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

TLDR

China’s urbanization is a major global phenomenon marked by rapid land expansion and underurbanization of population, yet the driving forces and true purpose—improving living standards rather than revenue generation—remain poorly understood. The study aims to fill this gap by analyzing 1999–2009 panel data from 286 prefecture‑level Chinese cities and encourages future research to examine additional factors and recent urbanization trends. The authors analyze panel data from 1999–2009 covering all 286 prefecture‑level cities in China. Land financing significantly drives urbanization, with economically stronger cities and higher real estate investment pushing it more aggressively, but achieving its intended goal of improving living standards requires adjustments in fiscal and political relations between central and local governments.

Abstract

:China’s urbanization is significant worldwide. This process is characterized by underurbanization 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, not to generate revenue. 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.