China’s real estate market continues to languish, with official data showing a sharp 40.3% year-on-year drop in land transfer revenue in July. This marks the second consecutive month of the largest decline since July 2022.
According to data released by the Chinese Ministry of Finance on August 26, general public revenue for the period of January to July totaled 13.5663 trillion yuan, a 2.6% decrease compared to the same period last year. National government fund budget revenue amounted to 2.3295 trillion yuan, down by 18.5% year-on-year, while local government fund budget revenue at 2.0909 trillion yuan, decreased by 20.7% year-on-year. Among these figures, revenue from the transfer of state-owned land use rights was 1.7763 trillion yuan, a 22.3% decline compared to the previous year.
The decline in revenue from the transfer of state-owned land use rights by local governments in the first seven months significantly widened compared to the first half of the year (which saw an 18.3% year-on-year decrease), reflecting the continuous slump in the land market.
In July, general public revenue stood at 1.98 trillion yuan, a 1.9% drop year-on-year. Government fund revenue reached 338 billion yuan, down by 33.6%, with the decline expanding from the previous month and achieving the largest drop since July 2022 for a second consecutive month. Specifically, land transfer revenue plummeted to 250 billion yuan in July, a drastic 40.3% year-on-year decline, widening by 5.0 percentage points from June.
Guosen Securities believes that the significant weakening of land transfer revenue is consistent with their earlier forecasts. On one hand, the acceleration of land transfer revenue entering the treasury at the end of last year has led to reduced income this year. On the other hand, the continuously weak real estate market and limited improvements in land transfers have resulted in the current decline. Looking ahead, these factors are unlikely to see significant improvement, and land finances may continue to face pressure.
Feng Lin, Director of Research and Development at Orient Jincheng International Credit Rating Co., Ltd., pointed out that the expanding decline in land transfer revenue in July is a reflection of the ongoing adjustment in the real estate market, where the demand for land acquisition by real estate developers has significantly decreased.
Nie Tianqi, a macroeconomic researcher at Galaxy Securities, highlighted that the sustained weakness in land revenue since the beginning of the year is a key factor constraining fiscal revenue and expenditure. When setting the annual budget target at the start of the year, expectations for land revenue for the whole year were more optimistic compared to the current operational situation, resulting in a significant discrepancy.