China’s land‑sale revenues — the backbone of many local governments’ finances — fell for a fourth consecutive year in 2025, underscoring the country’s prolonged property malaise and the fiscal stresses it is creating at the municipal level. The Ministry of Finance reported that revenue from the transfer of state-owned land use rights dropped to ¥41,518 billion in 2025 (about ¥4.15 trillion), a 14.7% year‑on‑year fall and a decline of roughly ¥4.6 trillion, or 52.3%, from the 2021 peak.
The collapse of “land finance” is not merely an accounting phenomenon. For many provinces and cities land sales have funded government investment, debt servicing and urban infrastructure; the rapid reduction in receipts has therefore squeezed local budgets, raised repayment risks and curbed planned capital spending. Land‑related spending also fell to about ¥47,000 billion in 2025 (roughly ¥4.7 trillion), down 7.6% from a year earlier and nearly 39% below 2021 levels.
Economists and provincial officials alike attribute the slump to a structural real‑estate correction rather than a temporary blip. Luo Zhiheng, chief economist at Yuekai Securities, describes the erosion of land‑sale revenue as a consequence of China’s shift toward “high‑quality development” and a rebalancing of factor scarcity: as the growth model evolves, the marginal returns to land, capital and labour change and the old “land finance” model becomes unsustainable.
Market metrics underline the severity of the adjustment. National real‑estate development investment fell about 17.2% in 2025 to roughly ¥83,000 billion (¥8.3 trillion), while commercial housing sales slipped 12.6% to about ¥84,000 billion (¥8.4 trillion). Slower demand and tighter conditions have made developers more cautious about buying development parcels, further depressing land prices and sale volumes.
Regional outcomes remain uneven. Beijing bucked the national trend with a modest 4.7% rise in land‑sale dominated government fund revenue, whereas Guangdong recorded an 11% decline and Henan plunged nearly 27.7%. Local budget forecasts for 2026 are mixed: several provinces — including Guangdong, Henan, Hebei and Jiangxi — expect land‑sale revenues to rebound, some by sizable margins, while others such as Zhejiang project further declines.
The fiscal implications are concrete. Reduced land receipts directly shrink discretionary funds in the government fund budget, weaken the collateral base for municipal financing vehicles, and raise the burden of debt servicing for jurisdictions that relied on future land receipts to back borrowing. Anhui’s finance department, for example, has documented a near‑50% fall in land revenue from the 2021 peak and warned that the drop has constrained debt ceilings, reduced general‑debt shares and complicated financing for public goods.
That said, the headline falls overstate the impact on ordinary budget lines because a large slice of land‑sale receipts goes immediately to demolition and related costs; some studies estimate net income at around one‑quarter of gross land receipts. The central finance ministry has similarly noted that the pass‑through to the general public budget is smaller than the headline decline suggests — for instance, a ¥2 trillion drop in land receipts in 2022 cut general budget resources by only around ¥300 billion.
Policymakers and analysts are debating remedies. Luo proposes a centrally funded “real‑estate stabilisation fund” financed by sovereign bond issuance to underwrite two priorities: ensuring completion of unfinished housing projects and buying idle landbanks from distressed developers to free up liquidity. He also recommends bigger central transfers or higher local debt quotas, selective easing of purchase restrictions in first‑tier cities to unlock demand, and measures to lower financing costs for households and sound developers.
Officials expect 2026 to be a year of gradual stabilization rather than a robust recovery. Several provinces have budgeted for higher land receipts and central directives call for stronger support to the property sector, but analysts warn that local budget projections historically diverge substantially from outcomes and that a durable recovery depends on both improved developer balance sheets and genuine demand recovery.
The slide in land‑sale income is a signal of a deeper transition in China’s economy. As the state tries to reduce dependence on cyclical property‑driven growth and reorient investment toward technology and manufacturing, local governments must find alternative revenue sources or face chronic constraints on infrastructure and social spending. How Beijing balances fiscal backstops with the longer‑term objective of weaning cities off land‑led growth will be one of the defining public finance questions of the next few years.