￥8.7 Trillion in Land Finance At Risk

The anti-corruption freight train is barreling down the tracks and ahead of it is the oncoming land finance freight train.

A strict audit of ￥15 trillion in land sales is going to uncover dirt in many Chinese cities. Already, according to the article below, 9 cities have been found to have violated regulations governing land finance, including Shangluo, Hengyang, Neijiang, Xingtai, Huzhou and Suqian. Recall how land finance works:

Chinese local governments sell land to developers who build homes and commercial centers. The revenue from land sales pays for development of supporting infrastructure, everything from roads and subways to schools and parks. Land sales also finance local government debt which exploded after 2008. In the post-2008 economy, developers rushed to build property amidst a real estate bubble and when the government moved to restrict activity in first- and second-tier cities, developers poured into third- and fourth-tier cities and repeated the model. However, developers have run ahead of many local governments. In areas where there are true ghost cities, support infrastructure such as schools and hospitals have not been built. If the real estate bubble bursts and land sales fall, local governments will need to find another revenue source or they may be unable to finance the infrastructure that generates GDP growth and supports the local real estate market, and they may even face a debt crisis in some of the worst hit areas. This ignores all the potential issues with indebted developers, plus overproduction and bad debts in other sectors of the economy.

84 major Chinese cities have borrowed ￥8.7 trillion, backed by revenue from land sales. If cities have violated regulations or violated the law in their use of land finance, things could quickly come to a head in areas where the governments are borrowing to survive, which is already the case in some cities.

The conclusion to the article is a good summary:

"Mortgage financing using state-owned land, borrowing money to promote urban development and stimulating economic growth, this economic growth model is not sustainable, it can very easily bring about hidden volatility in the capital markets and macroeconomic development." Wang Jianwu told reporters, the key to solving the problem is for the local government to gradually adapt to the "new normal," get rid of "land hormone" stimulus, while local governments also need to shift from the dominant role of economic development to servicing economic development.

Yet again, the anti-corruption probe lines up with the leaderships vision of economic reform. By squeezing local governments' ability to borrow through land sales, the shift towards a rabalanced, market-based economy can proceed more quickly.

84城土地抵押融资达8.7万亿 地方热衷借钱过日子

Land violations since the end: disaster from the city involving the amount of mortgage financing 84 Super 8 trillion

Experts said the local government is keen to "borrow money to live", need to get rid of the "land hormone" stimulus

Terence Chang

Excessive growth of land mortgage finance financial debt behavior is giving land mortgage financing of local government in land use and management of illegal hardest hit.

It is understood that since the end of July this year, the State Land Inspector of each branch of total cases of illegal land projecting nine cities warning interviews. Among them, Shangluo, Hengyang, Neijiang, Xingtai, Huzhou, Suqian six city was clear that the presence of illegal use of land mortgage financing has become a common problem of illegal land areas.

Ministry of Land, an insider told the "China Business" reporter, said, according to the latest statistics, as of the end of June this year, the total amount of land mortgage finance 84 major cities has reached 8.7 trillion yuan, including enterprise mortgage financing, but the city voted government, construction investment and other financing platforms accounted for the majority.

Reporters wrote to the Ministry of Land verify the data and want to learn more illegal use of land nationwide mortgage financing the overall situation, but as of this writing, has not been back.

84 city land mortgage financing amounted to 8.7 trillion yuan

Recently, the Ministry of Land, an insider told reporters, according to the latest statistics, as of the end of June this year, the total amount of land mortgage finance 84 major cities has reached 8.7 trillion yuan, including mortgage financing companies, but the government City investment, construction investment and other financing platforms accounted for the majority.

But these experts also said that the data is only preliminary MLR data systems, present the relevant data have been submitted to the State, to be further confirmed.

According to the data, "2013 China Land and Resources Communique" disclosure at the end of 2013, 84 major cities in the state of mortgage for 403,900 hectares of land area, the total amount of mortgage loans 7.76 trillion yuan, the annual land area and mortgages are mortgages a net increase of 53,300 ha and 1.77 trillion yuan.

"2012 China Land and Resources Communique" is displayed at the end of 2012, 84 major cities nationwide mortgage state in land area 348,700 hectares, the total amount of mortgage loans 5.95 trillion yuan, an increase of 15.7% and 23.2% respectively.

"Total loans and mortgage financing major cities with more than 20 percent of land is probably an annual growth rate last year, the growth rate reached 30.4 percent, more than 8 trillion yuan is the basic certainty." The insider told reporters.

In this context of rapid growth, the use of land for violations of mortgage financing has become a common problem in the place of illegal land issues.

Deputy Commissioner of State Land Supervision Bureau 赵毓芳 Shanghai municipal government during interviews Huzhou main person in charge pointed out that mortgage financing Huzhou land violations, illegal approval of temporary land use issues more prominent, with strong representation in East China. Interviews At the meeting, Vice Governor of Zhejiang Province, Xu-Ming Huang reminded cadres at all levels, Zhejiang, do not suffer in silence, do not have luck, and just on land use and management issues do not make the "uncorrectable errors, earth-shattering mistake."

In fact, the illegal use of land mortgage finance financial debt problem has become an annual national land inspectors found the hardest hit. March 12 this year, the Ministry issued a "Notice of State Land Supervision" shows, where some of the city and county governments dominated by repeated illegal acts, land management situation is still more severe. Among them, the illegal use of land mortgage finance financial debt side, there are inspectors in the routine presence of 48 cities in 19 cities illegal land mortgage financing behavior, involving a total of 1361 projects, land area of ​​14,233 hectares, the amount of 118.379 billion yuan mortgage.

"In the Land of mortgage financing process, local governments can issue warrants dominant state-owned land use, land valuation, land allocation and other procedures, which is the main cause of illegal-prone." Land and Natural Resources Law Center Research Associate Jianwu said.

The Working Group has been set up a comprehensive inventory of Hengyang rectification land violations

"Local government financing platform to land by way of mortgage financing debt financing is compelling choice, especially in some provinces and cities in central and western regions to rely on maintaining a high investment-led economic growth." Jianwu said, there is another important reason is that Local governments in developing economies keen to "borrow money to live" to promote urban infrastructure with land mortgage financing to the money quicker and easier the achievements.

Reporters learned that, in order to enhance their own government financing platform management capabilities to enhance the city voted, built the company's total assets and net assets, thereby successfully finance, local government, without exception, the company chose to inject a lot of land in the platform the way.

A Case Study of Hengyang Hengyang city government to enhance Urban Construction Investment Co., Ltd. (referred to as "Hengyang Construction Investment") is operating capability in 2008 by the "Office of Hengyang Municipal People's Government approved the transfer of land on the consent" of approval Shek Kwu District will assess the value of 2,530,641,400 yuan of 32 commercial and residential land injection; 2010 turn Yanfeng District 14 is located in the assessed value of 3,002,854,600 yuan of commercial and residential land injection.

Construction Investment is subject Hengyang Hengyang investment in urban infrastructure construction and urban assets, operations and management of the main body, including the operation of state-owned assets operations authorized by the government; land purchasing and storage, land development, real estate development. September 25, 2012, Hengyang built using the land use right to vote the way collateral issue "12 Value City voted" corporate bonds to raise funds 1.8 billion yuan, of which 1.08 billion yuan for the construction of affordable housing in Hengyang City project, 720 million element is used to support affordable housing in urban road construction projects.

It is understood that 12 city voted to provide collateral value of inventories in liquidity with strong three state-owned land use rights for the bonds debt service, to assess the value of land was 3,065,915,300 yuan.

According to the Ministry of Finance, Development and Reform Commission, People's Bank, China Banking Regulatory Commission jointly issued four departments "for the suppression of the financing of local government illegal acts notice" clearly states that "local governments should not be injected into the reserve land as an asset financing platform companies not committed to reserve land transfer revenues expected debt financing platform as sources of funding. "

Land mortgage financing has also been the Wuhan Bureau of Land Inspector attention. Deputy Commissioner of Wuhan Bureau of Land Inspector stone row in Hengyang City in 2014 notified cases of land inspectors noted the presence of Hengyang rights of landless farmers to maintain the implementation is not in place, land revenue and expenditure management issues more land mortgage finance irregularities involving large amounts of illegal land occupied a prominent problem, the government introduced the policy documents and national conflict with existing laws, regulations and policies, such as five outstanding issues.

It is understood, deputy director of the Wuhan Bureau of Land Inspector Don Sai force of the serious problems in interviews in Hengyang City in land use and management exist in the work raised serious criticism, and alert the government is mainly responsible to deeply understand the seriousness of the situation of illegal land , deep ideological roots, troubleshoot common land management weaknesses in accountability mechanisms, to prevent "re-development, light protection," "heavy landing, sparse Management" and "because of the public offense, extenuating circumstances," the idea, as well as "fragmented, there is no force "situation.

However, Hengyang Construction Investment relevant person in charge, said in an interview with reporters, Hengyang built using the land use right to vote the way the issue of collateral "12 Value City voted" corporate bonds "As far as I know and the Board of Land and land violations inspectors mortgage financing It does not matter, we do not exist irregularities. "

Hengyang City, the status quo for the land law and corrective measures, the reporter wrote Hengyang Municipal Propaganda Department and Land Resources Bureau, its reply said that after "the Department of Homeland Wuhan inspectorate Hengyang City, the main person in charge of interviews, the municipal government attaches great importance has been established Working Group, a comprehensive inventory of the problems rectification During the interview should not be a comprehensive inventory of rectification. "

"Mortgage financing through state-owned land, borrow money to promote urban development, stimulating economic growth, this economic growth model is not sustainable, it is very easy to capital markets and macroeconomic developments pose potential risk of ups and downs." Jianwu told reporters, solve this The key issue is that the local government to gradually adapt to the economic growth of the "new normal," get rid of "land hormone" stimulus, while local governments also need to shift from the dominant role of economic development services to economic development.

