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China Land Sales Slump For Fourth Month Amid Debt Crackdown

Cash-strapped developers move cautiously on land buying after tighter regulatory curbs on fresh borrowing

Bond defaults in China have passed $20 billion this year, more than double 2021.
Last year, China's troubled property market saw the worst decline in new home prices in nearly nine years. Photo: Reuters.


The Chinese government’s revenue from land sales slumped for a fourth month in October compared with levels a year ago, as cash-strapped developers moved cautiously on land buying after tighter regulatory curbs on fresh borrowing.

The value of government land sales in October declined 13.14% from a year earlier to 573.7 billion yuan ($89.90 billion), after suffering a drop of 11.15% in September, according to calculations about data released by the Finance ministry on Friday.

Many developers including China Evergrande Group have grown desperately short of cash since authorities last year unveiled the “three red lines” – a key policy of President Xi Jinping that imposes limits on liabilities-to-assets, net debt-to-equity, and cash-to-short term borrowing ratios.

Poor demand among developers at China’s urban land auctions risks squeezing regional finances, pressuring local governments to scramble for other income sources to fund investments and support the economy, including the issuance of more bonds that increase their debt obligations, some analysts say.


Impact on Infrastructure

“Declining land sales will constrain fiscal funding for infrastructure, leading Chinese regional and local governments to temporarily shift to debt-funded growth,” according to a Moody’s recent report.

Not all provinces and regions are equally dependent on land sales revenue. “The unevenness in regional growth will persist, with developed provinces continuing to perform better than less-developed ones,” according to Moody’s.

However, China’s government land sales revenue grew 6.1% to 5.937 trillion yuan (over $930 billion) in January-October from a year earlier, data from the Finance ministry showed, slowing from the 8.7% rise in the first nine months.

In February, the Chinese land regulator imposed restrictions on land sales, allowing up to three auctions a year in 22 key cities including Beijing, Shanghai and Shenzhen, with the rules aimed at reining in rising land prices which could otherwise lead to higher home prices.

Private developers have bought at least 138.7 billion yuan of land in a nearly completed round of auctions held by 22 major cities, down about 75% from 553.1 billion yuan in the first round of sales this year in March-June, according to a Reuters analysis of public notices on the sales.

China’s property woes have worsened in recent months, with prices lower in both new and resale homes in October amid deeper contractions in construction starts and investment by developers, weighing on the overall economic outlook.


• Reuters with additional editing by Jim Pollard



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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