Policy Briefing
14
JunThe unique land system is a driving force for China’s fast economic growth in the last three decades. Now our economy has entered the “New Normal” of economic slowdown. The demand of land, especially of commercial and residential land has declined, so has the land sale revenue. The mode of “seeking development with land” will bring four big risks. First, the debt for local governments due to land finance is colossal and still increasing rapidly. Second, the debt refunding of local governments highly depends on land sale revenue. Third, local governments use short-terms debts to serve long-term purposes, putting great pressure on debt refunding and bring risks to banking system. Fourth, the risks of non-standard operation in land mortgage and unqualified mortgage in local governments may erupt when the land market moves downwards. Therefore, we believe that the core to solve the current land risks is to grab the opportunity, promote the collective land in the suburb and urban villages to come into the market, so as to avert the mode of “seeking development with land” and activate local economy. To achieve these, first of all, local governments in the east of China could achieve industrial transition and upgrading through restructuring. Second, the east cities could also promote the collective land in the rural-urban fringe zone to enter the land market under the guidance of the government. Third, it is a good opportunity for middle-west provinces to make reforms as the land risks are higher there. Local governments should promote land reform proactively, revitalize stock industrial land structure, balance the supply of commercial and industrial land and get rid of the former mode in order to foster new growth points for national economy.