Land-sale finance can no longer sustain cities

How can China's hard and long-drawn economic transition be judged from what its cities have done to drive local economic growth? The fact is they have basically done nothing in the past three years.

The old practice of funding local development with fiscal revenue from land auctions for housing projects, which people call "land-sale finance", still continues in many cities. There hasn't been a meaningful replacement of the source of local revenue in many cities even though land-sale finance no longer generates as much funds in these times of economic slowdown.

Nurturing new growth industries and building new growth drivers, what the central government has envisaged, is happening in only a few cities. Last year's data show some of the most financially powerful cities continue to rely on land-sale finance for more than half of their revenues, as they did in the years immediately following the 2008 global financial crisis when housing development was a speculative game and housing prices were rising rapidly. Such cities include Nanjing, Hefei, Guangzhou, Fuzhou, Foshan, Haikou, Jinan, Wuhan, Hangzhou, Changzhou and Shijiazhuang.