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Local Governments in China Sold Land to Themselves to Maintain the Price

Selling land usage rights is the main source of income for local governments in China. As Chinese private real estate developers are stressed for cash these days, state-owned-enterprises, especially the city investment enterprises, have become the main buyers when governments auction land.

However, the city investment enterprises are the financing platforms that local governments set up to raise money for government spending. They are owned and managed by the government. Government’s selling land to them is in essence to move land from the left hand and give it to the right hand. This shows money on the books. However, in reality, it does not bring money to the government. So this practice just serves to maintain real estate prices. These city investment enterprises still need to find true real estate companies to develop the land. It is at that time that they hope they will make money.

Source: Epoch Times, February 19, 2022