Analysis of Land Financial Dependence and Discussion on Causes

Abstract

This paper divides China’s land finance into two parts: land transfer income and land tax, then uses K-means clustering method to classify the dependence of 31 provinces on land finance into severe, sub-severe, moderate, and mild. It is found that the dependence on land finance of provinces across the country has declined from east to west. And the higher the fiscal deficit, the greater the dependence on the land finance. The lower the per capita GDP is, the less dependent on the land finance is. Based on this, the following two suggestions are proposed: further improve the current fiscal decentralization system, giving local governments more financial power; further improve the budget management system, alleviating the local government’s dependence on land finance.