Land sales

The red-hot property market sparked huge growth in land sales last year as property developers rushed to grab land on expectations of further rises in home prices.

Yang Hongxu, an analyst from E-House China, a real estate services company, said when the economy is in a slow recovery, many companies, especially those state-owned enterprises with abundant funds, are inclined to invest in real estate for a quick profit and an inflation hedge.

China's government earned 1.59 trillion yuan from land sales last year, up 63.4 percent from a year earlier, according to the Ministry of Land and Resources.

Land sales are a major source of revenue for local governments, especially when other sources dropped off amid the global economic downturn.

The eastern city of Hangzhou netted 105.4 billion yuan in land sales taxes in 2009, the most of any city nationwide, according to the China Index Research Institute. Shanghai came next with 104.3 billion yuan while Beijing was third with 92.8 billion yuan.

Experts said local governments should speed up economic restructuring and reduce reliance on land sales for fiscal revenue, as the dependency makes local authorities reluctant to rein in soaring prices.

Zeng Yesong, a researcher at the Party School of the Central Committee of the Communist Party of China, said to curb housing prices, priority should be put on reforming the allocation of land sale earnings between the central and local governments, to reduce the latter's impulse to make fortunes with land sales.