Research On The Risk Effect Of China's Land Financ

As a prominent phenomenon in China’s economic and social transition period,land finance has experienced an inverted “U” shaped process of occurrence,development,maturity and decline in more than 20 years.After entering the recession channel,the economic and social risks caused by land finance are constantly amplified.This paper takes the effect of economic and social risk caused by land finance as the research objective,and uses a variety of theoretical analysis and empirical testing methods to systematically study the transmission mechanism of land financial risk and the effect of economic,fiscal,financial and social risk.This paper tries to carry out research in five aspects as follows: The first is the theoretical analysis of the main mechanism and concrete performance of economic and social risks caused by land finance.The second is to make an empirical evaluation of urban land financial dependence and economic risk.The third makes quantitative evaluation on the relationship among urban land finance,budget soft constraints and local government debt risk.The fourth measures the relationship between land finance dependence degree and financial risk(leverage-ratio of non-financial enterprises).The fifth measures the causal relationship among land financial dependence,real estate prices and the income gap between urban and rural residents.First,this paper takes the actual operation mechanism of land finance as the entry point,analyzes the management and operation mechanism of land finance,which is the basis of the economic and social risks caused by land.The root cause of economic risk caused by land finance is not only the unsustainability of land finance,but also its effect of inhibiting scientific and technological innovation,inhibiting industrial upgrading,distorting industrial structure and hollowing out industrial structure,which leads to the whole social industrial structure upgrading blocked and the economy falls into the "trap" of low-quality development.The root cause of the financial risk caused by land finance is that land finance expands the scale of government debt with the support of financial resources.Policy-based investment and financing platform enterprises are the main supported bodies of soft budget constraints.The financial risk caused by land finance is mainly manifested by the increase of the leverage-ratio of nonfinancial enterprises.The institutional root is the financial system of land finance,and the local legal entity bank is the main credit support body.The core influence of land finance to cause social risk is to widen residents’ income distribution gap through distribution effect,among which the link of "making money from land" has the greatest impact on residents’ income distribution,and the main influence channels are the wealth effect,credit financing effect and restriction of labor flow effect of urban real estate.Second,this paper empirically examines the internal relationship and actual effect between land financial dependence and economic risk.The paper constructs an economic risk evaluation system of land fiscal dependence,uses the entropy method to calculate the comprehensive evaluation index of economic risk of land fiscal dependence of 285 cities at prefecture-level and above in China from2003 to 2017,and then uses the two-step SYS-GMM estimation method and the mediation effect model to conduct empirical analysis.The research results show that:(1)The developed cities have stronger financial payment ability,higher ability to resolve government debt risk,and lower degree of economic risk;Less developed cities or resource-based cities have weaker financial payment ability and higher economic risk.(2)Land financial dependence plays a significant role in promoting the formation and transmission of economic risks.Housing price,inflation and local government intervention are important factors driving up economic risks.Economic growth,financial development,opening to the outside world,improvement of human capital and upgrading of industrial structure will help to restrain the formation and expansion of economic risks.The improvement of economic development level can effectively resolve the boosting effect of local government land dependence on economic risks,and land financial dependence has an inverted U-shaped dynamic effect on economic risks.(3)The impact degree of land financial dependence on economic risk has regional heterogeneity and temporal difference.It has the greatest impact on the economic risk in the eastern region,and the impact on the northeast and central regions weakens successively.The degree of positive impact on economic risk from 2009 to 2017 is greater than that from 2003 to 2008.(4)By constructing the mediation effect model,it is found that the effect of technological innovation and the effect of industrial structure are two important transmission mechanisms of land financial dependence on economic risk.Third,this paper takes the local government debt risk(financial risk)as the research object,and empirically studies the internal relationship and actual effect among land finance,budget soft constraint and local government debt risk.Based on the data samples of 285 prefecture-level cities in China from 2006 to 2017,this paper empirically demonstrates the impact of land finance and budget soft constraint on government debt risk through SYS-GMM model test.The specific conclusions are as follows:(1)Land finance inhibits the rise of local government debt risk;(2)The indirect effect of soft6budget constraint as an intermediary is that the decrease of land fiscal income “harden”the soft budget constraint of local governments,and the excessive borrowing behavior of local governments will increase the debt risk.