May Land Sales Plummet; 300 Cities Down Nearly 40%; Some Cities Have No Sales

If land sales continued at the rate seen in May, the annualized sales would be down 60% from the ￥4.1 trillion sold in 2013. First quarter land sales of ￥1 trillion were on pace to match 2013, but those numbers look good due to sales in January and February. A significant portion of many city budgets is funded by land sales and land sale revenue is also used to back some debt. Even if sales bottom out or rebound slightly, the decline is already large enough to constrain budgets in cities that overly rely on land sales. As reported last week, one city already cannot repay a developer for returned land.

The numbers:

Land sales: 1767; decline of 19% mom; 45% yoy
Land premiums: ￥137.5 billion; down 30% mom; 38% yoy
Area transacted: 62.2 million sqm; down 26% mom; 49% yoy
Residential land sales: 414; down 37% mom; 54% yoy
Residential area transacted: 17.7 million sqm; down 42% mom; 56% yoy

Since March, Hangzhou has not sold a single parcel of residential land. Hangzhou plans to sell 12 parcels in June, only one is residential. Authorities are intentionally keeping residential plots off the market in order to ease the inventory burden.

In Wuhan on June 5, 10 parcels were offered and 9 transacted at the low price, with one failing to sell due to no bidders. On May 27, Shenyang offered 3 parcels, but no one signed up for the auction. In May, Shenyang offered 18 parcels and 10 were unsold. Changsha and Foshan also saw land fail to catch a bid.

The phenomena also hit first tier cities. Although they didn't experience failed auctions, Guangzhou and Nanjing saw land sales at the low price. In Shanghai, an auction for two parcels were delayed due to a lack of bidders.

In Jinan, there were no land transactions in May.

5月300城土地出让金骤降近四成 土地流拍频现

Affected the property market turnover decline, the recent and more frequent transfer of land or unsold upset phenomenon. Among them, Jinan, Hangzhou and other places last two months or even zero land deal.

China Index Research Institute's latest report shows that in May a total turnover of 300 cities nationwide land 1767, a decrease of 19% mom, down 45% yoy; land premium of the total 137.5 billion yuan, a decline of 30 percent mom, down 38% yoy. Land transactions and premium declined steeply. The May transaction area of 62.21 million square meters was a decrease of 26% mom, down 49% yoy. Among them, the residential land 414 lots, a decrease of 37% mom, down 54% yoy; area of 17.74 million square meters, a decline of 42% mom, down 56% yoy.

Yesterday (June 8), Shanghai E-House Real Estate Research Yanghongxu vice president told the "Daily Economic News" reporter, said that the land market is really cool, but also during further cooling, the negative impact on land finance "This year the land premium may be lower than last year's local government debt pressure increased, so have the driving force to relax regulation, stimulate the real estate."

Frequent land unsold

Compared with previous years, the land market fiery scene, this transaction was deserted, and even months in some cities were neither a deal. "Fired the first shot of the property market price" of the land market in Hangzhou, from March of this year so far, the main city of Hangzhou, had not yet been assigned a case homestead. June Hangzhou launched 12 land, only a commercial and residential land, and the rest are all commercial land.

Hangzhou local media said authorities want to control the land transfer is pressure for lower property inventory considerations, to sell the land last year, the project will form a supply peak this year.

Hangzhou is not only the land market in the doldrums, other parts of the country have launched a number of land transactions occur sharply, and most land transfer to the reserve price. June 5, Wuhan 10 9 to land there at the opening price, no other land appeared quote last unsold. May 27, Shenyang Land Exchange Center 3 land, because no one signed up for the auction, leading all unsold. May, Shenyang launched 18 plots, of which 10 unsold. Changsha, Foshan also experienced the embarrassment of unsold land,

Downcast land market, not only in the second and third tier cities, a second-tier spared. Among them, Guangzhou, Nanjing and other places even with land transactions, are mostly upset bid. The Shanghai plans to launch two unmanned land auction was postponed due to transfer.

Unsold land market is not only appear in some places even zero turnover. For example, in May of Jinan land market is quite deserted, reproduce sell turnover "double hung Zero" situation.

Cooling land market, bringing the land premium atrophy. E-House Real Estate Institute of the latest data show that 10 cities in May typical land transfer revenue 57.8 billion yuan, a decline of 20.3%, down 24.6%, which is the index to fall slightly wounded fell 20 range.

Land becomes difficult to finance short-term

In addition to the land premium to decline, real estate-related tax revenues also appeared sharply. April public finance balance of payments data released by the Ministry of Finance, real estate sales tax dropped 10.2 billion yuan more than the ring. Local tax revenue, the land premium "double down" real estate drag on the local revenue has become an indisputable fact.

With policy advice Research Department released "45 property purchase urban land financial dependence analysis report "shows, Hangzhou, Foshan, Nanjing, Changsha four municipal finance extent of land rely more than 100%, Foshan reached 147.5%, Ningbo land finance dependence was 85.1%.

Research Director Zhang Hongwei same policy advisory body that, for the city is not good in terms of fundamentals, local government finances is dependent on the extent of land is more prominent, such as Hangzhou, Ningbo, Wenzhou. However, he believes that the possibility of Chinese local government debt default is unlikely, while China and the U.S. federal system different; other local governments to ease the debt burden by borrowing new subordinated old.

Cooling land market also led to discussion of community land finances. Last year the country's total land revenue amounted to 4.1 trillion yuan in the first quarter of land revenue reached 1.08 trillion yuan, compared with 1.95 trillion yuan of local fiscal revenue. Land revenue and local public revenue ratio of 1:1.8, local governments dependent on land and not reduced.


Finance Research Institute of the Central University of Finance Wang Jun Yong said, "when the slowdown in economic growth, higher local government reliance on land transfer local government wants to get rid of dependence on" land finance ", it should be a process. "

Professor of Huazhong University of Science and Technology of China Rural Governance Research Center Xuefeng told the "Daily Economic News" reporter, said the land as the basis for urban infrastructure finance, the city is expanding further support an important guarantee, if there is no local government land revenue, urban infrastructure can not keep up.

Zhang Hongwei believes that the land premium decrease is not a bad thing, the local government can promote industrial restructuring, "If the land market is not good, urban construction, how to do, how to do debt, can not simply rely on the local real estate market, the needs of emerging strategic industries, more carry out structural adjustments to promote urban transformation. "

Analysis of China's 23 Provinces Shows Housing Bubble Laden Provinces Are Most Reliant on Land Sales to Repay Debt; Zhejiang Tops the List

China Economic Weekly （中国经济周刊） and China Economic Research Institute （中国经济研究院）teamed up to study China's 23 provinces' exposure to land prices. Zhejiang topped the list as most exposed.

First some background. China $3 trillion local government debt stirs alarm

Analysts said this suggested China is not on a verge of a fiscal crisis - the figure is less than half the debt burdens in Japan and Greece where public finances are strained - but warned the world's second-biggest economy needed to urgently reduce debt if it wanted to safeguard growth and financial stability.

This is especially because the long-awaited report showed some governments were using new loans to repay more than a fifth of their debt, and that authorities still relied heavily on selling land to pay off old loans.

...About 37 percent of debt owed by provincial, city and county governments are backed by land sales revenues, it said. Of all debt directly incurred by China's central and local governments, 5.4 percent are overdue and have not been repaid.

A $6.8 Trillion Price Tag for China's Urbanization

“Urbanization has relied on land conversion and land financing, which is causing urban sprawl and—on occasion—ghost towns and waste. Land conversion has added to inequalities and has fed social unrest among farmers whose land has been expropriated,” said Sri Mulyani Indrawati, managing director and chief operating officer at the World Bank, in a speech in Beijing on March 25. “In the future, a higher portion of local expenditures needs to be financed through local revenues, such as phased-in property taxes and adequate charges for urban services.”

...To date, China’s localities have turned to debt—often backed by land sales–to finance operations. The median debt-to-gross domestic product ratio of all of China’s 30-some provinces is 31 percent, with a high of 79 percent in the poor southwestern province of Guizhou, notes a March 25 report by Moody’s Investors Services. “Many provinces are reliant on land sales for a large portion of their revenues. While this revenue source has proven to be quite lucrative, it has also been highly volatile and therefore not a reliable source for debt repayment,” the report cautions.

Land sales and debt backed by land sales fuels urbanization which then fuels land prices. A virtuous cycle that turns vicious if it reverses and the cities haven't moved on to a new revenue model.

Where Is China’s Debt Bomb Hiding?

A final concern is the degree to which provinces rely on land sales for their revenue. Again, Zhejiang, Jiangsu, and Chongqing are among the most dependent, with Fujian and Shandong rounding out the top five. (Tibet relies less on land sales than any other region in China.) “While this revenue source has proven to be quite lucrative, it has also been highly volatile and therefore not a reliable source for debt repayment,” warns Moody’s.

One way to make indebtedness less of a risk would be to allow municipalities or provinces to issue bonds, particularly to help cover infrastructure projects that may not provide returns for many years (to date, bond financing by local governments is largely barred). “It’s not fair if projects that will benefit future generations are funded only through the tax payments of the current generation. So it’s OK to issue some bonds but under strict conditions,” said Chinese Finance Minister Lou Jiwei at a recent conference in Beijing, reported China Daily on March 26.

In sum, many of China's localities and provinces are heavily reliant on land sales for financing both their operations, which includes urbanization drives that lift GDP, as well as debt repayment. The new report, below, shows that the places most reliant on land sales are also in several cases experiencing the largest housing bubbles.

Select parts of (Google Translated) article follows: 23省份土地财政依赖度排名：浙江依赖度第一

"Report" shows, from the "promised land revenue to repay the total debt," the absolute value, such that the total debt, the rank order of Beijing, Zhejiang, Shanghai, Sichuan, Liaoning, Hubei, Guangdong, Chongqing, Shandong, Tianjin , Fujian, Jiangxi, Hunan, Anhui, Hebei, Guangxi, Heilongjiang, Shaanxi, Jilin, Hainan, Shanxi, Gansu, Jiangsu, unpublished data.

