**1. Introduction**

Urbanization in China has progressed rapidly since the reform and opening up in 1978, with the proportion of the urban population growing by 60.60% and the urban builtup area increasing by 58,455.66 km<sup>2</sup> in 2019 [1]. A large amount of land resources was developed for the sake of industrialization and urban construction, resulting in a dramatic change of land-use structure over the country [2]. At the local level, the city government fanatically developed land as a tool for promoting urban expansion and economic growth and as a source of local financial revenue [3]. This land-led development constitutes a key facet of China's urban and economic growth in the post-reform era [4,5]. However, rarely known is the informal land-use practice behind the dramatic urban transformation, which was pervasive in China and mostly occurred in urban fringe areas at the township level [6]. A high proportion of rural land conversion for industrial and housing uses has occurred through informal channels [7]. According to the statistics of the Ministry of Land and Resources of China (MLRC) in 2014, there were 56,926 cases of unapproved land use, involving 348.82 km2 of land area [8]. In Guangdong Province, which was a demonstration zone for institutional experimentation in China [9], there were 7129 cases of unapproved land use, involving 20.55 km2 of land area, including 2.92 km2 of arable land in 2014. These data suggest that China's rapid urbanization cannot be fully understood without considering informality in land development.

Informal land-use practices in China have drawn increasing attention from both the public and academics [10,11]. This term generally refers to urban development on land without land-use permission or planning approval from the state or development that does

**Citation:** Huang, Y.; Xue, D.; Huang, G. Economic Development, Informal Land-Use Practices and Institutional Change in Dongguan, China. *Sustainability* **2021**, *13*, 2249. https://doi.org/10.3390/su13042249

Academic Editor: Harald A. Mieg

Received: 9 January 2021 Accepted: 13 February 2021 Published: 19 February 2021

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not comply with land-use planning and development regulations [12]. Informal land use can be understood as the spontaneous response of society to the absence or imperfection of land institutions. It is a pragmatic practice from below, involving the circumvention of and incomplete complying with formal land institutions based on practical needs [13], such as the behavior "hitting an edge ball".

Academic interest in informal land-use practices in China has mainly focused on the formal-informal dualism perspective [14,15]. Studies also examine the actors of urban development and economic growth, such as local villages, village collectives, and small enterprises, and how their interests and survival needs lead them to break land laws [12,16,17]. Little research has been concerned with the role of the state in the dynamics of informal land-use practices and their effect on the formal land system [2,18]. Following the literature of urban informality [19,20], this paper investigates forms and dynamics of informal land-use practices on the part of the local state in the Chinese context with a case study of Changan Town in Dongguan City in the Pearl River Delta (PRD). It examines why and how informal land development is practiced by the local state at the township level in different historical circumstances since 1978 and how it brings about changes to the formal land institution. The paper furthers the conceptualization of informality as forms of governance by investigating how the government navigates the relationship between informal land development and formal land system to achieve the goal of economic development in different institutional contexts. From this investigation, we detect the possibility of informality as the seed of institutional innovation. Our main argument is that informality is both a violation and a seed-of-change of formal institutions.

This research contributes to the existing literature by examining how the relationship between the Chinese state and informal land practices has evolved since the reforms of 1978, and with more recent decentralization [2,20]. Urban development and informal land practices in China have occurred in the context of political and economic transition, characterized by numerous simultaneous processes, including decentralization, marketization, and globalization, which have significantly changed the relationship between the state and city governments [21]. Moreover, because the state is an actor, this study has incorporated related literature regarding state development to understand the regulation of informal land practices in the Chinese milieu. This approach has permitted a critical understanding of informal land practices at the grassroots level by considering informality as a device that reveals the nature of the state [22].

The rest of this paper proceeds as follows. The second section discusses existing literature on urban informality and the theory of institutional change and elaborates on the article's analytical framework. The third section introduces a case study on the relationship between the state and informal land practices in Changan Town of Dongguan City in PRD, China. The final section discusses the results and their policy implications.

