Waning demand at China’s urban land auctions amid a clampdown on lending by private developers risks putting pressure on regional finances, pushing local governments to search for other income sources to fund investments and support the economy, reports Reuters. The value of nationwide land sales abruptly fell 17.5% on year in August, the biggest slide since February 2020.
Land sales soared to a record RMB 8.4 trillion ($1.3 trillion) in 2020, the equivalent of Australia’s annual gross domestic product, bolstering fiscal budgets in a pandemic year.
But tighter regulations on borrowing by private developers since the summer of last year are increasingly eroding demand for land.
Further falls could force regional governments, who on average depend on land sales for a fifth of their revenue, to cut spending and investment. Many economists have already downgraded China’s 2021 GDP growth forecast, due to a cooling property market and contagion risks from indebted property giant China Evergrande.
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