From the land of financial dependence, namely "land sinking in the government bears the responsibility to repay the debt in proportion", the rank order of Zhejiang, Tianjin, Fujian, Hainan, Chongqing, Beijing (estimate), Jiangxi, Shanghai, Hubei, Sichuan , Liaoning, Guangxi, Shandong, Jiangsu, Anhui, Heilongjiang, Hunan, Guangdong, Shanxi, Jilin, Gansu, Hebei, Shanxi.

There are also at least 23 provinces, 1/5 of the repayment of the debt by selling land

Zhejiang, Tianjin, 2/3 of land revenue to repay debt depends

"Report" shows that 23 provinces, Zhejiang Province ranked first with 66.27%; ranked second in Tianjin, 64.56%. In other words, Zhejiang, Tianjin two governments bear the responsibility to repay the debt, the share has 2/3 of the land to repay depends.

Zhejiang Provincial Audit Department audit released announcement made clear that a higher reliance on debt repayment local land revenue. By the end of 2012, Zhejiang province, city and county government bears the responsibility to repay the debt, the promised land transfer revenue sources for the debt service debt balance was 273.944 billion yuan, accounting for city and county levels of government bears the responsibility to repay the balance of 413.391 billion yuan of debt of 66.27%.

Zhejiang is ground zero for the housing bust. Hangzhou is in Zhejiang. The city I posted on yesterday, Yuyao,where home prices are sinking fast is in Zhejiang. Ningbo, home to the bankrupt developer Zhejiang Xingrun, is in Zhejiang. In a bit I'm going to post a news story on Haining, just north of Yuyao, which reportedly has 8 years of housing supply.

What happens if real estate prices don't recover and/or land sales dry up? Bank loans? Central government aid? That works if the real estate slowdown or a real estate crash is temporary. If it is long-term, Zhejiang faces much higher debt servicing costs. If the late 1990s early 2000s are a model (when the central government bought up the bad debt from the banks and recapitalized them), maybe the central government will take up all the debt and then reissue it as muni bonds that each province must repay, then sell them off to private investors, creating a muni bond market.

Top-ranking Beijing ranked first in absolute "commitment to the land transfer income to repay the total debt", but did not give its statistical deadlines in the same relative ratio of the total debt. In recent years, Beijing's land kings continue to emerge, according to the Beijing Municipal Audit Bureau, as of the end of 2012, the size of their land revenue used to repay debt reached 360.127 billion yuan, ranked first in 23 provinces. As of June 2013, the Beijing Municipal levels of government debt outstanding was 649.6 billion yuan, the average annual growth of 33% in the last three years. Accordingly, estimates that by the end of 2012, the size of local government debt at 600 billion yuan in Beijing should be up and down, sinking land that Beijing's share in the overall debt should be 50% to 60%.

The smallest proportion of the three provinces, namely Gansu (22.4%), Hebei (22.13%), Shanxi (20.67%). This means that even a small degree of dependence on the land sinking provinces, but also at least one debt 1/5 to rely on the land to repay.

These last three provinces are not economic leaders at the moment. Shanxi was, but coal prices have cratered. Hebei and Gansu are underdeveloped.

There is one bright spot in the report:

However, Guangdong exception. Large-scale land insolvent Guangdong, ranked No. 7, but the land sinking ranked 17th in the proportion of the entire debt. It is understood that the total economy of Guangdong ranked first in the country long-term, well-developed private economy, especially the real economy developed, effectively easing the finances of local government land hunger.

Why isn't Guangdong in trouble? Maybe because their highest ranking official was Wang Yang, who is expected to rise into the Politburo Standing Committee on the next go around. He guided the province to greater economic freedom until being promoted to Vice Premier in 2013. He was praised for his "Guangdong Model" and has said, "We must hasten the development of small government and a great society." That smaller government didn't require as much reliance on land sales.

Below is the full Google translated article:

" China Economic Weekly "and the China Economic Research joint research and publish: Which is more dependent on the provincial land finance?

"China Economic Weekly" reporter, Chinese economic researcher Liude Bing | authored

23 provinces "land finance dependence" ranking Overview

Beijing land total debt service first, Zhejiang dependence of the first

"Report" shows, from the "promised land revenue to repay the total debt," the absolute value, such that the total debt, the rank order of Beijing, Zhejiang, Shanghai, Sichuan, Liaoning, Hubei, Guangdong, Chongqing, Shandong, Tianjin , Fujian, Jiangxi, Hunan, Anhui, Hebei, Guangxi, Heilongjiang, Shaanxi, Jilin, Hainan, Shanxi, Gansu, Jiangsu, unpublished data.

From the land of financial dependence, namely "land sinking in the government bears the responsibility to repay the debt in proportion", the rank order of Zhejiang, Tianjin, Fujian, Hainan, Chongqing, Beijing (estimate), Jiangxi, Shanghai, Hubei, Sichuan , Liaoning, Guangxi, Shandong, Jiangsu, Anhui, Heilongjiang, Hunan, Guangdong, Shanxi, Jilin, Gansu, Hebei, Shanxi.

There are also at least 23 provinces, 1/5 of the repayment of the debt by selling land

Zhejiang, Tianjin, 2/3 of land revenue to repay debt depends

"Report" shows that 23 provinces, Zhejiang Province ranked first with 66.27%; ranked second in Tianjin, 64.56%. In other words, Zhejiang, Tianjin two governments bear the responsibility to repay the debt, the share has 2/3 of the land to repay depends.

Zhejiang Provincial Audit Department audit released announcement made clear that a higher reliance on debt repayment local land revenue. By the end of 2012, Zhejiang province, city and county government bears the responsibility to repay the debt, the promised land transfer revenue sources for the debt service debt balance was 273.944 billion yuan, accounting for city and county levels of government bears the responsibility to repay the balance of 413.391 billion yuan of debt of 66.27%.

Top-ranking Beijing ranked first in absolute "commitment to the land transfer income to repay the total debt", but did not give its statistical deadlines in the same relative ratio of the total debt. In recent years, Beijing's Wang continue to emerge, according to the Beijing Municipal Audit Bureau, as of the end of 2012, the size of their land sinking up 360.127 billion yuan, ranked first in 23 provinces. As of June 2013, the Beijing Municipal levels of government debt outstanding was 649.6 billion yuan County, the average annual growth of 33% in the last three years. Accordingly, estimates that by the end of 2012, the size of local government debt at 600 billion yuan in Beijing should be up and down, sinking land that Beijing's share in the overall debt should be 50% to 60%.

The smallest proportion of the three provinces, namely Gansu (22.4%), Hebei (22.13%), Shanxi (20.67%). This means that even a small degree of dependence on the land sinking provinces, but also at least one debt 1/5 to rely on the land to repay.

Land sinking scale and proportion of the overall debt incomplete peer

Guangdong accounted for more than a small amount, less Hainan, a large proportion of the total

In absolute terms, 23 provinces, Beijing, Zhejiang and Shanghai need to rely on revenue from land sales to debt servicing debts top three, namely 360.127 billion yuan, 273.944 billion yuan, 222.265 billion yuan; land compensation debt is the smallest size in Jilin, Shanxi, Gansu, were 58.616 billion yuan, 26.894 billion yuan, 20.654 billion yuan.

"Report" shows that the size of the land and the land sinking in debt service accounted for the overall debt data presented in these two relatively close correlation: the size of the land sinking more than 100 billion yuan in the province, land sinking in the overall debt The proportion is higher. Because it is easy to sell, sell at high prices in order to ensure the solvency of land size, but also more dependent on the land. Zhejiang, Shanghai, Sichuan, Liaoning, Hubei, Chongqing, Shandong, the size of their land sinking columns 2 to 9, the overall proportion of their land sinking in debt were ranked No. 1,8,10, 11,9,5,13 bit. Beijing ranked first in the scale of land sinking, its proportion of the total debt of 50% to 60%, ranking higher.

However, Guangdong exception. Large-scale land insolvent Guangdong, ranked No. 7, but the land sinking ranked 17th in the proportion of the entire debt. It is understood that the total economy of Guangdong ranked first in the country long-term, well-developed private economy, especially the real economy developed, effectively easing the finances of local government land hunger.

On the contrary, the size of the land sinking below the 100 billion yuan in the province, the land sinking in debt accounted for most of the entire row behind. But there are exceptions.

Despite the small size of land sinking in Hainan, only 500 billion, but the proportion of land sinking the entire debt was ranked 4th in. In recent years, Hainan's real estate market is very hot, especially in the international tourism island , driven by the concept of social and economic development of Hainan Island high degree of reliance on the real estate industry, this situation is also reflected out of the land on Hainan debt tables.

Guangxi scale land sinking only 700 billion yuan, ranking the 16, but the land debt service ratio as high as 38.09%, ranked 12. Further analysis found that, on one hand, the whole place Guangxi smaller debt, as of the end of 2012, the Tibet Autonomous Region (excluding towns) only 190 billion yuan, ranking in the middle of all the provinces on the list, below average; another On the one hand, Guangxi local debt structure, the main local government debt grew at city level, and Guangxi in debt payments, land purchasing and storage spending big in the actual economy, local government investment in land purchasing and storage of large, will be particularly dependent on revenue from land because the land as government funds fiscal revenues, the main beneficiary of that is the city level and county-level governments.

This directly shows that the more dependent on local land finance, will inevitably push to increase the size of the land, as well as the introduction of high-priced land. As early as in 2010, one of the king Nanning floor price broke through the 10,000 yuan / square meter.