#### **2. Literature Review: Urban Informality and Institutional Change**

#### *2.1. Urban Informality: A Mode of State Governance*

Urban informality is a pervasive phenomenon in the global South, which has attracted attention from economic, sociological, and urban studies since the early 1970s [23,24]. Research on urban informality has evolved over more than four decades, from investigating a single discipline or territory into a comprehensive, transnational, and comparative topic. Three types of theoretical perspectives have generally guided informality research. First, the early dualist perspective viewed informality as sets of traditional and undeveloped socio-economic activities, which are divorced from formal economic sectors in developing countries [11,23]. This view emphasized a precise distinction between formal and informal sectors. The informal sector was generally associated with marginalization and poverty but not regarded as illegal; instead, it represented the survival strategies of the grassroots amid difficult living conditions, which were outside state regulations. Therefore, identifying how to reduce informal activities through the accelerated development of formal economies was viewed as a significant concern.

Second, the New-Marxism theoretical perspective criticized dualism, arguing against the dichotomy between the formal and informal sectors [25,26]. This perspective considered the informal and formal sectors as closely connected, with the informal economy remaining a segment of modern economic systems.

Third, the neo-liberal perspective developed in the context of the acceleration of economic globalization and the prevalence of neo-liberal policies. This theoretical perspective views informality as the grassroots' spontaneous response to the state's overregulation; the excessive regulation of economic activities by the state causes the formation of the informal economy. Informality was the real reflection of the market, rather than the consequence of unemployment [27]. The economic development gap between developing countries and developed countries persists due to the developing countries' lack of formal property rights systems. As a result, the informal economy fails to be transformed into a conventional formal market [28]. However, the three perspectives generally treat the state as a background factor and, therefore, cannot fully explain informality.

Although the study of informality began with a focus on the informal sector in the 1970s, it has been extended to include informal spaces such as informal settlements, informal housing, and informal land use. There are no closed linkages between informal sectors and informal spaces [29–32]. There is still no defined concept for informality; the sole consensus is that lack of regulation leads to the formation of informality [14]. Based on these three theoretical perspectives, some research on informality has emphasized the role of the state in recent years. The appearance of the criticism governance perspective at the beginning of the 21st century introduced a novel and more profound understanding of informality [24]. Roy and AISayyad provided a comprehensive discussion of the relationship between the state's power and informal practices, introducing the concept of urban informality. There are three primary academic contributions of the criticism governance perspective [33].

First, advancing beyond the dualism perspective, the criticism governance perspective posits that formality and informality are not a simple binary opposition of legality and illegality, regulated and unregulated, or either in or out of control [14]. Rather, informality is the process of deregulation of the state. Formality and informality are not only contradictory, they are also connected with each other and one can become the other, moving the boundary between them, becoming a continuum. Informality lies within the scope of the state, rather than outside of it, and is a deregulated system rather than an unregulated one [19]. For instance, Dicken (2005) argues that Rio's favelas, far from being marginal spaces in the city, are central to the logic of urbanism and law [34].

Second, urban informality is a mode of governance. Urban informality is a flexible strategy of the state under different political, social, and economic circumstances. Urban informality can be viewed as the space practice of the state under the interaction of all actors in urban development and economic growth, such as the central state, local states, enterprises, village collectives, and villagers, rather than a simple economic sector or geographical space [20]. The production of space within a state's territory is embedded in its sovereignty [35–37], because the state has the power to determine what is informal and what is not, and the state can determine which forms of informality will thrive or fail [22]. In the case of Turkey, political authorities reconstituted the informal-formal spatial divide to support their own land claims [38].

Third, the epistemology of urban informality has shifted from bottom-up to top-down. The state contributes significantly to urban informality. As the informal is defined as the socio-economic activities that occur outside of and separately from the formal economic system, informality is typically observed in urban "grey spaces" and "shadow cities" [39]. Informality is usually regarded as the space practice of the grassroots; it is bottom-up and can be understood as a static object of study. Moreover, formality can be understood and considered a lie, or a temporary status; it is an ambivalent and uncertain system [22]. In other words, informality exists in the core power of the state, and it is the government that sets the conditions of the possibility of informality. In contrast to the idea that informality

is caused by the lack of state regulation, Roy contends that informality is generated by the state itself [40]. The state's selective enforcement of regulation, the suspension of relevant laws, and the partial authorization of informality, indicate a "calculated" informality, or a "system of deregulation" that is, in essence, a "mode of regulation." Recent studies have revealed the failure of the state to end social practices such as informal housing and street vending [41–43].

