Shenzhen's 1987 land auction: sell the right to use, not the land itself

After 1949, all urban land in China was state-owned and allocated free; the 1982 Constitution explicitly forbade any organization or individual from buying, selling, leasing or otherwise transferring land. Shenzhen, China's first special economic zone, was growing fast but had no way to convert its greatest asset into cash for infrastructure — the land under it could not legally be sold at any price.

Shenzhen drew on Hong Kong's leasehold system, adopting the suggestion of Hong Kong businessman Fok Ying-tung: separate ownership from usage rights. The state would keep ownership forever; buyers would purchase a defined right to use the land for a fixed term, and that right could be transferred, leased or mortgaged like property.

On December 1, 1987, the PRC's first land auction took place in Shenzhen. The plot — 8,588 square metres of residential land-use rights for 50 years — went to Shenzhen Special Economic Zone Real Estate Development Co. at 5.25 million yuan after a bidding contest that took 17 minutes, with auctioneer Liu Jiasheng striking the gavel.

The law had to catch up. On April 12, 1988, the National People's Congress amended the constitution so that 'land usage rights may be transferred in accordance with legal provisions,' and the Land Administration Law was revised to institute a paid-use system for state-owned land.

Sell the right to use land, not the land itself

Splitting ownership from use made the land marketable without touching the constitutional rule that land belongs to the state

A fixed-term, transferable right gives buyers everything a market needs: exclusivity, a life span, and the ability to resell, lease or mortgage it

An open auction revealed the price that a committee would have had to invent, and set a public benchmark for every plot that followed

The proceeds funded the special economic zone's infrastructure without waiting for central budget allocations

When an asset cannot legally change hands, don't fight the ban — invent a right that can. Terms, transferability and an auction can build a land market inside a system that forbids one.

The constitutional amendment of April 1988 legalized land-use-right transfer nationwide, and the paid-use system became the legal foundation of China's urban land market. Municipal land auctions went on to bankroll the infrastructure of Chinese urbanization — land sales became the largest single revenue source for city governments. Shenzhen's gavel is commemorated as the first land auction in the PRC's history, and the 'Shenzhen model' of leasehold-with-state-ownership remains the framework for China's property market today.