6 Report of the land outside the province dependence How?

Irregularities in some areas using BT (build - transfer) mode

Except these 23 provinces listed, Henan, Guizhou, Inner Mongolia, Ningxia, Qinghai, Yunnan these six provinces, and 23 provinces are not part of the statistics provincial, municipal and county governments, if the land does not exist solvency problem?

"China Economic Weekly" reporter interviewed found that since last year, Henan, Guizhou, Yunnan and other places, land sales situation is very active. Zhengzhou had appeared in several cases a king-level plots; while in Henan Nanyang, Xinyang, and Kunming, Yunnan and other places, have appeared since last year over land disturbance.

On the other hand, "China Economic Weekly" reporter from six provinces in the audit report found the place where land-related debt has been manifested in the form of a face-lift. Such as Guizhou Province audit found that some local violations by BT (build - transfer) mode, to non-financial institutions and individual borrowers, etc. borrowing government debt 40.064 billion yuan, as Xiuwen County Urban Construction Investment and Development Co., Ltd. to sell the land with the expected sources of income as the debt service fund, investment cooperation were signed BT mode 1.202 billion yuan framework agreement with four companies. Henan, Yunnan, Inner Mongolia and other places, there is also a large real situation with land revenue "disguised" to repay local government debt.

Background Report

The past 20 years, with the rise and development of Chinese real estate industry, aspects of China's urban construction, local government funding, quality of life, economic development in rural areas around the city, gained rapid development and greatly improved. Which is the direct contribution of land finance. Land of local government finance new and important source of revenue for urban social and economic development has played a positive role. At the same time, some local governments for economic growth and fiscal revenue considerations and the pursuit of the double, to varying degrees to a "land impulse", which over-reliance on land expenditure finance, even as a place to land revenue The main channels of debt, that is currently being criticized by outsiders "Land fiscal dependency syndrome."

At present, for "over-reliance on local government bonds are financial as well as compressed land market regulation space, kidnapped Chinese economy "and other concerns, the public debate varies, but all the controversy is the lack of quantitative criteria, not a quantitative indicator.

Quantitative indicators is a necessary foundation to analyze and solve problems. Financial terms of the land, with specific quantitative data, you can more clearly understand and analyze the current situation and problems of land finance, in particular to accurately define and determine a reasonable degree of dependence between local debt and finance land for real estate and local policies provide analysis of major issues such as debt ideas and decisions.

Data sources report

From January 23, 2014, the provinces, autonomous regions and municipalities Audit Office (Office) published a succession provinces government debt audit results, which is the country's first centralized provincial audit department announced local bonds.

From the published audit report, the audit department of the provincial audit report on local government debt is basically used the same reporting format: mainly divided into "major initiatives in recent years to strengthen the management of government debt," "government debt scale and structural situation "," the province's government debt burden of the situation "," the main problem in the presence of government debt management "Four section.

In "The main issue government debt management exist," the forum, the main problem the audit department announced three, one government bears the responsibility to repay the debt faster growth, the second is part of the heavy debt burden of local and industry, three local government debt dependence on land revenue higher.

Among them, the third question, namely, "local government debt dependence on higher land revenue," the provincial audit report a problem most attention. According to statistics, 29 provinces (except Xinjiang, Tibet, Hong Kong, Macao and Taiwan) audit notice, when "The main problem in government debt management presence" in the introduction, there are 23 provincial audit department explicitly "local debt-dependent land income to repay "included.

23 provinces audit agency gives the end of 2012, "the land sinking in the government bears the responsibility to repay the debt in proportion" of the specific numerical values ​​or estimates related items are available. This value reflects the proportion of land in the local government debt in the financial, but also reflects the degree of financial dependence of local governments on land. Therefore, we will audit report of "land sinking in the government bears the responsibility to repay the debt in proportion" as "land finance dependence."

Calculation of quantitative indicators report

"Land finance dependence," or "land sinking in the government bears the responsibility to repay the debt in the proportion of" value, which is calculated as follows: the total "commitment to the land revenue to repay all levels of local government debt" (ie numerator), divided by the "provincial cities and counties in three government bears the responsibility to repay the outstanding debt" (ie, the denominator) results.

Specifically, is, first, the delineation of the scope of the provincial audit department "is committed to the land transfer income to repay the debt," the local governments of the provinces and calculate the total. For example, Zhejiang was "provincial, municipal and county government," three levels of government; range Sichuan is "18 municipal, 111 county-level government" (ie, Sichuan Province, 21 cities (prefectures), 183 counties (cities, districts) , there are 18 municipal, 111 county-level government commitment to the land transfer income to repay the debt, others are not counted).

Secondly, the provincial audit department and then the statistics of the province, "provincial cities and counties in three government bears the responsibility to repay the outstanding debt" (there are very few provinces such as Sichuan, the provincial government statistical excluding debt statistics only two counties government).

Finally, will be divided over two statistics, namely, "promised land transfer income to repay the debt" divided by total "provincial cities and counties in three government bears the responsibility to repay the outstanding debt" to arrive "in the government debt-negative Land have the responsibility to repay the debt in proportion, "this value. That is what we call the "land finance dependence."

According to the audit report disclosed above provincial government audit departments and their associated data, "China Economic Weekly," China Economic Research Institute and published a joint study "of 23 provinces 'financial dependence on the land' Ranking Report" (the "Report" ).

Might As Well Face It, You're Addicted to Land Finance

It was the best of times, last year land finance hit a new high of nearly ￥5 trillion. (去年“土地财政”创新高：地方卖地收入超四万亿)
It was the worst of times, land financing revenue growth collapsed and local government finances face an unresolved predicament. (土地收入增速骤减 地方融资困局待解)

"Daily Economic News" reporter's inquiries learned that the budget report for the local governments forecast land revenue of 4.31 trillion yuan, down 10.1%. Among them, the state-owned land use right transfer income of 3.63 trillion yuan, down 11.8%.

Instead of falling, state-owned land transfer revenue climbed 17%. However, this growth was still a shadow of the 44.6% growth in 2013.

The spike in land sale revenue was the result of the government's crackdown on borrowing by local governments. Even though prices were down, governments were able to raise revenue by increasing land supply. Regular revenue channels brought in only ￥2.6 trillion in revenue. At nearly ￥5 trillion, the land finance reliance ratio was 192% (as the Chinese report it) or a still incredible 66% of total revenues. It gets worse because a big chunk of that ￥2.6 trillion was the result of real estate taxes:

Treasury data show that the local general public revenue (this level) 7.59 trillion yuan. That is, the local land revenue has more than half of the local public revenue.

In addition, land and real estate taxes also include small local taxes. Ministry of Finance data showed: deed 398.6 billion yuan, an increase of 3.7%; land tax 391.4 billion yuan, an increase of 18.8%; farmland occupation tax 205.9 billion yuan, an increase of 13.8%; urban land use tax 199.3 billion yuan, an increase of 15.9 %. Several data add up to 1.2 trillion yuan.

In addition, the real estate business tax 562.7 billion yuan, 296.1 billion yuan real estate business income tax, partly returned to local governments.

The slowdown in land finance comes as local governments face ￥650 billion in maturing debt this year. Cities aren't going to default, but if they don't have excess cash to finance infrastructure and development projects, growth will slow.

Background: May Land Sales Plummet; 300 Cities Down Nearly 40%; Some Cities Have No Sales

f land sales continued at the rate seen in May, the annualized sales would be down 60% from the ￥4.1 trillion sold in 2013. First quarter land sales of ￥1 trillion were on pace to match 2013, but those numbers look good due to sales in January and February. A significant portion of many city budgets is funded by land sales and land sale revenue is also used to back some debt. Even if sales bottom out or rebound slightly, the decline is already large enough to constrain budgets in cities that overly rely on land sales.

June Land Sales Plunge

Even first tier cities are seeing land sales collapse. According to Centaline, through June 16, the four first-tier cities had sold only 8 parcels of land for ￥1.8 billion. The firm forecasts land sales will be below ￥20 billion for the month, the lowest figure in the past several years. Last year, the four cities sold ￥35.7 billion worth of land.

Land sales picked up in the second half of 2014, but they were heavily split. Top=tier cities saw land sales rebound strongly, while bottom-tier cities saw sales drop to zero. The lack of finance will be an issue for cities in the first half of 2015.

Housing Market Rescues Begin, Subsidies for Buyers, Lotteries Whip Up Speculative Fever

Third- and fourth-tier housing markets have cooled down enough that governments are launching rescue efforts. Meanwhile, first- and second-tier cities have seen increased use of housing lotteries. As before, the lotteries are whipping up speculative fever because homes are sold at below market prices.

iFeng: 楼市降温！三四线已有城市开始酝酿“救市”

In 2018, due to the cooling of the property market and the retreat of the shed, the land market cooled down and the growth rate slowed down. In some third- and fourth-tier cities with high financial dependence on land, cities have begun to “save the market”.

The end of cash payments for shantytown renovations hit smaller cities hard.

Lu Wentao, an analyst at Shanghai Zhongyuan Real Estate Market, said in an interview with the reporter of China Times that the change of the shed reform policy has a certain impact on the land market. With the reduction of monetized resettlement, there is a lot less demand for home purchases in the market. Especially for the third- and fourth-tier cities, there is not much endogenous demand. The demand for home purchases has been released when the previous wave of house prices grew rapidly. There may be fewer needs. Housing companies will naturally look at these markets with caution and will be more cautious when buying land.

BAck in June 2018, there were doom and gloom articles about lower-tier housing markets because this policy was ending. See: Third and Fourth-Tier Cities Doomed As PSL Goes Away, Deleveraging Will Not End

Many Chinese cities rely on land sales for revenues.

Since 2012, the ratio of land use right transfer fees to local public budgets has remained above 0.4. In the past two years, as the land transfer fees have risen, the ratio to local general public budget income has also increased. 2017, 2018 The ratio rose to 0.57, 0.66, more than half of the local general public budget income.

