF encountered the bottleneck in the form of the lack of space for the expansion of production. The local government did not know about JMF’s expansion requirements and JMF was not aware initially that the local authority was keen to carry out the renewal project. This is typically what happens in the “prisoners’ dilemma” (PD). Hereafter, we assume that both JMF and the local government, as two “criminal” accomplices interrogated in separate police cells, are absolutely rational and strictly self-interested. There are three possible outcomes in the model (Table 2). Two actors can arrive at an unexpected consensus, owing to their cooperation, sharing both the costs and benefits of industrial land redevelopment. Alternatively, one actor may conduct the redevelopment project without the cooperation of the other and in return, pay the entire cost while enjoying half the benefit (while the other actor gets the rest of the benefit for free). The third possibility is that neither actor conducts the redevelopment and both receive nothing. For the pair, the optimal outcome is the first: they cooperate and share the costs and benefits. For each individual, however, the best result is the second, which is obtained by “defecting” and “free-riding” on the other's willingness to redevelop alone (Bennett, 1999). Conversely, co-operators risk becoming “victims” of defection and, thus wind up having to pay the entire cost. Owing to the lack of communication, “it always pays to defect – even though both actors would benefit by both cooperating if the game is played only once,” (Stewart & Plotkin, 2012): each actor refuses to redevelop, and both get nothing. This is the third outcome, the worst of the three for the pair together. In reality, scholars display a systemic bias toward cooperative behavior in this and similar games, despite what is predicted by simple models of “rational” self-interested decision-making (Fehr & Fischbacher, 2003). Fortunately, an extended “iterated” version of the PD game has been developed (Axelrod & Hamilton, 1981). In repeated encounters, each actor would clearly know the potential benefits and costs of redevelopment for the other. Consequently, the canonical game of incomplete information becomes one of complete information (Nowak, 2006). According to our interviews with the manager of JMF and employees from the Nanjing Municipal Commission of Development and Reform, the Nanjing Urban Planning Bureau, and Qinhuai District Government, major requirements of and conflicts between the local government and JMF can be listed as follows:

Keep the original benefits, win a larger space or better chance for development, share the increase of urban land value, get a return on investment, improve the environment of production, etc.

Construction of infrastructures and land use right transfer at a lower price in the suburb, etc. Upgrading of urban industries, renewal of the landscape along east ring road, relief of the traffic of east ring road, land transfer fee, etc.

JMF

Supervisor Manager Urban land owner Local interest spokesperson Original land user Central interest spokesperson Local government

Land reuse/redevelopment, industrial upgrading, transition of urban development, maximum of land use benefit, landscape regeneration, welfare and equality, etc.

Costs/Risks Benefits Major concerns/requirements Roles Stakeholder

Table 1 Benefits and costs/risks of stakeholders in the redevelopment of JMF.

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As the original urban land user, JMF 1) wants to relocate its manufacturing sectors to the suburb with its research center remaining in the city center; 2) continues to hold land use right at the original site and redevelops it with an expected annual revenue of 80 to 100 million yuan; and 3) maximizes the land value by transferring parts of the space to other developers engaging in either similar or related industries (excluding retail and catering). Meanwhile, the local government would like JMF to completely relocate the entire factory to the development zone in the suburb and to redevelop the land at the original site for service-oriented industries (tuier jinsan). By retransferring the land use right to potential commercial developers, the local government would earn a great amount of rent surplus, 83% of which would be used for the relocation of JMF, and the rest of which would benefit the urban landowner. Though the latter was somewhat rational and profitable for both actors, JMF could not get the expected sustained income from the appreciation of urban land and thus refused to give up land use rights. As the representative of JMF and an employee from the Nanjing Urban Planning Bureau remarked:

Table 3 Pigs' payoffs matrix after rounds of bargaining at the early stage. JMF (big pig)

Local government (small pig)

Decision

Redevelop

Not redevelop

Redevelop Not redevelop

(R-C/2，P-C/2) (R-C′，P)

