Comprehensive audit of land finance will force the government to be more self-disciplined
Starting from mid-August, the National Audit Office will conduct an audit of local land transfer revenue and expenditure, land expropriation, reserve, supply, consolidation, farmland protection and land law enforcement over the past 6 years. This audit is the third large-scale nationwide audit, following the social security audit and the local debt audit.
“Land finance” is the intersection of contradictions for observing and understanding the complex realities of contemporary China. This is mainly reflected in: on the one hand, along with steadily rising land transfer revenue, “land finance” has already become one of the most important sources of fiscal revenue for governments at all levels. For example, in 2013 the national revenue from the transfer of state-owned land use rights hit a new historical high, reaching 4.13 trillion yuan, an increase of about 45% year on year. The proportion of land transfer fee revenue in the overall local government fund revenue was as high as 86%. Not to mention that in addition, local government debt, also astonishing in scale, was obtained on the guarantee of “land finance.” Therefore, in general, if we agree that competition among local governments is an important driving factor behind China's rapid economic development, then “land finance” is the key lever that makes this factor effective.
On the other hand, local governments' increasingly serious dependence on “land finance,” combined with China's consistent “strong government” governance model, has also made “land finance” a concentrated breeding ground for factors hindering China's sustainable development. For example, the “2013 Blue Book of Society” of the Chinese Academy of Social Sciences shows that at present, about half of the mass incidents occurring each year are triggered by land expropriation and demolition. Another example is real estate prices, which have soared all the way and whenever they reach a turning point see local governments step in to support them. The systemic risks they have accumulated and their “crowding out” effect on the real economy and on household consumption and welfare have long been enormous visible economic and social hazards.
The above two aspects are in fact precisely the “dilemma” of contemporary China's deepening reform and transformational development. On the one hand, changes in the situation make it very difficult to continue copying and applying a large number of once-effective institutional arrangements, and because of the path dependence problem, correcting these institutional distortions is bound to be a race against time. But on the other hand, the enormous entanglement of interests and the prudence, strategic nature and systematic nature that reform must observe often mean that many fundamental solutions are either too slow to meet urgent needs or still require waiting for preconditions to be reset.
The fundamental solution to local governments' land dependence involves many fields, including transforming government functions, reconstructing central-local relations and improving the fiscal and taxation systems. Reform in these fields is indeed currently being solidly advanced step by step. The focus of the next step is, first, to advance these reforms with greater intensity and speed, and second, to immediately carry out a batch of small, incremental institutional improvements, thereby buying time for deep-level, large-scale change, exploring the path, clearing the periphery and consolidating the foundation.
⟦NL> Sunshine is the best antiseptic. A comprehensive audit of “land finance” is conducive both to clarifying the situation and enabling later reforms to be targeted, and, more importantly, by making the detailed accounts of “land finance” widely known, recognized and supervised by the public through the audit, it will inevitably force local governments at all levels to carry out land-related administration in a more scientific, more democratic, more standardized and more restrained manner. And are not these credible effects precisely the important demands that all current reforms keep in mind?