Informed by a Coasian transaction cost paradigm (Coase 1960), this paper discusses the costs and benefits of what one may call experimental coastal reclamation of the sea as an alternative to urban expansion using intra-marginal land in a megacity.  The authors argue that given certain conditions, experimental reclaimed land, while generating a Schumpeterian effect, can have a great potential to achieve win-win outcomes that enhance business and the economy, ecology, and society – a faithful adherence to the essence of sustainable development. The case of Qianhai (“Front Sea”) in China, is a test case of the international development policy of China with particular regional repercussions for Hong Kong.

Political theorists have a perennial interest in city states focusing on their institutional arrangements and continuous institutional innovation. They may not pay enough attention to that fact that many classic city-states depended on or were even products of reclamation. The economics of reclamation, however, have always had a bearing on institutional changes. This is the stance of this paper on the benefits and costs of reclamation.

Reclaiming the sea to produce new land has become a hot issue in recent years in international politics, but this engineering feat for nation-building or development has a long history starting with the insular city-state of Republican Venice and the Romanov Russian capital of St. Petersburg as the best-known examples.  The rationale behind such work could well be military, but the land formed has invariably become urbanised platforms for trade and development. Contemporary and ongoing reclamations have added a new dimension: its impact on sustainability, which calls into question the tradeoffs or win-win solutions for a three-prong sustainable development strategy stressing social, economic, and environmental concerns, given the ever-changing technology in our modern economy.

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