Urban Land Revenue and Sustainable Urbanization in China: Issues and Challenges

Since urban land development launched in 1987, urban land transactions and local land leasing revenue have exploded sharply in China. Classical research on urban land use and urbanization often focuses on making decisions and enacting policies of zoning and land use regulations. Scholars from different disciplines have long been aware of this issue and have attempted to account for it with different theories of urbanization. This paper considers urbanization and the associated spatial interaction effect as an alternative factor in China's urban land revenue. After reviewing the existing literature on China's land reform, a dynamic panel data model with GMM estimator is established to explore the reasons for the emerging land revenue. The empirical results show that the spatial weight matrix is significant to the land leasing revenue, and the provincial level of fiscal decentralization has negative effect on the volume of urban land leasing revenue. These empirical results demonstrate that local governments have the intrinsic motivation to maximize the land leasing revenue, which is significant to expand local optional revenues. The province having higher urbanization level usually experiences the larger scale of urban land revenue. The spatial interaction effect among adjacent provinces has a significant effect on urban land revenue which is closely associated with local economic growth. However, it is essential to know that the large scale of rural land conversion and disordered urbanization force negative payoffs, such as environmental degradation, the damage of farmland, and the problem of food safety.