The role of the state in the 1990s property cycle in Hainan

The continuous debate between the radical and the conservative approaches on which one is more suitable for a successful economic transition seems to be in favour of the latter. With the recent upswing in the property market in Hainan, the review of the 1990s property cycle in Hainan is linked with economic transition in China. A case study approach is used to establish the importance of the 1990s Hainan property cycle to the formation process of the Chinese property market system. The analytical framework is an integration of the theories of property cycles and economic transition, using the conceptual model of typical commercial property markets modified according to the historical settings in Hainan. It is found that the 1990s Hainan property cycle is unique in that the economic transition has been the key driving force. The structural imbalance caused by the equally imbalanced reform process in different sectors has been proved a wasteful practice. By and large, the 1990s cycle in Hainan lasted for about 10 years and was state-driven. It was considered an experiment conducted by the state in testing the radical approach of economic transition in the property and urban land sectors. It is suggested that current knowledge of emerging commercial property markets, especially their cyclical behaviour, is limited at both theoretical and empirical levels. Evidence from the past 15 years seems to suggest that the structural and investment imbalance in the economic transition was the main cause of the high instability in the Hainan property market.