As government policies aimed at cooling the country's overheated real estate market begin to take effect, analysts worry that stagnation or even a decline in home prices would cause local governments' revenue from land sales to shrink, the China Securities Journal reported Wednesday.
Analysts estimated the total land transfer revenue in 2010 would decrease by 400 billion yuan ($58.59 billion) from the previous 1.42 trillion yuan, the newspaper said.
The local financing platforms which had extended a huge amount of credit in 2009 might also accumulate enormous risk if profits from land development decrease,further threatening the security of the whole commercial banking system, the report said.
According to the Ministry of Finance, in 2009 the country's total revenue from land transfer amounted to 1.42 trillion yuan, up 43.2 percent from 2008. Local governments' total revenue amounted to 3.26 trillion yuan, 43.7 percent of which was from land sales.
However, land price increases began to slow down. According to the latest report by the China Land Surveying and Planning Institute, land prices in 105 cities averaged 2,715 yuan per square meter in the first quarter, up 8.1 percent year-on-year or 2.34 percent from the previous quarter, 0.7 percentage point lower than the last quarter in 2009.
