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Reliance on land sales 'must be reformed'

By Lan Lan (China Daily)

09:31, January 07, 2013

Local governments too dependent on this revenue, says top economist

The new leadership is facing an increasing clamor for reforms and one of its priorities should be to reduce the reliance of local governments on land sale revenues, said a leading economist.

Resolving this issue is important for further urbanization, a major objective, said Hua Sheng, who was on a key research body under the Chinese Academy of Social Sciences in the early years of reform in the 1980s.

Local governments should depend on tax revenue for expenditure, Hua said in an interview with China Daily.

Only then can local governments follow the central government's line that the purpose of urbanization is to enable migrant workers and their families to settle down in cities where they work, rather than making money through more land auctions.

"Expectations of more reforms are running very high after the leadership transition," Hua noted. "This will be a crucial year, a time to address major issues and set the tone for the nation's progress over the next decade."

Income from land sales hit 2.9 trillion yuan ($467 billion) in 2011.

Revenue slumped to 2.35 trillion yuan in the first 11 months of 2012, thanks to the tightening regulatory measures on real estate.

However, figures from the Ministry of Finance revealed that the costs of land acquisition - including compensation for demolition and resettlement for the people involved (mainly farmers) - also rose to 1.69 trillion yuan to December. This accounted for 72 percent of land sale revenues.

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