China: No Easy Cure for Local Governments' Addiction to Real Estate Revenue

MIN READOct 16, 2015 | 09:02 GMT

Buildings under construction near the People's Bank of China office building in Chongqing.

(CHINA PHOTOS/Getty Images)

As China's economic slowdown ravages domestic property markets, Beijing is implementing supportive policies to ease the pain on China's local economies, as well as its overall national economy. Yet these policies do not resolve the underlying structural problem: local governments' financial dependence on real estate markets. This dependence has made local governments reliant on Beijing, giving the central government significant influence at the local level. Thus, as Beijing revisits its fiscal relationship with local governments, it will have to determine how much control it is willing to give up to rectify inefficient economic practices....

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