Zhuge looked for housing analysis. From the ratio of land use right income to local general public budget income, it can be clearly seen that local governments have always relied heavily on land finance. Local governments hope to sell land to make up for and maintain local fiscal revenue and expenditure gaps. However, in recent years, the negative impact of excessive reliance on land sales revenue has become more and more serious. The dependence on land finance has gradually become one of the important factors leading to the rise of housing prices, and it has also increased local debt risks and financial risks.

From the perspective of cities, in 2018, the average ratio of land transfer fees in first-tier cities, second-tier cities, and third- and fourth-tier cities to local general public budget revenues was 0.4, 0.91, and 1.51, respectively. Third- and fourth-tier cities have the highest dependence on land finance.

Way back in 2012, the central government realized land finance was an issue. Around 2014, the government started talking seriously about the issue, along with replacement revenue. There was serious talk of launching a real estate tax. Municipal bond markets were pushed because cities had been relying on land sales, and financing borrowings with revenue from land sales. As debt levels increased, the cities became more and more reliant on a revenue stream that is at the mercy of the cyclical credit market.

2014: China Will Have a New Housing Minister; Nanning Fires First Rescue Shot; More May Come in Second Half of 2014 (a good reminder for those looking for stimulus and/or housing recovery that China started rescuing housing in 2014, but the cycle bottom was in 2016)
2015: The Age of Land Finance Is Over

In the first quarter, land finance only made up 32% of government revenue (as Chinese media reports it), down from 60% in 2013. The 32% figure is equivalent to about 25% of total government revenues. This has serious implications for local government finances, since some local government debt is backed by land sale revenue and land sales fuel development projects.

2017: The End: Provinces Plan 45 Trillion Investment Binge

Back in 2014, flaws in the land finance model were exposed. The need for reform and a new revenue stream, via a property tax, was identified. Instead of reform, the Chinese economy got more credit. The only thing forestalling a significant deceleration is still massive credit growth. Remove the credit and there will be a reckoning.

Nothing has changed. If anything, the problems from 5 years ago have grown worse, particularly for smaller cities.

Zhuge looked for housing analysis, the first-tier city industrial transformation, and gradually entered the post-industrialization stage, the industry is reasonable, the government generally has higher public budget income, and the land financial dependence is at a lower level; the second-tier cities are in a period of rapid expansion, demand is strong, and the market is hot. The scale of land supply is large and the competition of housing enterprises is fierce. The land financial dependence is slightly higher than that of first-tier cities. The third- and fourth-tier cities have limited economic resources and insufficient anti-risk ability. However, under the circumstance of the shed reform and the industry's upward cycle, some cities have land transfer. The income has increased substantially, and the land finance reached its highest dependency in 2018.

No wonder that smaller cities are starting their "housing market rescue" efforts.

Some third- and fourth-tier cities are brewing "rescuing the housing market"

At the end of 2018, several cities began to quietly loosen their control policies. Heze canceled the policy of restricting sales, the social security requirements for the relaxation of housing purchases in Hangzhou and Zhuhai, the cancellation of the implementation of the lottery policy issued by the Qingdao High-tech Zone six months ago, and the loosening of restrictions on purchases by Hefei. These cities have opened a small climax of local relaxation and purchase restrictions.

Recently, some local governments have started the “bailout” policy. Heze Chengwu County has introduced a new real estate policy, stipulating that farmers in the towns can enjoy a discount of 300 yuan/square meter for the first suite. The down payment is no more than 30%. The lower limit of the loan interest rate is 0.9 times the benchmark interest rate of the loan. The upper limit does not exceed 1.25 of the benchmark loan interest rate.

In this regard, Lu Wenzhao said that buying a house subsidized housing, this is the most direct stimulus, the action of Chengwu County to save the city has been very obvious. In some places, relying too much on land finance, if the house is not sold well, and the land cannot be sold, it will directly affect the income of the local government. This is definitely not acceptable to the local economy. Third- and fourth-tier cities, especially those with high financial dependence on land, will definitely find ways to loosen their policies. There are still many cities like Chengwu County in the future.

Guo Yi also said that this year's real estate regulation and control implements “implementing the main responsibility of the city”. All localities need to introduce regulation and control policies according to the characteristics of the city. Some cities with demonstration effects are not stopped by the central government. It is expected that more cities will carry out the property market this year. Moderate loosening, but this loosening will be a gradual, tentative. If the market is overheated, the loosening will not continue, because the local government still has to be responsible for the results of the regulation, and keep the bottom line of "house is for for living, not speculating."

While smaller cities are loosening and even beginning direct subsidies, first- and second-tier cities are experiencing a revival of animal spirits.

CNStock: 万人摇号买房又出现！楼市迎来“小阳春”？

The property market, which has been depressed for half a year, is heating up with the warming of the weather.

On March 21st and 22nd, two buildings in Hexi, Nanjing, were publicly shaken. A total of 7766 people participated in the purchase of the house, and the winning rate was about 6% and 7.8% respectively.

Similar buying scenes have been staged in hot cities such as Beijing, Hangzhou and Chengdu after the Spring Festival. Individual real estates have also seen thousands of people participating in the lottery.

Not only is the property market, but the land auction market is also heating up.

Since the Spring Festival, the volume of high-value plots has increased significantly, and the premium rate capping and the highest unit price of the region have flashed from time to time.

The Chinese government has never had success with real estate controls. The only time controls have worked is when the credit cycle is working in their favor. When controls are put in place in the growth cycle, speculative fever surges as buyers rush to grab property because the next time policy eases, prices will surge along with credit growth. When controls are lifted, it often leads the credit cycle and has seemingly no effect until the credit shows up.

For now, there is no major stimulus effort in China. Real estate easing should have some positive effects, but not as much as anticipated. If the economy stalls and stimulus is pushed, the door is opening for another inflation of the housing market.

Land Price Bubble Driven By Local Govt Revenue, Growth Needs

Land finance is a core funding mechanism for local governments, supplying about one-third of revenues. The funds are used for infrastructure investment. Without land finance, there's little funding for investment. Developers don't want to build apartment buildings in corn fields if the government isn't building hospitals, schools and subways. Local governments have a strong incentive to drive up land prices and real estate development.

Land finance is at the heart of local government. 2014 without considering land finance, land finance contributed 35.63 percent of local revenue. 2015 state-owned land use right transfer income reached 4.26 trillion, 2003--2015 years than the land transfer payments and local general budget revenue an average of 49.74%. 2014 Tax and land, real estate association representing local general budget revenue is close to 28%. 2015 total local debt 18.4 trillion in land financing 3.68 trillion.

Objective understanding of the positive role of land finance in mobilizing local initiatives to promote economic growth, improve the urban public infrastructure. Local government through low-cost collection of agricultural land, the low price of the transfer of industrial land, high prices to sell commercial, residential land, while stimulating investment, on the other hand to obtain high land finance to make up the financial gap. A huge amount of land transfer income used for land acquisition and relocation compensation, land development, urban construction, infrastructure construction, has become an endogenous logic of China's economic development.

The economic slowdown in 2014-2015 was a transition away from this development model, and the rebound over the past year was a step back for the Chinese economy. Now another step forward is at hand.

iFeng: 地王之迷：来自地方土地财政视角的解释

Real Estate Sales Taxes Fall YoY in April; More Than 30 Cities Consider Loosening Housing Policies; Threat to Development Model

Real estate sales tax collections fell 4.2% yoy in April, a sharp drop compared to the 5.5% yoy gain in March. Real estate companies income taxes also fell 3.1% yoy. At the national level though, real estate taxes are only 2% of government revenues. Tax revenue was up strongly year on year overall. Real estate is a major source of local government revenues though, and in a bid to increase turnover (and increase those sales tax collections), more than 30 cities are looking at loosening housing policies.

Small local government real estate taxes such as deed tax, land VAT, farmland use tax, city land use tax, etc. increased by 1.2%, 24%, 3.2% and 16.9% respectively, down sharply from last year's 20% to 30% increases. These tax declines aren't a big issue in terms of revenue, but they are a bad sign for local governments that rely on land sales. The article below cites land sales as accounting for 25% of local government revenue, but in some cases this figure is far higher.

In response, more than 10 cities are working on plans to ease buying restrictions, according to incomplete research from a "China Business" reporter. More than 30 cities are looking at various easing plans. Tianjin is looking at allowing buyers to own a third home. In Tianjin, land finance accounts for more than 60% of government revenues, putting it ahead of cities such as Xiaoshan and Ninbgo in Zhejiang province, both of which have loosened housing policy. Provinces that rely on land finance for more than 50% of revenues include Tianjin, Zhejiang, Chongqing, Beijing, Hainan and Fujian.

Land use right transfers (land sales) raised 1.08 trillion yuan in revenue during the first quarter of 2014, an increase of 40% yoy, versus local revenue of 1.95 trillion yuan. The ratio of land sales to public finances at the local level is about 1:1.7, or well over one-third.

An example is Hangzhou. In 2013, the Hangzhou government was the most reliant on land sales in all of China. In January, Hangzhou earned 40 billion from land use right transfers, equivalent to 25% of all of 2013. In February, sales were 9 billion, a more than 70% drop from January. In March, sales were 3.8 billion, a 60% drop from February.

China International Finance Limited, chief economist Peng Wensheng sees three effects from weak land sales. The first is reduced local government investment, reduced fixed asset investment. [There's your economic rebalancing away from investment.] The second is increased debt risk for local governments. The third is restrained credit growth. Peng also makes the important point that real estate price decline expectations are still forming. As I've pointed out here in previous posts, the situation was worse from a price standpoint in 2011. Peng goes on to note that developers haven't started to reduce land purchases yet, but that could be coming in the next few months, in which case land revenue growth for many cities will decline and even turn negative.

