Chief Economist and Dean of the Research Institute: Luo ZhihengSenior Macro Analyst: Fang KunSummary:
In the 90s, the real estate market reform and the rapid urbanization process generated a large amount of housing demand, driving the rapid development of the real estate market, and the income from real estate-related taxes and land transfers continued to increase rapidly. After more than 20 years of development, "land finance" has become an important part of local fiscal revenue.
However, in recent years, with the reversal of the real estate supply and demand situation, the downturn in the commercial housing market has continued to impact the land market, superimposed on the lack of confidence in residents' purchase of houses, the deviation of cash flow of real estate enterprises, and the low willingness of private enterprises to acquire land, which has directly affected the local land transfer income and further exacerbated the local financial tension. In 2023, the national land transfer income will be 5,799.6 billion yuan, a year-on-year decrease of 132%, declining for two consecutive years, impacting the available local financial resources and arousing market concern. This paper sorts out the characteristics of the changes in the ranking of land transfer income by province from 1998 to 2023, and further examines where land finance will go in the future. (Please refer to the previous report "Clarifying Five Cognitive Misunderstandings of Land Finance" and "Where is Land Finance Going?")"The tax sharing system is not the reason for land finance, but the performance appraisal is", "What is equity finance?".Can it take over land finance?》）
In terms of revenue scale, the top 10 provinces in terms of land transfer income in 2023 are: Jiangsu (948.2 billion yuan), Zhejiang (647 billion yuan), Shandong (415.6 billion yuan), Sichuan (395.2 billion yuan), Guangdong (381.8 billion yuan), Shanghai (319.7 billion yuan), Hubei (230.7 billion yuan), Hunan (228.3 billion yuan), Anhui (208.5 billion yuan), and Beijing (194.7 billion yuan). From the perspective of income growth, among the 28 provinces that have published data, 22 provinces will fall into negative growth in land transfer income in 2023. The downward pressure on the land market in the southeast coastal provinces increased, and Fujian (-230%), Zhejiang (-22.).4%), Guangdong (-18.).2%), Shanghai (-159%), Jiangsu (-113%) The income from land transfer decreased significantly year-on-year. The total land transfer income of 10 provinces and cities in the eastern region in 2023 will decrease by 15 year-on-year4%, but its total amount reached 3,383.1 billion yuan, still accounting for 58 percent of the country's land transfer income3%, the pattern of land transfer income concentrated in the eastern region has not changed.
Risk Warning:The real estate downturn dragged down land sales income; The 2023 land transfer income data of some provinces has not been disclosed, which may have a certain impact on the ranking; There is a difference between the statistical caliber of land and resources yearbook data and that of the financial department.
Body
1. Characteristics of changes in the ranking of land transfer income by province from 1998 to 2023
With the rapid development of the real estate market, China's land transfer income has risen rapidly. After more than 20 years of development, "land finance" has become an important part of local fiscal revenue. In 2009, the scale of land transfer income was 14 trillion, equivalent to 41%, reaching 87 trillion yuan, equivalent to 76%, a significant increase compared to 2009. Since 2022, land transfer income has declined for two consecutive years, but in 2023, the national land transfer income will still be 58 trillion yuan, equivalent to 53%。From a broader perspective, "land finance" also includes the transfer of land use rights, taxes related to the real estate industry and land financing, etc., which is an important part of local fiscal revenue. This paper is limited by the availability of data, mainly the changes in land transfer income by province from 1998 to 2023.
The relationship between economy and finance is one and the same, and provinces with a higher level of economic development tend to have a higher scale of land finance. Most provinces in the eastern region lead the country in terms of land transfer income. The eastern coastal provinces and cities have a high level of economic development, a continuous inflow of population, a high level of real estate industry, a relatively active land market, and strong demand. Between 1998 and 2005, Jiangsu Province jumped from fourth to first place in land transfer income, and remained in first place for most of the following years. Since 1998, the scale of land transfer income in Zhejiang Province has always ranked among the top in the country, driven by the Internet economy, Zhejiang's development has added new impetus and rapid population inflow, and since 2016, the scale of land transfer income in Zhejiang has increased significantly and ranked among the top two in the country. Based on the advantages of a large industrial province, Shandong Province has vigorously promoted land investment, and its land transfer income has remained in the top four in the country since 2005, and in 2022, Shandong will start the conversion of new and old kinetic energy, and in 2023, the land transfer income will rank third in the country for two consecutive years. As the vanguard of China's economic development, Guangdong Province's land transfer income in 1999 can reach 27% of the national scale, ranking first in the country, and after being surpassed by Jiangsu and Zhejiang in 2000, the land transfer income has fallen all the way to the ninth in 2004, and the top four from 2013 to 2021, and since 2022, the land market in the first-tier cities of Guangzhou and Shenzhen has been seriously dragged down by real estate, and the land transfer income of Guangdong will be ranked fifth in 2023. Beijing and Shanghai are subject to the constraints of land resources, with high premiums and great influence of policy regulation, and there are certain fluctuations in the ranking of land transfer income over the years.