(R，P-C′) (0，0)

Note: Numbers in the front are benefits of the JMF, and the behind ones belong to local government. R and P denote the economic and political benefits of land redevelopment respectively, and C and C′ denote the cost with and without the cooperation of the other actor. P < C < C′.

government and JMF will be P and R-C′. Otherwise, the local government pays for the entire cost of C′, with JMF getting the benefit of R for free. The outcomes will be P-C′ and R for the local government and JMF, respectively. Taking all these things into consideration, the local government prefers free-riding by getting the benefits of industrial upgrading and landscape improvement for free, no matter what JMF decides. It seems that JMF has no other option but to pay the entire cost and conduct the redevelopment all by itself if it wants to maximize its benefits. However, this is only an illusion, and the reality is very different.

Both the authorities in municipal government and our managers would like to redevelop the land for a more profitable function. And we are very clear that the government has been unable to compensate for our relocation. If both parties can cooperate in redeveloping, there will be a win-win deal. The cost would be much larger if either of us refused to cooperate… (Interview with the representative of JMF, May 2016).

4.2. Neo-pigs’ payoffs: a creative pathway toward Nash equilibrium

As we all know, JMF is an SOE that is directly controlled by the central state, so we cannot introduce any document of firm migration. Without any information about its development strategy, we can hardly afford the compensation for its relocation… If the enterprise does not give up the land use right voluntarily, we can earn nothing from its redevelopment. In all, we can do nothing without its cooperation… (Interview with an employee from the Nanjing Urban Planning Bureau, March 2016).

As Zhang (2009) reported, JMF had been planning the development of commercial services since the turn of the new millennium. However, the lack of space and the limited right to reuse industrial land in the city center became a bottleneck that hindered the firm’s transition at the original site. To deal with these problems, JMF invested in a new factory in Jiangning, a suburban district of Nanjing, and had relocated a major part of its production sector there by November 2005. As a profitoriented enterprise, JMF, however, did not give up the land use right in the city center (Gao et al., 2018). As a result, the local government could not get the benefit for free at an early stage, as mentioned in the previous discussion (Table 3). The accelerating process of urbanization also highlights the contradiction between the supply of and demand for urban land in Nanjing, which has led to an increasingly serious problem of traffic jams and vacant land in the city center. This means that the potential benefits of industrial land redevelopment for the local government have risen rapidly. Since 2005, JMF transformed part of the old factory (mainly the warehouses) either through cooperation or by renting space, without any reconstruction and land redevelopment. For instance, it cooperated with RT-MART to establish a warehouse supermarket called “Jinrunfa” in the southwestern corner of the block, and rented out an abandoned canteen to a catering company in the northern part of the block (see Fig. 2). In the words of an employee of Nanjing:

Thus, it can be seen that inconsistent interest demands made by the pair of actors make their utility functions different in the redevelopment of the industrial land. Theoretically, as the user of industrial land, JMF has two strategic options – “relocate” and “do not relocate” – and the urban government, as the owner of industrial land, also has two options – “redevelop” and “do not redevelop.” Given that both the user and owner of industrial land have a consistent impulse for redevelopment, they follow no particular order while making decisions. Instead, they can participate by responding to their counterpart's decisions and by putting forward their own conditions or requirements, which can be considered as a dynamic game with perfect information. The PD game thus changed to a new game of “pigs' payoffs” with the interaction between the pair. As Table 3 indicates, within the cooperation case, JMF can get a total benefit of R units, including both the compensation for relocation and a sustained income from land redevelopment; while the local government can earn the expected political and social benefits without sharing the economic benefits with JMF.8 This leads to an outcome whereby the total benefit for the local government is no more than that for JMF and can be assumed as P units. In the meantime, both actors must share the additional cost of land redevelopment of C units, which covers most of those listed in Table 1. As a result, the net benefits for the local government and JMF are P-C/2 and R-C/2, respectively. Alternatively, JMF chooses to relocate without the cooperation of the local government, paying the entire cost (the cost of redevelopment would increase to C′ units without the cooperation of the other actor) in return, with the same benefit of R units. The total benefits for the local