#### *2.2. Institutional Change: From Informal Institution to Formal Institution*

Over the last three decades, with the development of economic globalization, the social sciences have embraced new institutionalism by recognizing the centrality of institutional frameworks, when dealing with social and economic phenomena [44–47]. Institutions are one of the primary factors of production, which contribute significantly to the economic growth and reshape the capitalist milieu; institutional change is considered the fundamental source of economic growth and urban development [48].

This study utilized institutional theory to study formality and informality. According to Douglass North, institutions "are the rules of the game in a society, or more formally, are the humanly devised constraints that shape human interaction" [48]. There are two kinds of institutions: formal and informal. Formal institutions are governed by rules codified by laws, regulations, administrative orders, and administrative statutes. Informal institutions are defined as organizations that are motivated by deeply embedded values, norms, customs, and traditions [49]. Both formal and informal institutions can enable and constrain human behavior [50]. Informal institutions may also exert considerable influence on formal institutions. In fact, throughout human history, many formal institutions were established upon the foundation of informal institutions, which modified, supplemented, or extended to become the formal institution [51]. The study of the global South has discovered that informal practices not only supplement and rectify the defects of formal institutions but also become the foundation of state reform and institutional innovation [52].

Institutional change can involve the substitution of a less effective arrangement in socio-economic activities, which is an ongoing evolution from institutional imbalance toward innovation, and ultimately, the realization of institutional equilibrium. Institutional change essentially involves the transfer and redistribution of power and interests. In general, informal institutions are transformed into formal institutions. The state and local governments, as the primary founders of institutions, typically make institutional arrangements to serve the space production within their territory, based on the characteristics of institutional implementation, such as the changes within socio-economic structures and the goals of urban development [18].

While the social sciences have given greater attention to formal institutions, the study of informal institutions is by no means a new research agenda [53]. Informal institutions are equally as important as formal ones for understanding the world. How do informal institutions emerge, spread, change, and become formalized? In recent years, some research on institutional change theory has moved beyond institutional forms and has again, interjected institutional function into the discussion [54]. The functionalist approach holds that informal institutions emerge to perform essential functions, such as providing efficient solutions to problems of information or collective action [50]. For example, Helmke and Levitsky argued that informal rules may be created when formal institutions are incomplete and cannot cover certain contingencies [49]. Similarly, Tsai found that local actors devise informal coping strategies to evade the restrictions of formal institutions [55].

However, in the scholarly debates concerning informality, the term "informal" is not linked to institutions in North's work or interactions among actors. In general, the field of urban studies has not applied the institutional perspective to the impact of urban development institutional change theory [48]. Nevertheless, drawing on Roy's urban informality and North's institutional change theory, Altrock proposed the concept of conceded informality [19]. He analyzed the connection between the two theories, which include interactions between state and local governments, enterprises, villagers, and village collectives. Not only are formal and informal institutions constructed, but also the formal and informal urban development statuses are formed in the socio-economic system. The state is viewed as the central actor, that determines the status of institutions and urban informality.

In summary, land is not only the spatial carrier of urban development but also an important tool for attracting investment. In the context of global environmental change, rapid urbanization, and sustainable development, land use has been a great concern among Chinese academics [2,42]. The reform of land systems is the most important institutional change in China since 1978, and it has had a far-reaching influence on urban development. The PRD was a typical peri-urbanization area under the bottom-up urbanization mode [16], and there have been significant informal land practices at the grassroots level in the PRD since the market-oriented institutional changes of 1978.

This process, however, has differed significantly from the conventional understanding of informal land-use practices, as a negative consequence of state-led land expropriation [6]. This research contributes to the understanding of informality as a production of the state by investigating the regulation of informal land practices in China since 1978. By exploring the state's motivations behind regulatory practices in different historical circumstances, this present study argues that the definition of informality is not a neutral classification, but rather, one made and remade by the state to satisfy its political purposes. The state is viewed as an actor and is understood to have disclosed the relationship between the regulation of informal land practices and the political purposes of the state.

Although it has been proven that the state and the land institutions are contributing more significantly to urban development and economic growth, there exists a close relationship between informal land-use practices and land institution innovation, especially in regard to the acts of the state from the perspective of criticism governance. Three questions remain unanswered. First, how did informal land practices in the PRD emerge, spread, and persist? Second, how did the state and local governments deal with large-scale informal land-use practices in different historical circumstances? Third, how did informal land institutions become authorized by the state and come to represent land institution innovation? The case study answers these questions.