Thanks to the strategy of "the rise of the central region" and the promotion of the construction of urban agglomerations, the economic growth of the central provinces is strong, the process of industrialization and urbanization is accelerating, and the rapid development of infrastructure and real estate has an urgent demand for land resources. Since the implementation of the strategy of promoting the rise of the central region in 2006, Anhui, Hubei, Hunan, Jiangxi and other central provinces have taken the initiative to undertake the transfer of manufacturing industry, the development of real estate and urban construction have accelerated, and the income from land transfer has grown rapidly, especially the land transfer income in Anhui has ranked among the top ten in the country in the past 20 years. In 2015, the construction of urban agglomerations in the middle reaches of the Yangtze River was launched, and Hubei's land transfer income has basically ranked among the top 10 in the country since 2015, Hunan's land transfer income ranking has risen from 15th to 6th in 2021, and Jiangxi's land transfer income has basically been between 10th and 15th in the past ten years. In 2016, the planning of the Central Plains urban agglomeration was approved, Henan's real estate development and investment boom, and Henan's land transfer income soared to the 6th in the country, but since 2019, Henan's economic development has experienced many rounds of major impacts, industrial structure adjustment and negative population growth, the real estate market continues to be sluggish, and the land transfer income ranking has slipped from the 6th in the country to the 16th in 2023. In 2023, Hubei, Hunan, and Anhui will rank seventh to ninth respectively in terms of land transfer revenue.
There are considerable differences in land transfer income among provinces in the western region. Sichuan Province, a major economic province in the western region, has a large scale of land transfer income, ranking among the top 10 in the country since 2000, and since 2016, with the Chengdu-Chongqing City ** Exhibition leading the new urbanization in the west, Sichuan's land income ranking has jumped all the way, ranking fourth in the country in 2023. In recent years, Guizhou and Guangxi provinces have accelerated the layout of new urbanization and infrastructure construction, which has a certain driving effect on the rhythm of land supply. The fiscal revenue of these three provinces and autonomous regions is relatively dependent on the income from land transfer. Most of the other western provinces are constrained by their level of economic development, and their land markets are not active enough and they rely more on transfer payments than on land transfer income. Due to factors such as sparse population, low urbanization rate, and limited economic volume, Qinghai's land transfer income has long been in the bottom two places in the country.
Liaoning took the lead in promoting shantytown reform from 2008 to 2012 to form the "Liaoning model", and the land transfer income ranked high during this period. However, after the reform and opening up, due to the heavy task of transformation and upgrading of the traditional economic structure, the lack of market vitality and the serious population loss, the economic growth rate of the Northeast region has gradually widened the gap with the eastern coastal provinces, and the land transfer income has ranked lower in recent years. Since 1998, Heilongjiang and Jilin have similar land transfer income, ranking low, mainly relying on the two core cities of Harbin and Changchun, and the financial dependence on land transfer income is not high. As one of the industrial bases in Northeast China, Liaoning relied on the twin cities of Shenyang and Dalian to drive the economy in the face of the challenges of resource depletion and institutional transformation, and the income from land transfer ranked among the top 10 from 1998 to 2007. Since 2008, Liaoning Province has vigorously carried out the "climax period" of shantytown transformation, and the implementation of large-scale shantytown reform under the "Liaoning model" has increased the economic development potential and the value of land use rights, while the liabilities of shantytown reform projects are mainly repaid by land transfer income. From 2010 to 2012, Liaoning's land transfer income ranked among the top four in the country, and the fiscal revenue was highly dependent on land transfer income. After 2013, under the "new normal", Liaoning Province's economic growth rate declined, the land market shrank, and the ranking of land transfer income fell from the top 10 all the way to about 20.
