Beyond Land Finance: Exploring the Fiscal Revenue Effects of Urban Renewal in Guangdong Province, China

Given the Chinese government’s aim of high-quality development and under the double constraints of incremental land and limited local revenue, Chinese local governments' path-dependence on land finance is confronting significant challenges. Guangdong Province has implemented a series of urban renewal programs called Three Olds Redevelopment (TOR) projects, providing a potential alternative for financially sustainable development. Using panel data covering 21 prefecture-level cities in Guangdong during 2009–2018, this study constructed a quantitative analysis of the fiscal revenue effect of TOR. The results illustrate that TOR reduces fiscal revenues, including tax revenue and land-transfer fees, in the short term but increases them in the long term. Higher fiscal decentralization tends to amplify the fiscal effects, while market power and dependence on land finance may weaken the impact. As for the mechanism, TOR projects can increase long-term fiscal revenue because of social capital involvement and functional upgrading effects. We suggest urban renewal and policy innovation to transcend land finance path-dependence and realize sustainable local finance.