Property Crisis Means Chinese Cities Sell Land to Themselves
- Local government finance vehicles have become biggest buyers
- LGFVs have avoided property selloff sparked by Evergrande
Buildings surrounded by fog in Rizhao, China.
Photographer: An Baiming/VCG via Getty Images
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On the surface, the recent land auction by the Chinese city of Rizhao appeared routine. There were four bids, pushing the price up 11% to $170 million. A closer look reveals something curious: The offers were reportedly made by a finance entity owned by the Rizhao government, meaning the city effectively sold land to itself.
Across China, local government financing vehicles have replaced cash-strapped property developers as the biggest buyers of land for real estate development, stoking fresh concerns over the ability of these off-balance sheet borrowers to repay a debt pile that tops $8.4 trillion by some estimates.