As a tradeoff for rent surplus of industrial land in the city center, JMF successively invested in another four industrial bases in Jiangning Economic and Technological Development Zone since 2007. In addition, JMF invited Zhijun Luo – the governor of Jiangsu Province at that present time – to unveil the nameplate of one of the four bases at the opening ceremony in November 2008, which action was widely recognized as a brand promotion strategy and further increased the political benefit for local government… (Interview with an officer from the Development and Reform Commission of Nanjing, May 2016) Having seen all these projects, the local government espouses the idea that JMF would conduct the redevelopment and that it can enjoy the benefits for free as a small pig in the orthodox model of pigs' payoffs. However, the enterprise turned to negotiate with the government after the latter issued the master plan for this block. The situation became quite different from the one in the orthodox model as evinced by local authorities. By 2009, and after several rounds of bargaining, the

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Note: Generally, the rights to use state-owned land were dispensed through state administrative allocation (huabo) to either non-profit or state-owned users free of charge in urban China before the establishment of the land market in the late 1980s. Thus, the local government has no way to share these direct economic benefits with them while conducting redevelopment projects. 6

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Fig. 4. Neo-pigs' payoffs in the redevelopment of JMF. Notes: Numbers in the front are benefits of JMF, and the ones behind belong to local government.

municipal government finally arrived at an agreement with JMF's parent company on jointly redeveloping the industrial land in the city center. According to the agreement, JMF would keep the land use rights and relocate its manufacturing department to the suburb along with its headquarters, research and development center, while retaining its marketing and services departments in the city center. This helped achieve the Nash equilibrium of “all-win” by echoing the diversified needs of various stakeholders (e.g., employment for nearby citizens, fiscal and taxation growth for the local government, and sustainable profit for the original land user) at the same time. From a theoretical perspective, the bargain between JMF and the local government has gone beyond the orthodox pigs’ payoff, which is argued hereafter as neopigs' payoffs or new pigs’ payoffs (the “big pig” would employ a strategy of enticing the enemy in the orthodox model of pigs’ payoffs, the “small pig” cannot get the benefits for free).

another 50 units as an additional benefit of urban promotion. Thus, the final net profits of JMF and the local government would be 80 and 100 units, respectively. This mismatch between the cost and benefit became the very reason why JMF rejected the plan. Keeping the land use right in hand and putting up a pretense around the redevelopment of the industrial land, JMF won in the bargains that followed. There were two possible outcomes for the local government without the cooperation of JMF in the implementation of the plan. If the local government revised the plan as JMF needed it to, the former would provide 30 units to the latter as interest concessions and make its total revenue higher than that in the “do not issue the plan” scenario. As a result, the net benefit for the local government would decrease to 70 units. Otherwise, the local government would pay an additional political cost of 50 units for the failure of the plan and win nothing as the final benefit. Meanwhile, the benefit for JMF would be the same as that in the “do not issue the plan” scenario. To achieve sustainable development for both stakeholders, the local government had to revise the plan. It cooperated with JMF to conduct the redevelopment project. In 2012, the municipal urban planning bureau issued a revised version of the regulatory plan issued in 2006.10 According to the revision, the municipal government re-conveyed the industrial land to JMF and its parent company at the bottom price. As Fig. 2 (on the right) indicates, the planned functions of land use were also adjusted from commerce and office to research and design, as well as a mixture of commercial and residential, offices, and residential.11

