There has been a fundamental institutional change during the transformation from the centrally controlled system to a market-oriented economy in China since the early 1980s. The socialist land use right as an institution of the out-going central planning system became an obstacle to the emerging land market for urban redevelopment, although land leasing as a new institution had created a real estate market primarily for the development of greenfield sites. From a case study of a district in Shanghai, it is discovered that rapid urban land redevelopment since 1992 has been greatly facilitated by the informal institution of a land development right. The land development right unlocks the process of land redevelopment in the central city, while the existing land users' land use right is taken care of during the gradual transition. Land use efficiency is improved to a great extent through land redevelopment to uses of higher productivity. However, the informal and insecure institution of the land development right induces hasty land redevelopment. Assisted by a capricious land use planning regime, the land development right yields sub-optimal development. Clarification of property rights is the goal for further institutional change.
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