How do city governments sprint trillion-GDP threshold through land transfer?

Purpose In the “competition for growth” of local performance appraisal, Gross Domestic Product (GDP) exceeding one trillion yuan has become an important goal for local governments in China, and sudden land sales may be an important means for local governments to sprint the trillion-GDP threshold. Design/methodology/approach Based on the micro land transaction data of cities from 2007 to 2022, we apply the multidimensional fixed effect model to explore the land transfer behavior of local governments in China in sprinting the trillion-GDP threshold. Findings The results of the study show that a local government sells more land in the year when its city's GDP breaks the trillion yuan and the year before. Moreover, both transaction volumes and prices increase across all four land-use categories: industrial, commercial, residential, and other land. Land acquisitions by both state-owned enterprises (SOEs) and private enterprises increase significantly, with private enterprises experiencing a larger absolute increase in land acquisition volume. Practical implications Based on above conclusions, we put forward the following policy recommendations. The role of land finance in promoting economic growth should be clearly recognized. Local governments have sufficient information advantages in the land market, and they can promote regional economic growth by rationally utilizing land tools to increase fiscal revenues. In addition, local governments should regulate the utilization of land and improve the inefficiency of land use. Although land finance is the “second finance” of local governments, too much reliance on land finance can lead to a series of problems, such as land resources misallocation, environmental costs, and high housing prices, which impede the sustainable development of regional economy. Finally, the performance appraisal system should be improved, and land use constraints should be incorporated into the cadre appraisal system. Although there are strict restrictions on the supply of new land in each city, illegal occupation of arable land, concealment of land use indicators, and falsification are commonplace. Therefore, the political cost of wasting land resources should be increased through the performance appraisal system to curtail the inefficient use of land. Originality/value The results of the study show that a local government sells more land in the year when its city's GDP breaks the trillion yuan and the year before. Moreover, both transaction volumes and prices increase across all four land-use categories: industrial, commercial, residential, and other land. Land acquisitions by both state-owned enterprises (SOEs) and private enterprises increase significantly, with private enterprises experiencing a larger absolute increase in land acquisition volume.