Land finance dependence and urban land marketization in China: The perspective of strategic choice of local governments on land transfer

Abstract

In the context of tax-sharing system, the issue of using profits from land transfers to cover local government deficits has attracted widespread attention. However, research on how local governments contingently choose different types of urban land transfer methods and the transfer volumes remains limited. This paper utilizes China’s transfer of land parcels data from 2007 to 2016 to calculate the marketization level of different types of urban land, and investigates the driving forces of urban land marketization in China, paying special attention to land finance dependence and urban land marketization. We find that urban land marketization level is increasing. Among different urban land types, residential land has the highest marketization level, while industrial land has seen the largest increase in marketization. The results of a spatial lag model also show that when local governments increase the level of land marketization, governments in neighboring regions react correspondingly. Judging from the status quo of economic development in most cities, local governments usually tackle financial deficits by vigorously promoting urban land marketization, but they tend to prioritize residential and commercial land transfers for their own interests given the degree of land finance dependence. This study broadens our understanding of the heterogeneous nature of land marketization and the role of local government behavior in the urban land market in China.