As the "dividends" of land finance gradually fade, how to strengthen urban fiscal resilience and solve funding challenges in public service spending and urban renewal has become a core issue that all Chinese cities must face. Professor He Yang, adjunct researcher at the Center for Urban Development and Land Policy at Peking University-Lincoln Institute, led a multinational team in research results titled "Make or Break: Land Public Finance and The Fiscal Resilience of Chinese Cities," which was recently published as a working paper on the Lincoln Institute's official website.
The project team includes Associate Professor Wang Qian from San Francisco State University, Xu Yan, a PhD student from City University of Hong Kong, and Hou Xianchen, a PhD student at Georgia State University. The project systematically reviews the evolution of land finance in China, quantitatively analyzes its deep relationship with urban fiscal resilience, and, through typical cases and international experience, explores the path of urban development in the post-land finance era.
The study constructed urban fiscal resilience evaluation indicators from three dimensions: emergency response capability, restoration and recovery capacity, and long-term growth capacity. Combined with data analysis, it was found that under external shocks, the shortcomings in urban fiscal resilience became prominent. At the same time, dependence on land finance has a significant impact on urban fiscal resilience. Grouping by dependence on land finance revealed significant differences in fiscal resilience among cities: the high-dependence group saw a continuous rise in fiscal deficits after 2021, reflecting the long-term risks of relying solely on land finance; The fiscal resilience of the moderately dependent group remained generally stable, demonstrating stronger risk resistance; Some cities in the low-dependency group are not due to diversified incomes, but because the land market is relatively weak, and the fiscal resilience index continues to decline.
The project conducted research on several cities in China and reviewed advanced experiences in building international urban fiscal resilience, such as innovative financial instruments like Urban Capacity Development Potential Bonds (CEPACs). The research project proposes that, in the long run, to reduce local dependence on land finance and systematically enhance urban fiscal resilience, multidimensional coordinated efforts are needed. In the short term, moderately delegate local tax management authority and innovate sustainable land financing tools; In the medium to long term, relying on industrial upgrading and technological innovation to cultivate the city's endogenous growth momentum.
During the research process, the Peking University-Lincoln Institute received strong support in data acquisition and case studies. Director Liu Zhi and Researcher Liu Wei from the Urban Development and Land Policy Research Center at Peking University-Lincoln Institute, and Associate Professor Huang Zhiji from the School of Government Management at Central University of Finance and Economics participated in the discussion. Lu Zhiyu and You Yang from Central University of Finance and Economics contributed to the data organization and analysis of the project.
Lincoln Research Institute work paper download link:
https://www.lincolninst.edu/publications/make-or-break-land-public-finance-fiscal-resilience-chinese-cities/
Report Table of Contents
1.Research background and literature foundation
1.1 Research Background
1.2 Literature Review
2.Data sources and research methods
2.1 Fiscal Resilience Measurement
2.2 Data Explanation
3.Urban Land Transfer Revenue and Fiscal Resilience in China: Data Analysis
3.1 Construction of the Fiscal Resilience Index
3.2 Fiscal Resilience Characteristics under Heterogeneity of Land Fiscal Dependence
4.Case Study
4.1 Case Study of Hangzhou
4.2 Shenzhen Case
5.International experience lessons from the post-urbanization period
5.1 Practices for capturing land value value gains
5.2 Practice of Local Fiscal Resilience
6.Research and Outlook
6.1 Directions for the New Round of Fiscal and Tax Reform
6.2 Future Development of Urban Finance in China