The downturn in the commercial housing market continues to impact the land market, superimposed on the lack of confidence in residents' purchase of houses, the deviation of cash flow of real estate enterprises, and the low willingness of private enterprises to acquire land, which directly affects the land transfer income of local governments. In terms of scale, among the provinces that have published data, the top 10 provinces in terms of land transfer income in 2023 are: Jiangsu (948.2 billion yuan), Zhejiang (647 billion yuan), Shandong (415.6 billion yuan), Sichuan (395.2 billion yuan), Guangdong (381.8 billion yuan), Shanghai (319.7 billion yuan), Hubei (230.7 billion yuan), Hunan (228.3 billion yuan), Anhui (208.5 billion yuan), and Beijing (194.7 billion yuan). From the top 10 changes, Sichuan's ranking rose to fourth, Guangdong's ranking fell to fifth, Hubei's ranking rose from 10th to 7th, Beijing's ranking rose 1 place to return to the top 10, and Fujian's ranking fell 3 places out of the top 10.
From the perspective of growth rate, the income from land transfer in most provinces in the country has grown negatively, and the eastern provinces have decreased by more than 15% year-on-year. Among the 28 provinces that have released data, 22 provinces will experience negative growth in land transfer income in 2023, and 9 provinces will have a year-on-year decline of more than 20%. The relatively positive signal is that in 2023, the year-on-year growth rate of land transfer income in the country will be (-13.).2%) compared to the same period in 2022 (-23.).3%), and the year-on-year decline in land transfer income in 20 provinces has narrowed to varying degrees compared with 2022. However, the downside is that the downward pressure on land revenue in the central and eastern economic provinces is prominent. Six of the 10 provinces with the largest decline in land sales revenue in 2023 are in the central and eastern regions. The total land transfer income of the 10 provinces and cities in the eastern region in 2023 will be 3,383.1 billion yuan, a year-on-year increase of -154%, the decline is greater than the overall national level. In 2023, the land market in the southeast coastal economic provinces will be weak, and Fujian (-230%), Zhejiang (-22.).4%), Guangdong (-18.).2%), Shanghai (-159%), Jiangsu (-113%) The year-on-year decline in land transfer income was larger, and the year-on-year decline in Fujian, Zhejiang, and Shanghai increased by 1 percent compared with 20220, 28, 235 percentage points. The real estate and land markets in the central provinces performed poorly, and in 2023, Anhui (-261%), Hunan (-22.).7%), Henan (-16.).0%) The year-on-year decline in land transfer income was higher than the national level, and the year-on-year decline in Anhui and Hunan increased by 13 compared with 20222, 46 percentage points. The income from land transfer has shrunk sharply, which has directly led to the negative growth of local ** income and the decline of local available financial resources.
From the perspective of key provinces, the downward pressure on the land market in the southwest provinces has eased, and the situation in the northwest provinces is still grim. Among the provinces with positive growth, Jilin and Tianjin's land revenue will increase significantly year-on-year in 2023. 8%, the income from land transfer has picked up, but it is mainly affected by the low base, and the average growth rate in the two years from 2022 to 2023 is only -297%、-23.3%。Heilongjiang's 2023 land transfer income decreased by 15 percent year-on-year3%, a decrease of 49 compared with 20221 percentage point, but the two-year average growth rate is only -451%。The land market in southwest provinces is running at a low level, and the overall situation has picked up. Chongqing's land transfer income increased by 85%, while Guizhou and Yunnan are basically flat, both of which are significantly better than in 2022. It is worth noting that Chongqing's land transfer income in the first 11 months of 2023 fell by 100%, and the annual land transfer income growth rate of 8The difference of 5% is obvious, or it may be related to factors such as the payment of land price, the allocation of land income and other income, and the centralized storage of other income at the end of the year. Guangxi's real estate investment and sales remain sluggish, with land transfer revenue falling by 25% year-on-year in 20233%, with a two-year average decrease of 33%. The land market in the northwestern provinces is still bottoming out. The income from land transfer in Qinghai, Ningxia and Gansu will continue to decline in 2023 on the basis of the sharp decline in the previous year. 3%, the downward pressure has not yet eased.
2. The past and future of China's local "land finance".
On the whole, "land finance" in the course of China's economic development has merits, advantages and disadvantages, which has promoted the process of urbanization, supplemented local financial resources, and formed a large number of infrastructure construction, but also indirectly pushed up housing prices, with land mortgages, capital injection into urban investment companies, indirectly promoted the financing platform and debt. The realization of land finance depends on the reform of real estate marketization and public ownership of land, and the reform of the tax-sharing system is only one of the contributing factors. The performance appraisal mechanism is the key to the problem, and the incentive mechanism determines the behavior, which has triggered a chain reaction of local hidden debts and land financeIf there is no tax-sharing system, as long as there is a GDP assessment, there will still be a hunger and shortage of funds.
