Does Land Finance Contraction Accelerate Urban Shrinkage? A Study Based on 84 Key Cities in China

Abstract

After approximately 30 years of sustained and rapid development, some Chinese cities have seen urban shrinkage marked by a decreasing population size. Land finance, which is the second public finance of local governments in China, influences urban development through capital and land supply. It is the primary source of funds for urban infrastructure construction and the driving force behind promoting urban boundary expansion. In the context of the overall downturn of domestic land finance, land finance contraction for shrinking cities may accelerate the further decline of population in these cities. This paper investigated 84 key cities across China between 2008 and 2015 and found that (1) the contraction of land finance has heterogeneous impacts on shrinking cities and nonshrinking cities, which, in turn, has significant catalytic effect on population loss in shrinking cities; and (2) the insufficient replenishment of capital caused by the contraction of land finance in shrinking cities has a more significant impact than the insufficient supply of land. Infrastructure investment has a complete mediation effect in this influencing mechanism.