top of page

What gave rise to China’s land finance?

Updated: Sep 25, 2023

After the 1994 tax system reform, there has been increasing debate about whether the shared tax system has led to an increase in local reliance on land finance. We share the paper by Yudan Cheng here for purely informational purposes, which may shed some light on this discussion.

Land finance, or tudi caizheng, is a phenomenon unique and critical to China’s urban development. Its genesis, however, has not been seriously addressed. This research questions the widely accepted conventional theory that the 1994 tax-sharing reform resulted in land finance. This theory assumes that the reform created a deficiency in local fiscal income; As an expediency, land finance was formulated when local governments sold land usufructs to increase revenue. This research demonstrates that local governments after the reform neither experienced a plunge in revenue nor owned the capacity to create the institutional framework that enables them to increase land revenue. Instead, the combination of rigorous fiscal management, monopoly of land supply, strict land use control, and market mechanism of conveyance, this paper argues, is the primary cause of land finance, and only national institution building can actualise these conditions. The efforts regarding institution building were driven by the party state’s idea of ‘land as resources and asset.’ Otherwise, localities would have to compete to loosen their regulation to attract investments and, therefore, capture much less land value increase, and land finance would be impossible.

Download PDF • 1.31MB


The content of the journal shared and discussed is for informational and discussion purposes only. It does not contain any information that has not already been made public by the publisher and author. If you would like this information to be removed from our repository and Database, please file a DMCA takedown notice via the terms of use page.

You might also like

Stay Informed on Economics and Technology with Zimark Insight 


Connect & Get to Know Our Cases and Practice

  • Twitter
  • LinkedIn