To shift the mindset of local policymakers away from growth at all costs, China must also reset incentives and fiscal priorities
Real estate development has powered immediate economic growth even as industrial investment has been squeezed out. Residential land can be sold for instant revenue and with expectations of swift projects, while industrial land is priced lower in exchange for industrial development and future tax revenues. Beyond the land-based model of municipal finance in China, cadres’ incentives have played a key role in creating China’s property glut.
