China: “Disposal of land use rights” is sluggish:
Deterioration of cash flow in Chinese real estate:
The cash flow of Chinese real estate developers is deteriorating.
This has had a serious impact on the “land use rights surplus” of local governments.
Research company Middle Finger Research Institute:
The total amount of land use rights sold in 2021 in 300 cities in China was 5.6 trillion yuan (100,641 billion yen).
“Total land use right surplus” decreased by 9% from the previous year.
The continuous increase since 2015 has stopped in 6 years.
Withdrawal income is declining in the majority of provinces.
Mid-sized securities company
Tenfu Securities
Report released on January 11th.
Of the 31 provinces, autonomous regions, and municipalities under the direct control of mainland China, “2021 land use right payment income” is
The increase from the previous year is
Beijing,
Shanghai,
3 municipalities under the direct control of Tianjin,
as well as
Guizhou,
Jiangsu,
There were only three provinces in Zhejiang.
The decrease from the previous year is
Yunnan,
Xinjiang Uygur Autonomous Region,
Heilongjiang Province,
Inner Mongolia Autonomous Region,
Guangxi Zhuang Autonomous Region,
Shanxi,
Gansu,
Hebei,
Ningxia Zhuang Autonomous Region,
Jiangxi,
Jilin Province,
Henan,
Liaoning,
In 13 provinces and autonomous regions, “payment income” decreased by more than 20% from the previous year.
Yunnan:
The most serious of these is Yunnan. “Payment income” is sluggish in all areas of the province.
“Payment income in 2021” dropped sharply to 30 billion yuan (539.1 billion yen), which is 73% lower than the previous year.
Kunming
In Kunming, where real estate development was active, the rate of decrease in withdrawals reached 78.3%.
Important financial resources of local government
“Land use right withdrawal” is an extremely important financial resource for local governments.
Under Chinese law
Local governments pay 30% of the payment to the central government and
The remaining 70% can be used as independent financial resources.
Analyst estimates:
Withdrawals account for 30-40% of local revenues.
40% of that has been invested in the construction of local infrastructure.
A significant reduction in withdrawals could directly lead to financial difficulties for local governments.
However, at this point, it is unlikely that the surplus will recover in 2022.
Rating agency Moody’s:
Unless the Chinese government relaxes real estate lending regulations
The rate of decrease in payouts in 2022 will exceed 20% on a national average.
Rating agency Moody’s pointed out in a report released in October 2021.
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