China’s property market is a cornerstone of its economy, and its recent downturn is often blamed for eviscerating local government finances, sowing the seeds for even greater challenges.
But China’s government has shrugged off concerns about the plunge in land sales. What gives? A deeper look at the issue offers insights into the Chinese financial system, and explains why land prices—despite the downturn—have largely held up.
If you look at land sales, Chinese real estate is in dire shape. As a result, there was a two trillion yuan ($290 billion) decline in income from land sales last year. And that drop continued into the first two months of 2023. As Alicia Garcia Herrero, chief Asia Pacific economist at Natixis, puts it: Land sales are “one of the most important components of China’s local government revenue.”
Source : Understanding China’s Resilient Real Estate Prices: An Analysis