First, the system of public ownership of land and the system of paid use are the basis of "land finance." After the founding of the People's Republic of China, China's land system was public ownership. Before the reform and opening up, land use was allocated without compensation. The 1988 amendment to the Constitution clarified that "the right to use land may be transferred in accordance with the provisions of the law". Subsequently, the content of the Land Management Law was also adjusted accordingly. After years of exploration and experimentation, in 1998, the revised Regulations for the Implementation of the Land Management Law formally clarified the content of the system of paid use of state-owned land. In 2004, the system of bidding, auctioning, listing and transfer of commercial land was fully implemented, and the construction of the land use right market system was basically formed.
Second, the tax-sharing system does lead to a low proportion of local and a high proportion of expenditure in the primary distribution of fiscal revenue, but after the secondary distribution of transfer payments, the proportion of local governments has risen sharply, and it is necessary to achieve regional equilibrium by controlling certain financial resources and strengthening macroeconomic regulation and control. After the reform of the tax-sharing system in 1994, the comparison of the primary distribution of revenue and expenditure of local finance has changed fundamentally, and the proportion of revenue in the primary distribution of finance is greater than that of the local government, and the gap between revenue and expenditure in the primary distribution of local finance is solved by transfer payment. The reform of the tax-sharing system has changed the situation of financial difficulties under the fiscal contracting system, solved the problem of "two proportions (the proportion of fiscal revenue in GDP, and the proportion of fiscal revenue in national fiscal revenue)", and improved the ability of macroeconomic regulation and control, which is an important part of continuing to promote the reform of the fiscal and taxation system. However, in the early stage of the reform of the tax-sharing system, the rationality of the division of financial rights and powers between the local government and the local government was lacking, the local government was responsible for the heavy expenditure, and the local transfer payment system needed to be improved urgently, and even the situation of "running the department to make money" appeared. After the reform of the tax-sharing system, all the income from land transfer was transferred to the local government, which became the most powerful fiscal revenue of the local government.
Third, the realization of land finance depends on the reform of the real estate market, and the reform of the tax-sharing system is only one of the contributing factors. Before the "housing reform", China adopted a single welfare housing system. In 1988, Shenzhen promulgated the "Shenzhen Special Economic Zone Housing System Reform Plan", which took the lead in initiating the reform of the housing system in the country, proposing to "subsidize rent increases and encourage house purchases", thus starting the process of monetization of housing allocation. In 1998, the "Notice on Further Deepening the Reform of the Urban Housing System and Accelerating Housing Construction" was promulgated, and various policies were proposed, including raising wages and lowering interest rates to encourage consumption, improving the housing system, carrying out housing mortgage loans, liberalizing the secondary housing market, and supporting the development of housing enterprises.
Fourth, the reform of the land transfer revenue management system has promoted the further standardization of "land finance". Before 2006, the income from land transfer was first included in the management of extra-budgetary special accounts, and then the balance after deducting cost expenditures was paid into the local treasury and included in the local budget management. In 2006, the State Council and the Ministry of Finance issued supporting documents (Guo Ban Fa 2006 No. 100 and Cai Zong 2006 No. 68) to start the reform of the land transfer income management system. Since 2007, all land transfer income has been paid into the local treasury and included in the local budget, and the management of "two lines of revenue and expenditure" has been implemented, with special funds for special purposes. Since 2010, financial departments at all levels should report to the people's congress at the same level on revenue and expenditure, and the implementation of the land transfer revenue budget is subject to the supervision of the people's congress. In 2015, the new "Budget Law" officially incorporated the ** budget into the ** budget system, and the Ministry of Finance further regulated the budget management of land transfer revenue and expenditure (Cai Zong 2015 No. 83). In 2022, the natural resources department was originally responsible for the specific collection of land transfer income to the tax department, and the collection of land transfer income was further standardized.
