The Study On The Scale Of Finance Land, The Cause Analysis And The Hazard Risk Of Local Governments

Since the reform and opening-up, the annual economic growth rate in China has risento10%and the urbanization rate has soared from17.9%in1978to53.7%in2013.Compared with other economic entities which has the characteristics of rapid developmentand fast urbanization, the land plays the double role of “initiator” and “engine” in China:on one hand, local governments make money through land, namely, they develop the realestate market and upgrade urbanization by means of land of high costs as well as attractinvestment and speed up industrialization by means of land of low costs; on the other hand,they raise capital through land, namely, they set up organizations such as the Land ReserveCenter and make use of land mortgage to gain capital, in this way, a large amount ofcapital can be raised for infrastructure construction. This land finance mode of “seekingdevelopment through land” accommodates the demand of rapid development in pursuingstage. However, we are present at a time of crises and hidden dangers, which is a seriousrisk for the sustainable economic growth in the future, thus a great deal of attention shouldbe paid. This paper attempts to conduct research on the scale, cause, danger and risk ofland finance of local governments, and puts forward some measures and suggestionsconcerning land finance governance on the basis of the research result.In this paper, the land finance is composed of three parts: revenue from the transfer ofstate-owned land use right; revenue from land-related direct tax and indirect tax; landadministrative fees and the mortgage revenue from “raise capital through land”. Then theportion between the central government and local government is determined according tothe present financial and tax system, and a reasonable and comprehensive estimation isundertaken concerning the land finance scale of local governments from2003to2011.From2003to2011, the land finance scale expanded greatly and the local government hadfree control for land, from which considerable revenue had been made.In the second place, taking the competitive behaviors of local governments into account, this paper elaborates the institutional reasons of land finance from the perspectiveof binary land system, the limitation of tax distribution system reform and performanceappraisal system. In addition, this paper takes advantage of the empirical test of the gapbetween land finance, economic growth and financial revenue and expenditure, with theaim of verifying local governments’ high dependence on land finance. Next, it analyzesland confiscation disputes caused by land finance, real threat such as administrativecorruption and hidden risks like local government debts.At last, the paper summarizes the research conclusion, integrating the causes of landfinance and put forwards three suggestions: improve binary land system under publicownership, deepen financial and tax system reform and speed up the transformation ofgovernment functions, improve the check-up and evaluation system of developmentefforts.