Urbanization, Land Development and Land Financing: Evidence from Chinese Cities

Abstract

China’s urbanization is significant world-wide. This process is characterized by under-urbanization of population and fast urban land expansion. The driving forces behind this expansion and their rationale are not fully understood and empirically tested. This study fills this gap by analyzing panel data from 1999-2009 for all 286 prefecture-level cities in China. The findings reveal that land financing, using different measures, significantly contributed to land urbanization in China. Economically stronger cities with higher real estate investment more aggressively pushed for land urbanization. The true purpose of urbanization should be improving the living standard but not revenue generating. It is suggested that urbanization can serve its justified goals only if fiscal and political relations between central and local governments can be adjusted. As more data become available future studies are encouraged to further explore the subject by investigating additional factors and the latest trend of urbanization in China.

Keywords: Urbanization, regional development, government, reform, land financing, China

JEL Classification: H10, H11, H30, H70, H71, H80