Macroeconomic Cycle And Sustainability Of Land Development Model

In 1994,China began to implement the tax-sharing system of financial management,to some extent,this system solved the problems of centralization to central government and decentralization to local governments.But this reform expanded local government's governance,and increased local fiscal expenditure.Along with the main tax of consumption tax and part of the small taxes have been handed over to the central government,local government's financial revenues through tax is reducing,which bring great pressure to local finance.In 1998,China implements the land administration law.This law enables the local governments have the power to sell land,at the same time,the land grant fee don't have to turn over to the central,so local governments can get extra-budgetary revenue by selling land in order to make up for the fiscal gap.Under the background of fiscal revenue is difficult to meet the demand of fiscal expenditure and related land policy put into effect,land finance of local government arises at the historic moment.Land finance is given priority to with bidding,auction and listing of land transfer mode and supported by land directly,set up investment and financing platform companies issuing city debt debt financing mode.In the development of land,local governments need to raise capital,bank loans,bonds are the current mainly source of financing.This paper discuss next is aimed at land mortgage financing manner.Land finance is local government get land grant fee through land sales.Land directly sell mainly refers to the government land management departments transfering the right to use of the land to land users within the prescribed time.Grenerally,according to the using type of land,it could be divided into industrial land and commercial and residential land.Considering after land transfer,industrial land and commercial and residential land may have the different influence on the subsequent fiscal revenue of local government at different levels,this paper in the following,will separately discuss two different types(industrial land and commercial and residential land)of land finance model."Budget law" regulate local budgets shall not contain deficit,at the same time,local governments can not issue bonds.Until March 2015,the central Treasury issued the documents about local governments could issue general bonds and special bonds.Prior to that,local governments not in a position to issue local bonds,and the central government help the local governments issue bonds to raise funds,it cannot satisfy the requirement of local fiscal expenditure.local governments set up local financing platform for raising money,besides through the platform loan to the commercial bank,issuing urban investment bonds to raise money is play a crucial role in the of local infrastructure.The issue of urban investment bonds completely use the operation mode of corporate bonds.Actually,the government borrow enterprise shell achieving the goal of raising the municipal money.In the following discussion,this article will start from urban investment bonds behavior,with dynamic perspective,to study the relationship between the land finance and local debt.This article mainly from the dynamic perspective,investigate land finance as the core of land development pattern with Chinese characteristics.The development mode of financing is largely dependent on the future land value,therefore it is related with macroeconomic and present strong pro-cyclical.This article statistics urban investment bonds between 2010-2015,financial dependence on the land and control variables related to the economy,population as the explained variable,bonds issuance and issue number to be explained variable,use bi-directional fixed effects of poisson regression and bi-directional fixed effects of OLS method to empirical analysis.Empirical analysis shows that when the macro economic keep growth momentum,the relationship between the early stage of the city land finance level and the late issuance scale or the number is positive correlation,When macroeconomic growth is slowing,these relationships are negative correlation.The results is more significant especially in the promotion competition strong region and low marketization region.This article conclusion confirmed land financing pro-cyclical,local debts' sustainability caused by the land development is affected by the macroeconomic trends.