supportive infrastructure, in return for transfer of the enterprise’s centrally located land to the municipality. The central government transferred the vast majority of state-owned enterprises to municipal control and ownership in the 1980s and 1990s. The relocation of these enterprises is entirely a matter of municipal governments’ choice.

The previous locations of state-owned enterprises near the city center were highly inefficient. Transportation to and from the enterprises was highly congested and generated spillover congestion for other urban activities. Most such enterprises were highly polluting, so that their relocation (often accompanied by modernization of facilities with lower pollution levels) was a benefit to urban air and water quality. In their new locations, enterprises enjoy superior transportation access and the localization benefits of high concentrations of complementary activities in the industrial supply chain.

Meanwhile, the land freed up by relocation becomes available through the municipal Land Reserve Center for sale to the highest bidder. The high bidder for centrally located properties typically is the developer of an office center, shopping complex, or upscale residential complex. Municipalities typically set aside some of the land for green space or parks as a value-enhancing amenity. Municipal ownership of the property to be vacated has accelerated municipalities’ ability to relocate enterprises and treat large tracts of land as assets to be strategically managed. Freed-up land in the city centers of large cities has sold for as much as $8,000 to $10,000 per square meter. At the same time, allocation of vacated land to new end-users through the market has increased the efficiency of land-use organization.

**Transplanting Municipal Offices.** Driven by the twin motivations of financial profit and land-use planning, municipal governments have exercised a good deal of imagination in their efforts to rationalize urban development patterns.  Starting in the mid-1990s (in the coastal region), municipalities began to recognize another inefficient use of the most valuable, centrally located land:  its use as municipal administrative centers.  Municipalities (and provincial governments in capital cities) began to move their administrative offices and municipal halls to new suburban or even exurban locations removed from the central city.  This strategy has two financial payoffs. First, it frees up more land that the municipal government can sell on the market.  The vacated land typically contains many of the most highly valued parcels in the city, since historically urban development has clustered around government administrative offices.  Second, by moving to new, undeveloped locations, municipal governments automatically spawn new centers of economic development activity, thus shaping the pattern of urban growth and (not at all incidentally) driving up the value of surrounding vacant land, also owned by the municipal government and available for market leasing.

Case studies of nine interior cities in central and western China, conducted for the Cities Alliance and World Bank “City Development Strategies” program, found that all nine cities either already had moved their administrative centers from the central city to alternative, suburban locations, or were far advanced in their planning and implementation to do so. Several of the old 20