Land Finance And Predicament Of Real Estate Industry In China

National housing price has raised for eight years until the current abnormal high level.Since 2008,the real estate market remains in the depression when the volume is descending rapidly and prices remain high. The current real estate market is in the state of the tripartite game: real estate developers insist on high prices.Local governments make "saving market" policy, so that real estate developers is confident in high prices. For most buyers, the prices are too high for more than their consuming capacity, they are eagerly waiting for prices to less than the price they can afford. For local governments, the real estate market is in depression means that the tax reduction, fiscal constraints.The housing prices descending also means that that land prices will descend in follow. To some extent , local governments and developers become stakeholders.High price and low volume will have important impact on the living standards and development of economy and society. For the lower-middle class, they should not enjoy the "basic living right" . Decreasing in demand of real estate investment has produced a chain reaction, and gradually effects related industries. Under the background of the global financial crisis, China's economy has encountered unprecedented difficulties.The plight of real estate related industries will be dragged down the national economy as a whole. In particular the construction industry can absorb about 40 million migrant workers.If the construction industry is in the depression, a large number of migrant workers will lose their jobs.In recent years, the central government made much policy of macro-control to stabilize housing prices, but still failed to effectively curb its rise. In this paper, after the Tax Sharing System Reform, local governments bind the asymmetry between income and expenditure.Through Analysing of "land finance"and behavior of local government,we can know that the incentive mechanism and "land finance" are the important reasons of the plight of the real estate market. The specific objectives is to restraining and incentiving behaviors of local governments through the rational making mechanism,reforming evaluation system of local officials, reforming taxation system, a reasonable division of income and expenditure.