To recap the situation: Chinese local governments sell land to developers who build homes and commercial centers. The revenue from land sales pays for development of supporting infrastructure, everything from roads and subways to schools and parks. Land sales also finance local government debt which exploded after 2008. In the post-2008 economy, developers rushed to build property amidst a real estate bubble and when the government moved to restrict activity in first- and second-tier cities, developers poured into third- and fourth-tier cities and repeated the model. However, developers have run ahead of many local governments. In areas where there are true ghost cities, support infrastructure such as schools and hospitals have not been built. If the real estate bubble bursts and land sales fall, local governments will need to find another revenue source or they may be unable to finance the infrastructure that generates GDP growth and supports the local real estate market, and they may even face a debt crisis in some of the worst hit areas. This ignores all the potential issues with indebted developers, plus overproduction and bad debts in other sectors of the economy.

As it stands today, the GDP slowdown doesn't even reflect a breakdown in this model. All we have seen thus far is cracks in the real estate market and some problems in the hardest hit areas such as Hangzhou. This is why the central government isn't planning a stimulus and won't even consider one until things turn for the worse. Near the end of the second article below, one professor speculates that if the market hasn't recovered by July or August, the government should consider a rescue. However, the policy choices are increasingly limited due to existing debt levels.

In the early 2000s, financial repression was covered up by high growth rates in real GDP. There was a real cost to bailing out the banks, but it was a fraction of the gains made during the decade. This time around, the costs of a rescue or bailout are going to be much clearer. The post-2008 credit bubble has created a tremendous amount of malinvestment and the bill is coming due. In the end, what a rescue will be is a cost shifting exercise. The government can take steps to redirect the fallout, but they will not avoid it.

Slowing housing market hits local govt revenues

Business tax from the property sector amounted to 44.3 billion yuan ($7.09 billion) in April, down 4.2 percent year-on-year and corporate income tax of property firms was 24.8 billion yuan, down 3.1 percent compared with the same period in 2013.

In comparison, business tax and corporate income tax from the property sector saw a year-on-year increase of 33.6 percent and 25.1 percent in 2013. The growth rate eased to 10.3 percent and 11.7 percent in the first quarter.

Tax revenue from the property sector contributed to nearly 30 percent of local government income in 2013, according to a report from Shanghai-based E-house China R&D Institute in February.

超30城有放松调控预期 十余城市传松绑限购

May 12, the Treasury announced revenue and expenditure in April, which, by the recent real estate sales decline affected the real estate business tax 44.3 billion yuan, down 4.2% compared to 5.5% growth in March dropped significantly.

Compared with the sales tax, VAT, income tax accounted for more than half of the three, as the property tax on all real estate taxes in tax accounting is not large, less than 2%, but the associated downstream industries brought on taxes accounted for ratio has reached about 10%, is a major source of local revenue.

April, the national real estate enterprise income 24.8 billion yuan, down 3.1%. Deed tax, land tax, farmland occupation tax, urban land use tax and other local taxes grew respectively by 1.2% smaller, 24%, 3.2% and 16.9%, an increase of two percent over last year at every turn also dropped significantly.

Decline in real estate tax increase for local governments, not just tax revenue, but also increased the land finance future income concerns. In this context, since April, more than the city of Nanning, Foshan and other buyers have came untied " restriction "policy is not hard to understand. As of May 16, "China Business" reporter to incomplete statistics, has reported "restriction order" to relax the city up to 10 or more.

"Such revenue decline, for a four-tier cities and second tier cities and the impact of the intensity is not the same as compared to first-tier cities, the overall four-tier cities in oversupply, the price may appear first or price change phenomenon. "Shanghai E-House researcher Yan Yuejin said.

There are over 30 cities expected to relax

For local government, real estate taxes shrink, perhaps not just as simple as reducing taxes, local governments rely more important mode of threatened land finance.

Local government revenues mainly include three: general budget revenue, the central and local transfer payments, income from government funds. Among them, the local government fund revenue primarily from land sales, land revenue since 2007 the proportion of total local government revenue increased rapidly in 2013 accounted for about a quarter of local government revenue.

Centaline Research Department statistics show that as of now, rumors have been brewing bailout of more than 10 cities, including certain adjustments have been made ​​to the existing six cities. Including Fuzhou, Hangzhou and other cities came second and third bailout rumors.

The latest rumor is Tianjin will release third suite purchase limit. The China Economic Research Institute said in a "23 provinces (municipalities) Land fiscal dependence" ranking statistics show that the financial dependence of land in Tianjin and Zhejiang Province, more than 60%, after Xiaoshan, Zhejiang Province, Ningbo also has reported the property market deregulation news.

The above statistics rankings, financial dependence on the land more than 50% of provinces including Zhejiang, Tianjin, Fujian, Hainan, Chongqing and Beijing.

"Cool the property market, leading to the gradual emergence of local fiscal issues, in this case, release the part of local government regulation has become the most commonly used measures to stimulate the economy, but also the most obvious short-term effects of the measures." Centaline Dawei, chief market analyst think.

A quarterly data released by the Ministry of Finance showed that the "land finance" hero status in the local government fiscal revenue is still strong.

The first quarter of the state-owned land use right transfer income reached 1.08 trillion yuan, up 40.3%, while the local fiscal revenue 1.95 trillion yuan, the proportion of 'land' income and local public revenue amounted to 1:1.7.

To relax the restriction came Hangzhou, for example, in 2013 the land was 156.4% financial dependence, 45 in the country to monitor the property market with the purchase of policy advice, the city's dependence on land finance ranked first. After entering 2014, Hangzhou land market appeared "weak after the first strong" trend. In January, Hangzhou sell 35 land, the land premium reached 33.956 billion yuan, accounting for 25.6% last year. But in February, the month in Hangzhou city's land transactions in the total amount of 9.2 billion yuan, down 72.8 percent. Into March, the city's only eight land, the total turnover of approximately 3.8 billion yuan, up and ring data are likely to drop sharply, the total turnover shrink four percent from the previous month.

China International Finance Limited, chief economist Peng Wensheng had published an article that the financial downturn has brought pressure on the land to local governments, will have an impact in three areas: First, reduce local government investment, the impact of investment in fixed assets; second is to increase local government debt risk; third is not conducive to credit expansion. Macroeconomic tightening effect will bring a whole. Land revenue decline brought pressure on local governments.

"In the case of the real estate market continues to cool, the country is expected to have more than 30 cities have expectations and the possibility of relaxing regulation. Follow, including prices close to stagnation of the city, there may be introduced where the bailout policies, they may not be obvious to relax purchase, but will be fine-tuned by other means. "Dawei analysis.

In this context, Peng Wensheng said that the current slowdown in real estate sales, the impact of cash flow has begun to reflect, but the real estate price expectations are still being formed. Inhibition of real estate investment sales decline and land acquisition is not yet fully reflected, land revenue growth is expected in the coming months will decline, and negative growth.

Or take the lead in the four-tier cities "occupied"

From the national market, the structural differences resulting decline in real estate tax increase is still relatively large.

Centaline data show that 35 cities in the country, there are 28 cities in inventory grew phenomenon appeared. Which Nanchang, Jinan and Ningbo three cities a greater increase in inventory, an increase of 68.6%, respectively, 63.8% and 56.8%. These three cities in April new supply deal stronger than, the stocks upward trend is also obvious.

"The common feature of these cities are: inventory digestion period exceeding one year the city; sharp drop in real estate transactions in the first quarter of the city; purchase to sales ratio is too high city; land premium is too low in the first quarter of the city; has substantial real estate prices city; net population outflow from the city; There are two more new area of ​​the city, "said Zhang Dawei.

"From the level of development in the local property market and weight watching, a second-tier cities for a relatively low degree of reliance on the real estate industry, and for the four-tier cities, the property market downturn will lead to smoother city funding cycle." Yan Yuejin said.

Data analysis with policy advice, said the purchase of the city from outside the first-tier cities, the dependence on land finance more than 50% of total 31 cities, which suggests that most capital cities, and some four-tier cities are still the land of financial dependence relatively high. Macroeconomic fundamentals, especially not good for the city in terms of its financial dependence on the land more prominent, such as city, Zhejiang Province, Hangzhou, Ningbo, Wenzhou and other.

"Four-tier cities, because of lack of local labor, slow import foreign population, the market demand is difficult to support because of the large number of new town development and soaring stocks." Yan Yuejin said.

In stock reaches a certain extent, the price seems to be an unexpected choice.

Professor at the Central University of Finance and Economics temperature come into view, although the real estate tax revenue, but there is no point to save the city, ability to tier cities has slowed down compared to before, but a short time, if you continue to seven January is still not turning, the government should be considered bailout.

Right now, housing prices destocking measures are becoming increasingly visible.


Sino-Ocean Land, president of Li believes that 2014 is more important for the ocean is to increase turnover. Accelerate the pace of sales, especially to accelerate the speed of inventory, which is to improve the turnover rate of the main path. Sales over the ocean to obtain a license for a year called slow-moving inventory, three months or more is called the continued sales, less than three months is called new.

After taking a series of measures over the current three-year offshore stocks is almost zero, more than two years of strong clean out, reducing the company's poor sales pressure.

In this context, housing prices on the four-tier cities are cautious to enter.

"The future of the city to enter requires three conditions: First, many people choose the city; Second, the urban economy is sustainable development, or that it's innate natural environment to attract new population movements; three cities ever Planning stability. "Li said.

Housing Bubble or Bust for Local Governments

A week ago I posted Housing Market Rescues Begin, Subsidies for Buyers, Lotteries Whip Up Speculative Fever. The thrust of the post was about land finance, as explained in this article:

Since 2012, the ratio of land use right transfer fees to local public budgets has remained above 0.4. In the past two years, as the land transfer fees have risen, the ratio to local general public budget income has also increased. 2017, 2018 The ratio rose to 0.57, 0.66, more than half of the local general public budget income.

