China’s local governments are getting more addicted to revenue from land sales amid mounting debt piles.
In 13 Chinese cities including Hangzhou, Foshan and Nanjing, land transaction fees account for over 80 percent of the local government’s fiscal revenue, Yangcheng Evening News reported Monday, citing a study by Tospur Real Estate Consulting.
The study looked into land sale revenues in 45 Chinese cities that have imposed home purchase restrictions. It said 50 to 60 percent of the government revenue of three first-tier cities — Beijing, Shanghai and Guangzhou — came from land sales. And 31 Chinese cities, mostly provincial capitals and lower-tier cities, also reported similar ratios.
“The land market is quite sluggish at the moment, and that will affect the funding capacity of local governments or even trigger a short-term debt crisis,” Zhang Hongwei, who led the study, was quoted as saying.
As such, local governments will be prompted to ease buying restrictions. Cities like Nanning, Wuxi, Tianjin, and Xiaoshan district in Hangzhou all have unveiled measures to ease property curbs.
Debt and guarantees issued by local governments surged 67 percent to 17.9 trillion yuan by the end of June 2013, according to the National Audit Office.
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