Hangzhou: the Chinese city using land sales as a cash machine to pay for the 2022 Asian Games

Hangzhou, the provincial capital of the third most indebted Chinese region, raised more funds through land sales than any other Chinese city in the first five months of this year, as the local authority grapples with how to pay for a massive infrastructure and construction binge ahead of the 2022 Asian Games.

The city renowned for its picturesque West Lake raised 113.5 billion yuan by selling 295 land parcels in the five months through May, according to calculations by the South China Morning Post based on Wind data.

The land sales are equivalent to 8 per cent of the city’s 1.35 trillion yuan GDP. The land sale bounty overshadows funds raised by similar sales in Shanghai by 91 per cent, and in the nation’s capital Beijing by 61.8 per cent.

Hangzhou, with a population of 9.8 million, relies on land sales for the majority of its revenue base, with income from these sales amounting to 1.34 times fiscal revenue, the highest among all major mainland cities.

Analysts said property developers eager to replenish their land banks were a factor in driving torrid sales in second-tier cities. Tianjin and Wuhan rounded out the second and third spots nationwide in terms of funds raised by land sales during the period.

“Developers have limited options. First-tier cities have limited land supply, very tight controls on buying eligibility and future home selling prices, which squeezed developers’ margins. Meanwhile, small cities don’t have such a strong housing demand,” said S&P Global Ratings credit analyst Matthew Chow. “Second-tier cities combine quantity, price, fewer policy restrictions and strong demand.”