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| 1 |
ID:
137535
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| Summary/Abstract |
The purpose of this study is to explore an important issue concerning the relationship among the local government deficit, land finance and real estate markets in China. This study uses a panel data of 30 provinces in China during 1999–2010 to estimate the panel smooth transition regression model. Since the estimated transition threshold value is 14.62, provinces with the ratio of fiscal deficits to GDP of greater than 14.62% are categorized as in the high fiscal difficulty (HFD) regime. Otherwise they are in the low fiscal difficulty (LFD) regime. The primary finding of this study is that the land leasing fee has a significantly positive influence on the total value of commodity buildings sold in the LFD regime. In addition, the local fiscal deficit has a significantly positive impact on the real estate market in the LFD regime, but this impact turns to be negative in the HFD regime.
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| 2 |
ID:
161843
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| Summary/Abstract |
China's stimulus plan in 2009–2010 brought local government financing vehicles (LGFVs) and new types of land finance into the spotlight. This paper uses national parcel-level land transaction data to examine the causes and consequences of LGFVs' land purchasing behavior in China. We found that LGFVs overbid significantly in terms of land prices. We explore channels through which LGFVs bid high prices for land. The stimulus plan induced local government to increase debt and rely more on land-based mortgages and land leasing revenue. Fiscal pressure led to an increase in LGFVs bidding for land. We found that the stimulus plan changed local governments' control over land leasing and land finance. Local governments hold more of the land market and inflate land prices following implementation of the stimulus plan.
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| 3 |
ID:
187908
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| Summary/Abstract |
China's land finance system has been a key contributor to the country's “economic miracle” over recent decades. While there is much existing research on different components of the land finance system, this paper, based on both an academic literature review and data analysis, provides an integrated understanding of how these parts function in tandem around the pivotal role of profitability in the system. First, we summarize the essentials of China's land finance system by providing a framework to understand the self-reinforcing cycle between local governments' financing and spending activities based on urban land-use rights (LURs). We also quantify the magnitude of profits generated by the cycle and its contribution to China's urban development. Second, we investigate the institutional underpinnings of the system, which empower local governments as the monopoly supplier of urban LURs. We also document the rising temporal trend in land prices in most cities. Both these institutional and market factors facilitate the profitability of land finance. Finally, we shed light on the sustainability of the system. Local governments' strong incentives to maximize the profitability of land finance have resulted in increasing economic and social costs/risks. Meanwhile, the feasibility of the system increasingly is coming into question, as both ongoing institutional reforms and recent urban land market cooling raise potentially fundamental challenges to the profitability of land finance.
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| 4 |
ID:
117182
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