I wrote:

Way back in 2012, the central government realized land finance was an issue. Around 2014, the government started talking seriously about the issue, along with replacement revenue. There was serious talk of launching a real estate tax. Municipal bond markets were pushed because cities had been relying on land sales, and financing borrowings with revenue from land sales. As debt levels increased, the cities became more and more reliant on a revenue stream that is at the mercy of the cyclical credit market.

In response to financial pressure, local governments have already begun loosening real estate policy. The local governments say the easing is rational. The central government says policy can differentiate based on local conditions. It also repeats the mantra that "houses are for living in, not for speculating on," but the reality is that local governments cannot afford a rational housing market in a nation with a falling population. The "war for talent" is already morphing into a war for population as cities cannibalize each others' under-50 population. Smaller cities need speculative activity to drive prices demand (prices and demand are positively correlated in speculative markets). Absent demand, they cannot invest for growth, absent growth the real estate market slows even more. The persistent deflationary pressure hitting rural areas all over the developed world has come to China.

How bad are local government finances? Caixin has an in-depth report on a couple of localities that includes some shocking aggregate figures for the country as a whole: Souring Debt in China’s ‘Lemon Capital’ Warns of Looming Local Fiscal Crisis

Many believe that Anyue and Yanjiang are only the tip of the iceberg, and that China’s other small local governments may be sitting on a ticking time bomb of unsustainable debt. At the end of February, local government outstanding debt on the books had reached 19.1 trillion yuan ($2.8 trillion), equal to more than a fifth of China’s gross domestic product last year, data from the Finance Ministry showed. The number could be much higher when off-the-books debt is added.

The debt level must be understood in the context of reliance on land finance. Local governments finance investment and GDP growth with land finance. It's not simply that they can't pay off debt, they also can't make investments needed to hit GDP targets.

Anyue and Yanjiang made their moves in response to deteriorating debt situations. In 2017, both of their annual interest payments on special-purpose government bonds as a percentage of expenditures of their government-managed funds exceeded 10%, a red line that triggers a fiscal restructuring under the 2016 policy.

Local governments’ special-purpose bonds, designated to fund public works projects including infrastructure, are generally repaid with returns from specific projects that receive the investment. Those projects are usually incorporated into local government-managed funds. The lion’s share of revenue for those local funds comes from land sales, with last year’s national average percentage at 91%, data from the Finance Ministry showed.

It's 2014 all over again, but with much higher debt levels and greater reliance on land finance. An optimist will say China can stimulate the real economy without creating more malinvestment, greater reliance on land finance and real estate. The realist will say, every round of stimulus has done just that. Barring a surprise policy move, it's once again housing bubble or bust for many local governments.

How Much Corruption in Land Sales? China Set to Crack Open ￥15 Trillion Can of Worms

China is conducting a strict of ￥15 trillion worth of land sales as part of the anti-corruption sweep.

China launches large land-sale audit to fight corruption

Led by the State Council, the move will involve audits of land income, land requisitions, reserves and supplies between 2008 and 2013, changes in farmland volume between 2009 and 2013, the protection of cultivated land, and sea use planning.

The audit report is expected to be released in October.

Land sales have become a vital source of income for local governments. In 2013, land revenue totaled 3.91 trillion yuan ($640 billion), according to the Ministry of Finance. The figure was 2.67 trillion yuan in 2012.

The Chinese articles are focusing on the potential corruption by officials, who are probably not sleeping these days. Some good snips from the Google Translation below:

he said such as land transfer states have reached a certain amount in some places the book, in fact, but most of these inside secretly transferred land revenue losses of state-owned enterprises, state-owned enterprises after years of surplus revenue to finance partially paid, Other balances to switch to channel spending.

......"Auction fraud is also very easy, the government had negotiated with companies in advance, and then find a few to accompany the subject of the auction posturing, of which there is money deals."

Some local governments have been paper over losses at state-owned companies with misdirected land sale revenue. No doubt those SOEs borrowed money based on their solid financial status. The SOEs paid back the money if they had some left over or earned a profit at year end. The latter is the type of corruption that will take down officials all over China. This audit is going to open up a major can of worms.

审计署严审15万亿土地出让金 部分官员或失眠

Many senior officials sacked and real estate are inseparable, land areas hardest hit by corruption.

From mid-August, the National Audit Office launched the first national land finance large audit and hit land transfer payments, the area of ​​land acquisition, storage, supply, and up to 15 trillion yuan of land transfer will be strictly examine objects. Among them, the abuse of power and corruption in the land areas will also be disclosed in the audit report in two months.

"Now in other systems, the audit working group to 'under the table of accounts' have turned out, the estimated land audit will not easily put in the past." Close to the land department officials Li (pseudonym) to the "China Times" reporter, said Financial audit only check the "bottom accounts" to the real thing, if you can find out the true ins and outs of the audit, and then tracing them seriously, many local officials would be affected.

Earlier, in the central inspection teams visited the 21 provinces, 20 provinces found that the existence of the phenomenon of corruption in real estate, accounting for up to 95%, while the 19 provincial and ministerial level officials sacked after the central inspection teams stationed, including many senior officials sacked and Real Estate Industry inseparable, land areas hardest hit by corruption.

Inventory "under the table of accounts"?

"Auditing land transfer, many officials estimate a night to sleep." One person southern city in land systems Zhang Hua (pseudonym) told reporters bluntly, real estate has been a government official involved in most areas, especially land and planning department, hands directly in charge of the land and planning powers.

According to Li revealed that the central audit had been gradually working group of financial institutions, regulatory units "fishing expedition" type review. Regular review of the past is different, this higher level of business audit staff, more detailed grasp.

"The Working Group has maintained for many digital sensitivity, often require the unit to come up with a more detailed trial data, unlike the previous regular audits as 'walk form'." Li sighed, some organizations being audited group a check and then check , repeatedly being asked to come up with detailed data. Many organizations in part by the audit "under the table of accounts" gradually inventory.

Li also told reporters that in the previous audit work, finance, taxation and land resources, such as system audits often blind, in the regular review, "It's hard to ferret out a big problem."

In the past, the newspaper investigation found that hundreds of billions of land transfer has become a close watch on the local government's "fat", the local government is not only financially dependent on land transfer income the higher the degree of this income use it often "secretive."

Publicly available data show that in 2013, the local government land transfer revenue hit a record high, reaching 4.1 trillion yuan, an increase of about 45%.

"It's part of the revenue point of view it is difficult to use in public accounts, books submitted to higher authorities also hard to find." A prefecture-level city in Guangdong, a person audit system Chao (a pseudonym) noted that such accounts are usually audited department called "under the table in the account."

"No earmarking land transfer phenomenon is most rampant, the conventional definitely check out the book." Yangtze River Delta, a prefecture-level city, an official told the GAO review found that reflect conventional land transfer payments problems, he said such as land transfer states have reached a certain amount in some places the book, in fact, but most of these inside secretly transferred land revenue losses of state-owned enterprises, state-owned enterprises after years of surplus revenue to finance partially paid, Other balances to switch to channel spending.

He believes that the land transfer audit from earmarking node, you can follow it identified a number of problems.

Previously, the newspaper in the investigation of Guangzhou Marshal House "king" Vanke block was recovered found that the land was withdrawn after the government, the Guangzhou municipal government has publicly promised to withdraw the land will pay 700 million yuan "ransom "But after three years, this commitment has not yet materialized. And about the project and the funds spent on reconstruction planning official documents, was not clear that the information about the refund. In this regard, the outside world have questioned the land transfer "has not come out."

"This land where the Golden Flower in the relevant departments of the heart are a few, but came back again to raise the estimated not so easy." The Guangzhou Municipal Bureau of Finance at the time, an insider told reporters interviewed.

Previously, the Audit Commission respectively in 2007, 2009, 2011 parts of the land fund to do audit work. Local government violations, disguised relief land transfer, land units outstanding land transfer, land transfer part of the fund are not included in budget management and other issues often occur. However, a comprehensive review and rectification, pursue efforts are trapped in a "thunder, little rain," the embarrassment.

It is worth noting that this year's government work report, first proposed land transfer payments for farmland protection and to conduct a comprehensive audit, the Audit Commission audit of land and resources will also be included in the focus of the work.

According to media reports, the specific audit local (Audit) Tepai Ban led by the provinces (autonomous regions), a member of the audit team and the rest of the staff by Tepai Ban audit departments to deploy the composition of municipal government is the direct object of the audit, the audit mode for off-site Cross audit, working hours or as of the end of October.

These respondents government systems analysts, this audit is expected to far exceed the intensity of the storm the previous regular review.

In this regard, the local government began to prepare early, some not included in the pilot provinces, the first two months of work has been carried out self-correction. For example, the Guangdong provincial government issued a notice requiring all units to do nine self-correction work and ensure the completion of the rectification in July 15.

Huge space for rent

Land transfer review storm, not only touched the interests of local governments on the use of part of the land transfer, but also to prove safety officials in the land trade links hidden deep corruption.

This year, after the central inspection teams visited more than due to the real estate sector officials sacked violation of discipline problems in the land transfer process, there is a larger space secret operations, the widespread abuse of power.

Zhang Hua pointed out that many cities are old land reform program, just symbolically shall pay the small amount of land, developers get the project, often proposed to increase the floor area ratio, or changes require architectural planning, because the old higher development costs change, the government does have a reason to change, outside of the middle bartering involved would know.

"Shenzhen land scarcity, the current land use trends in the government is to improve the volumetric rate, an expansion of the use of space efficiency, so now change the volume rate is relatively common." Shenzhen appoint a District Planning and Land Authority, a source said.

However, involving planning and the volume rate of change announcement, the issue was never mentioned payment of a premium, how much volume rate increase to pay the premium to the outside world have no way of knowing.

"Auction fraud is also very easy, the government had negotiated with companies in advance, and then find a few to accompany the subject of the auction posturing, of which there is money deals." Housing prices in Hunan, a person in charge of a city, told reporters said previously careen many plots have been repeatedly downtown looks weaker developers, these developers actually have a government background.