4.3. Theorizing land redevelopment: beyond the orthodoxy and the tradeoff of benefits As a central SOE retaining the industrial land use rights, JMF plays the role of a “big pig,” while the local government plays the role of a “small pig” with limited abilities to bargain with the “big pig.” Stemming from the orthodox model of pigs' payoffs, the local government prefers getting the benefits for free with the help of JMF. Therefore, JMF's choice – tradeoff of its benefits – becomes a key factor in this game. As Fig. 4 illustrates, we employ the following dimensionless numbers to represent both direct and indirect benefits and costs of industrial land redevelopment in this case. These numbers are not actual accounts of benefits and costs, but denote their relative sizes based on in-depth interviews with local authorities and enterprise managers, and governmental documents as well. In terms of benefits, JMF can get a total of 100 units from its relocation, covering both the upgrading of its main business in the city center and the expansion of its manufacturing scales in the suburb; meanwhile, the local government can get only 50 units as the benefit of urban landscape improvement without sharing the rent gap of space regeneration. The aforementioned transformation of industrial spaces since 2005 created an illusion that JMF would conduct the redevelopment and that the local government could then get the benefits for free (Xing, 2012). Consequently, the urban planning bureau issued the regulatory plan for the old city on behalf of the municipal government. In this plan, the block of JMF was designed as a commercial center of the old city with business services, cultural innovation, and entertainment and leisure as the primary functions.9 According to this plan, JMF would pay an additional cost of 120 units for land redevelopment, with its benefits increasing to 200 units. As a free-rider, the local government would win

5. Discussion In this paper, considerable empirical evidence has been adduced in support of the theoretical concepts that were worked out in detail in Paper I (Gao et al., 2017). It has now been demonstrated in empirical terms how the tradeoffs of benefits create one of those industrial land redevelopment outcomes in urban China. We argue that it is difficult to explain the redevelopment trajectory of industrial land that has been used by central SOEs without taking the entrepreneuralization of local 9 Source: Nanjing Urban Planning Bureau, 2006. Regulatory Detailed Plan of the Old City in Nanjing. 10 Source: Nanjing Urban Planning Bureau, 2012. Revision of the Regulatory Detailed Plan of Parcel #Mca030–20 (AVIC Technology Community) in Baixia District of Nanjing Old City. 11 This block was divided into three parcels (i.e., No. 2013GY15, NO.2013G23, and NO.2013G43) and conveyed, respectively, at the bottom prices of 61 million yuan (28,911.7 square meters for research and design,), 2.48 billion yuan (147,996.1 square meters for mixture of residential and commercial needs), and 3.96 billion yuan (167,025.2 square meters for research and design, commerce and office, and residential needs).

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governments and the politicization of SOEs into consideration. As Zhou, Lin, and Zhang (2019) argued, the neoliberal representation of urban (re)development in China, with its preoccupation with capital and class interests, was unable to effectively capture the distinctive nature of the entanglement of capital, state, and society, and thus obscured the driving role and the competing rationalities of the authoritarian state and the rapid reconfiguration of urban society. On the one hand, the reshuffling of the power relationship among the central, state, and local governments, which has been widely recognized as decentralization of liabilities and responsibilities in combination with the recentralization of the power of tax revenue collection (Chen, Tang, Wang, & Chen, 2017; Lin, Li, Yang, & Hu, 2015; Wu, 2016), has set new ground for local governments to play the game of competitive and locally responsible urban development (Lin & Zhang, 2017). This differs considerably from those service-oriented local governments in the Global West and makes them more entrepreneurial in China (Lai & Tang, 2016). Within this institutional framework, local governments in China prefer to gain more direct benefits in either economic or political terms rather than to construct platforms for redevelopers in the name of public welfare. In practice, the local government acts as both a judge and a player in the renewal of local SOEs (Gao et al., 2018), but it would prefer to play the role of a free-rider in the renewal of central SOEs, as seen in the present paper. On the other hand, SOEs inherited from the planned system under Mao are not only market entities, but also have political statuses with some administrative powers in hand. This reality may become an institutional obstacle in the path of land redevelopment in urban China (Lin, 2015). Urban industrial land was administratively allocated (huabo) to central and military SOEs free of charge, which led to relatively low enthusiasm for profit concession (Qiu & Xu, 2017). Given the disparity in political status between the local government and the interest group represented by the central SOEs, the former can hardly engage in any political interference with the land user. However, existing land users cannot achieve formal renewal and make the capitalized land rent equal to the potential one without the cooperation of the local government. Alternatively, making a pretense of making a profit concession is estimated as the best choice for central SOEs, according to the model of the neopigs' payoffs. The findings of this study contribute to debates on contextualizing and theorizing urban renewal in the Global South through the lens of games between the state and the market. Viewed in a broader theoretical perspective, the pair is characterized by its diverse and conflictual internal dynamics in the era of neoliberalization (Lin, 2014). According to Lim (2013), neoliberalization is a variegated process that is formed and fractured by existing uneven state spatiality across China. Land redevelopment in urban China emerging in the forefront of neoliberalization is full of inconsistencies, which involves not only conflict between neoliberal practices and social resistance, but also tensions between central and local states (He & Wu, 2009). At a macro level, the findings of this study should provide significant insights into the dynamism of the urban transitions taking place not only in China, but also elsewhere in the Global South, where power manipulation and contestation are more pronounced in shaping their distinctive paths and trajectories of urbanization.

