Has land finance driven China’s economic growth? Evidence from a quantitative counterfactual analysis

The Chinese government’s reliance on land finance to mobilize resources for economic development has attracted significant attention from other developing countries. Given the critical role of rural migrant workers in China’s economic growth, we construct a quantitative dynamic multi-sector model that captures the distinctive features of China’s urban–rural dual economic structure. Our findings demonstrate that land finance in China effectively stimulated economic growth; However, it did so at the expense of reduced consumption of urban residents. Land finance drove China’s economic growth through two main channels: increasing investment in urban and rural infrastructure and promoting the employment of rural migrant workers, and the ratio of the contribution of these two channels was about 5:4. Moreover, although the new land finance policy aims to allocate more land finance revenue to rural residents, such redistribution can only promote economic growth if accompanied by appropriate policy measures.