In addition, the person in charge of housing prices above told reporters the government in order to raise the value of regional plots, will be traded on the surface of high land prices, by secret operations, will then sell land to developers agreed in advance, and then return the money part of the land .

The middle of a capital city of a marketing person in charge of housing prices in a housing enterprises previously was responsible for land development work, familiar with the land sale process.

"Each district has a land bank of responsible government UDIC, if you go to a good location Land City Investment Company, the mayor needs to sell finalized while the district is responsible to negotiate the land, or at least need to get through two personal relationship, That Mayor and Deputy Secretary in charge of land use planning. "Housing prices in the marketing of the person in charge, told reporters that the bureau is only the executive branch, in fact, the main decision-making authority is the competent leadership of the city's. His city, good land per year are finalized by the mayor himself.

The person in charge of marketing, said housing prices, especially when the land market hot, a lot of projects to sell all secret operations. "Quality land grab many people, we need six months to a year in advance to communicate with City investment company, will certainly require RBI relationships. Sold some land project early relationship between the families of government officials, the store changed hands again for some time."

"Certainly not a panacea to get dozens, at least a million, before cash and property to the majority, nearly two stare borne anti-corruption officials dare not accept cash, usually in other forms, such as sub-shares, after completing construction projects profit-sharing, brokered by the middle of acquaintances guarantee the payments and some other officials after retirement. "the person in charge of marketing, said housing prices.

In addition, the housing prices marketing official also revealed that in many "irregularities", the most difficult to change the nature of the land, you need a tough background, a commercial real estate leader, once a city of Hunan residential land will be changed to the success of commercial land, building the price of office and commercial properties than residential undoubtedly high.

Local Government Unable to Repay Developer for Land As Purchases Dry Up

The biggest risk in the Chinese economy is not the real estate market, it is the local government fueled local economy. China's GDP growth is led by infrastructure investment and much of that investment occurs at the local level. Funding is in part provided by land sales to developers. Developers buy the land because the infrastructure development will make the land valuable. When home prices were rising, there was no end to demand for land and local governments were flush with cash to invest in projects—but governments assumed the cash flow would consistently rise. They increased their investments, took on debt and today have higher operating expenses. Hangzhou had more than 60% of its annual revenue coming from land sales last year, highest in the nation, but many cities are at well over 40% of revenue (above 80% land finance reliance ratio reported in Chinese media). The risk is that falling land sales will dent tax revenue and lead to a rapid slowdown in investment, a rapid rebalancing away from the investment led model.

The first crack in local government finances may have occurred. In China, a developer can return land to the government and receive back their money, less a non-refundable deposit. According to the article below, in an unnamed eastern third-tier city, a developer has been told that he can return the land, but temporarily cannot receive any cash back.

Centaline said nationally, May land sales were the lowest in the past year. The price of land zoned for residential construction fell 39% in May and the land premium was only 16.5%, down from 37.2% in April. CRIC Research said that land purchases by 15 representative developers spent 65% less to buy land in May, yoy. Several major developers bought no land in May.

Local governments have furiously sold land in recent years. One example given in the article is a developer in Nanjing, he was told his 200,000 sqm commercial project would be the only project in this area. Now two years later, there are commercial projects all around him and the investment is basically dead.

楼市下行压力传导到土地市场 土地流拍频现

"We have to apply for a refund, but the Government has to say yes, you can retreat to, but no money back." Developer Li (pseudonym) recently quite depressed, as the company's real estate sales continued to slump, he tried to hand, a few acres of land has not been returned to the development of the local government.

Since April, Li and third tier cities in the eastern part of the estate has been basically no longer marketable.

"Our company's debt ratio is not high, not to the apocalyptic time, but the house no longer marketable, really uncomfortable." Li "First Financial ( microblogging ) Daily "reporters, said," Since I can not return the land, then stood before it. "

And Li, as more and more developers are losing interest in buying land.

"Late last year the hot land market phenomenon difficult to continue, each line has the cool urban land, and has begun to produce differentiated." Central Plains real estate chief analyst Zhang Dawei told reporters, poor sales of housing prices, tighter capital chain, Although the plot is still craving for first-tier cities, but land acquisition has become more cautious and rational.

Liupai frequent

Downward pressure on the land transfer to the property market.

Centaline Research Department statistics show: May tier cities land total turnover of 266.6271 million this past year, turnover is the lowest point.

Among them, only seven of residential land transactions, land turnover amounted to 7.68 billion, also created the lowest point in the past year. Floor residential plots average transaction price of 7592 yuan / square meter, compared with April's 12,363 yuan / square meter, the average transaction price decline. The average premium rate of 16.5%, down from 37.2% in April.

A national developer of Guangzhou designed to take charge of Miss Wu told the newspaper, although recently the Division examine some plots, but has basically not involved in the bidding. "There must be carefully indeed."

Data CRIC Research Center show that in May, 15 typical housing prices get to an area of ​​2.746 million square meters, down 66%, to get to the amount of 8.8 billion yuan, down 65%.

Among them, China Resources Land , Lake real estate , Greentown China , Shimao , Agile, offshore real estate and other leading enterprises have no land accounted for a full month.

In fact, the May local governments are pushing to accelerate the speed, but due to the current downturn in the overall market, developers get the will be greatly affected, unsold and the opening price situation but continues to expand.

Guangzhou, Shenyang, Chengdu, Kunming, Hangzhou, Nanjing, Foshan, Changsha and other cities were "spared."

Shenyang last month launched a total of 18 land, eventually only eight transactions, and the remaining 10 land all unsold. As a comparison of May 2013, Shenyang launched seven land all transactions.

A developer of a number of projects in Shenyang have told this reporter: "Shenyang few years ago to sell a lot of land, the current local property market has an oversupply, coupled with the increased population and import less monetary tightening, the property market, both cities downturn. "

"At present, people are concerned about how to melt inventory, how can the mind to buy land." Li "First Financial Daily" reporters, said, "Now the situation is still far from clear, selling properties to buy land than emergency."

China Easy Home CEO Dingzu Yu believes that housing prices basically bearish on the current land market, land market into winter is a foregone conclusion.

President of Real Estate Economic Research Institute of the rich Long Bin told the "First Financial Daily", then the land market will be colder. In case the market does not accept the local government's land supply will slow down the rhythm.

April 28, Guangzhou launched a rubber in the Old Town Village, Haizhu District, eastern residential plots, as a rare old city of Guangzhou residential land has caused widespread concern, but the Guangzhou Land and Housing Bureau recently announced that the plot suddenly aborted transfer.

Land revenue decline

At the same strategy consulting, research director Zhang Hongwei seems that since 2014, the real estate market supply and demand into the downturn, the land premium is also showing a declining trend growth, the situation in some cities even Liupai land, which will directly affect the compensation to local debt capacity, and may even lead to periodic land financial crisis.

Zhang Hongwei, said the reporter, the pattern in the current tax system, local land revenue needs to be turned over to the central part of the remaining land revenue belongs to local government funds, in addition to essential uses, disposable income of the local government authority to sell the remaining larger. From this perspective, land finance triggered a push to sell land boom around.

Central Group founder, director Shih Wing Ching, told reporters that most of the local government debt hopes in the land, once the real estate prices, "by the new-old" no longer work. "The new debt financing than so much money, old debts will be a problem."

A real estate private equity fund managers and reporters shared a real case: He's a friend in Nanjing took a 200,000 square meters of commercial projects, is now basically "dead" in there. In the time he took to the local government told him that they planned this area only a commercial project. Results After two years, the surrounding commercial real estate "everywhere."

The above project developers in Shenyang have said: "Now a lot of ideas on local government borrowing aspect is the 'tube borrow matter also,' the land of poor sales in the background, some of the previous years, the local government vigorously infrastructure and even the payment of interest have difficulty. "

Double dilemma facing land revenue decline and high local debt, some local governments have been unable to calm.

A number of cities including Nanning, Wuhu, Xuancheng, Tongling, Wuxi, Ningbo, including the launch of a direct or indirect "bailout" policy.

Zhang Zhiwei, chief China economist at Nomura Securities, told the media that some local government policy of propping up the market, the greater the likelihood the central acquiescence, because the local government financial pressure is obvious. In the past, the central government's relatively loose monetary policy, local governments can find the money through other means, but now the local government a stronger dependence on the land.

With policy advice recently released "2013 45 finance the purchase of urban land dependence," The report shows that the higher the degree of financial dependence of land (over 80%) of 13 cities, followed by Hangzhou, Foshan, Nanjing, Changsha, Sanya, Hefei , Fuzhou, Kunming, Jinan, Xuzhou, Ningbo, Wenzhou, Chengdu. Among them, Hangzhou, Foshan, Nanjing, Changsha four cities of more than 100% to 156.4% in Hangzhou ranked first.

Or continue to sell off for

According to our reporter combing, facing the property, city both cold reality of local government there is a clear difference in the push to strategy.

Land Hangzhou, Shanghai and other cities almost "default"; risk Chengdu, Shenyang and other cities are still risking unsold strong push to; while Changzhou, Lianyungang city is represented by a sharp decline in the total amount for the land.

A senior industry believes that the government "reluctant sellers" of land, gambling is the length of time warming fiscal reserves and the market in which the key is not to rely on government land revenue in the short term can operate normally. Prior to Hangzhou, Shanghai abundant revenue from land sales, finance some reserves, the government dare to take a risk the market gets warmer, it is normal.

Zhang Hongwei said that this year the Ministry of Land suspend released national housing land supply plan, announced by the local self-change, which would increase local government initiative in the land supply. Especially on land supply and rhythm, the local government may for the program by reducing the slowdown in land rhythm, reduce market barriers and other measures to prevent land unsold, thereby reversing land market impasse, get more land premium premium income.