constituted a potent system of explanatory coordinates that effectively reveals the hidden logic of industrial land redevelopment. From a policy perspective, the redevelopment of urban industrial land used by central SOEs has been shown to be similar in terms of the spatial trajectory, with that of local SOEs (Gao et al., 2018). The resistance from the existing user as well as any slackening on part of the owner of urban industrial land are the biggest barriers to overcoming the renewal process. Though the tradeoff of benefits can help break the deadlock, public welfare has not received the attention it deserves, thus far. There are also SOEs with either heavy debts or social burdens in city centers (Eaton & Kostka, 2017). Their profit concession has become a new dilemma for the redevelopment of industrial land. To achieve the sustainable development of cities, local governments should actively seek common ground with the interests of SOEs, while also paying more attention to the social and ecological impacts of land redevelopment. Contrary to perceived notions, what really matters to the redevelopment of cities in China is not so much the natural and automatic operation of the marketization based on land rent, but rather the contestation of state power and the mobilization of capital. This is also why policies concerning neoliberalization are somehow useless. With reference to the aforementioned arguments, we propose a specific policy recommendation of creating a bottom line for land use efficiency (BL4LE). Similar to the urban growth boundary (UGB), the BL4LE is the minimum level of urban land use efficiency, set in an attempt to ensure the efficient use of urban land (particularly industrial land), in its simplest form, mandating that factories or plants with the average land use efficiency within a certain number of years below the bottom line should be redeveloped. We also argue that reforming local land property rights regimes, changing constraint structures of local governments in the hierarchical system, and designing better land use policies beyond the rank-based system may be helpful in China's sustainable urbanization. Further substantiation of these considerations will be provided in the final installment of this four-part series. The case study that follows will focus on the investigation of the redevelopment of private enterprise in the old inner-city areas of Nanjing, which are quite different from the cases of the SOEs at both the local and central levels. The model of redevelopment without land use right transfer will be investigated in the final paper in this series.

6. Conclusion and policy implications

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Stemming from game-theoretical concepts proposed by Gao et al. (2017), this paper substantiates on and demonstrates two major fronts in empirical terms. By applying a technique that has rarely been applied in previous studies, that is, game-theoretic analysis, the study advances the literature by demystifying the shift in bargains between the local government and the original land user (a central SOE). Based on the development of both the PD and the pigs' payoffs models, the study demonstrates that the disputes between the entrepreneuralization of local governments and the politicization of SOEs in transitional China

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Declaration of Competing Interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper. Acknowledgments The authors would like to express their gratitude to both the editors and anonymous referees for their constructive suggestions that led to significant improvements in this paper. This paper was financially supported by the National Natural Science Foundation of China (41701193 and 41971215) and the Research Fund of Key Laboratory of Coastal Zone Exploitation and Protection, Ministry of Natural Resources (2017CZEPK04).

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