Fifth, the performance appraisal mechanism is the key to the emergence of the "land finance" problem, and the incentive mechanism determines the behavior, triggering a chain reaction of local hidden debts and land finance; If there is no tax-sharing system, as long as there is a GDP assessment, there will still be a hunger and shortage of funds. The performance appraisal mechanism determines the local behavior to a large extent. China's long-term implementation of the GDP target assessment mechanism in the period of rapid economic growth is conducive to mobilizing the enthusiasm of local governments for economic development, but it has also brought a series of problems such as environmental damage and high debt. Even if there is no tax system, the GDP assessment will still lead to the local investment hunger and capital hunger, land finance can affect the local government at the same time to stimulate investment, fiscal revenue increase two aspects, more likely to be favored by the local government under the pressure of GDP target assessment.
Where will land finance go in the future? It is necessary to make a comprehensive judgment based on the national strategy, the transformation of the economic and industrial structure, and the trend of fiscal and taxation reform. As a product of the times, land finance will also undergo corresponding changes with the changes of the times, and common prosperity and high-quality development require that the era of real estate prosperity turn to the era of science and technology and manufacturing power, and the corresponding fiscal revenue and expenditure structure will change. The finite nature of land resources and the declining population growth rate will also gradually promote the land market from supply and demand, and the transformation of land finance is imperative. In the future, the downturn in economic growth will bring about a decline in the growth rate of fiscal revenue, the rigid pressure on expenditure will increase, and the implicit financing method will be gradually cleaned up, and the situation of local fiscal revenue and expenditure will become more tense. The transformation of land finance in the future can mainly start from the following aspects:
First, we will vigorously promote the transformation of the industrial structure, reshape the tax base and fiscal structure, and promote the transformation of China's economy from debt- and investment-driven to industrial science and technology as soon as possible. However, in the short term, it is still necessary to stabilize the real estate market, build a new model of real estate development, and avoid the continuous impact of the continued downturn in real estate on real estate. The transition to land finance does not mean the complete abandonment of land transfer income and real estate-related taxes, and the real estate market will continue to play an important role in the future, although its importance has decreased. It is necessary to take measures to ensure supply, promote demand and stabilize housing prices as soon as possible to stabilize the real estate market and promote mergers and acquisitions in the real estate industry; High-quality commercial housing will be launched in the core areas of first-tier cities as soon as possible; The restrictive measures will be lifted as soon as possible to give full play to the role of the market.
Second, stabilize the macro tax burden and free up strategic buffer space and time for land fiscal transformation. One, pay more attention to the accuracy and structure of tax and fee reduction, from the quantity and scale of tax and fee reduction to efficiency and effect tax and fee reduction, gradually standardize the basis for the introduction of tax and fee reduction, and gradually clean up the "patch" formed by phased tax and fee reduction, and form the stable and mature tax and fee reduction policy into law. SecondStrengthen policy coordination, and coordinate fiscal, financial, industrial and regional policies. It is necessary to look at finance from the perspective of national governance, abandon the theory of omnipotence of fiscal taxation, and reduce the comprehensive cost of enterprises rather than just the fiscal and tax burden, and there should be no situation where the fiscal and tax burden decreases and other costs rise to hedge the effect of tax reduction and fee reduction. Third, explore data finance, reform the tax system, and adapt to the development of tax sources in the era of digital economy. FourthHowever, due to the adjustment of taxes to promote common prosperity and high-quality development, the scope of consumption tax collection will be expanded to high-end service industries, and the resource tax and environmental protection tax rates will be increased.
Third, we need to optimize the structure of expenditures and improve the efficiency of expenditures. Persist in adjusting the structure with local pressure, use limited funds for high-quality development, give priority to supporting key areas and major projects such as promoting scientific and technological innovation, improving people's livelihood and welfare, and strengthening investment in infrastructure construction, strictly reduce general non-rigid expenditures, and further improve the level of performance management.
Fourth, clarify the relationship between the market and the market, improve the local performance appraisal mechanism, define the scale, and avoid the unlimited expansion of expenditure responsibilities.
Fifth, promote the reform of the fiscal and taxation system, collect some of the powers and expenditure responsibilities to the first and provincial levels, and reduce the expenditure pressure of local governments and cities and counties; The consumption tax collection link has been moved back and gradually transferred to the local government to enrich the local financial resources and make up for the impact of the decline in land transfer income on local financial resources.
(Please refer to the previous report "Clarifying Five Cognitive Misunderstandings of Land Finance" and "Where is Land Finance Going?")"The tax sharing system is not the reason for land finance, but the performance appraisal is", "What is equity finance?".Can it take over land finance?》）
Analyst: Luo Zhiheng, practice number: S0300520110001
Analyst: Fang Kun, practice number: S0300521050001