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Chinese Cities Hooked On Land Revenue Fuel Housing Costs

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http://www.bloomberg.com/news/2013-09-24/chinese-cities-hooked-on-land-revenue-fuel-housing-costs.html

Chinese cities, addicted to the money they raise by selling land to developers, are undermining the government’s multiyear campaign to contain housing costs.

Municipal residential land deals, measured by area, rose 26 percent in the first eight months of the year from the same period in 2012, according to China Investment Securities Co. The average price per square meter jumped 43 percent, pushing proceeds up 80 percent to 816.5 billion yuan ($133 billion).

Local officials rely on revenue from the sales to repay debt, especially as economic growth slows. Developers bid up prices because demand from homebuyers remains strong. The cycle is driving property costs higher, complicating Premier Li Keqiang’s task of preventing social unrest over the lack of affordable housing amid a massive urbanization program.

So if they stop people buying the land the local cities will go bust as they can't afford to service the debt?

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