(3)The impact of land finance on local government debt risk in different regions is different.First-tier cities use land finance to invest in infrastructure construction impulse is relatively weak;the main source of extra-budgetary revenue of local governments in second-tier and lower-tier cities is land transfer revenue,changes in land finance are more likely to have an impact on local government debt risk.Fourth,this paper empirically examines the internal correlation,function channel and influence degree between land finance and debt level of non-financial enterprises(leverage-ratio)and urban individual debt.Non-financial listed companies in Shanghai and Shenzhen Stock Exchange from 2004 to 2018 as research samples,matching the land transfer data on the level of prefecture level,with panel regression model respectively,the two-stage regression model(2SLS),sample regression,mediation effect causal analysis model empirically the influence degree between land finance and enterprise leverage-ratio on the five hypotheses.The general conclusion is that land finance can not only interfere with the decision-making behavior of enterprises,but also have an important impact on the macro economy.From the perspective of enterprises:(1)the increase of local land fiscal dependence promotes the asset-liability ratio of enterprises.(2)Land finance of local governments has a significant positive effect on the Eastern region,the asset-liability ratio of enterprises in areas with high real estate investment intensity and state-owned enterprises,and has the most obvious effect on enterprises in the real estate industry.(3)Generally speaking,land finance weakens the debt paying ability of enterprises,and the increase of financing cost of enterprises is an important indirect channel for land finance to improve the leverage-ratio of enterprises.From the perspective of cities:(1)land finance of local governments accelerates inflation and boosts asset bubbles.(2)Land finance has obvious “Matthew effect” on inflation and asset bubble.Fifth,this paper examines the effective relationship between land finance,real estate price fluctuation and income distribution of urban and rural residents.Based on the panel data of 285 prefecture-level cities from 2004 to 2017,the SYS-GMM model is adopted to empirically test the land finance,real estate price fluctuation and urban-rural income gap from the overall and regional levels.The conclusion is that land finance is an important reason for the rapid widening of urban-rural income gap in China.The results show that:(1)No matter the perspective of land finance dependence or land transfer fee,the increase of land finance scale will promote the rise of housing price.The impact of land finance on real estate price is different in different regions,and it has a stronger promoting effect on housing price in eastern regions and third-tier cities and below.(2)On the whole,the rise of real estate price has a positive effect on urban-rural income gap,and compared with rural residents,land finance can improve the income of urban residents.Furthermore,the rise of real estate price can widen the urban-rural income gap in eastern China and third-tier cities and below.(3)Land finance raises the land price by making up the gap between fiscal revenue and expenditure,and then pushes up the housing price,finally enlarging the income gap between residents.(4)From the perspective of urban residents,land finance expands the income gap of urban residents by increasing housing prices.(5)From the perspective of residents’ happiness,land finance significantly reduces residents’ happiness.Finally,based on the above research,this paper puts forward suggestions on specific governance paths for the “weak link” in the current land financial governance system construction:(1)Governments should deepen the reform of the financial system and improve the transfer payment system.We will put in place institutional arrangements to ensure that government powers are commensurate with spending responsibilities,improve the local tax system,and increase the revenue capacity of local governments.(2)Governments should transform the functions of local governments and improve the evaluation mechanism for local officials.Governments should clarify the relationship between the government and the market.(3)The governance of financial risks caused by land finance should focus on the detailed implementation of the principle of “holding your own children”,effectively improve the business performance of city and county investment and financing platform enterprises after the transformation,orderly promote the pilot real estate tax,and explore the implementation of the annual land rent system.(4)The governance of financial risks in land finance should focus on building a financial risk prevention system with coordinated supervision lines and stratified levels,and adhere to the structural deleveraging policy.(5)To control the social risks of land finance,the focus should be on reducing the scope of land public interest expropriation,clearly defining the scope of “public interest”,and improve land expropriation compensation mechanism.Farmers should be had the right to participate in the distribution of land value-added income;Governments should establish a policy system for land expropriation and compensation that combines unified and differentiated policies.In the last part of this paper,the future research on land financial economic risk,fiscal risk,financial risk and social risk is prospective forecasted.