The decline in land transfer revenue during the first quarter of this year resulted from a combination of factors, including a land supply strategy characterized by frequent but small-scale offerings, subdued willingness among real estate developers to acquire land, and a relatively high comparative base from the same period last year. Against the backdrop of continued pessimism surrounding local government revenue from land sales, there is a pressing need for timely transformation in local development models and methods of fiscal revenue generation. Recent data disclosed by the Ministry of Finance shows that in the first quarter, revenue from the transfer of state-owned land-use rights, a component of local government fund budgets, amounted to 517.6 billion yuan, a decrease of 24.4% year-on-year. This decline is significantly larger compared to the drop witnessed in the same period last year (-15.9%) and the full-year decline for last year (-14.7%). An analyst pointed out that the first-quarter slump stems from the interplay of the "high-frequency, low-volume" land supply pace, weak acquisition appetite from developers, and the elevated base figure from a year earlier. As policies aimed at stabilizing the property market continue to take effect and coordination mechanisms for real estate financing help clear developer debt issues, the rate of decline is expected to narrow progressively to single digits. The reasons for the persistent decline in land sales income are multifaceted. Land transfer income represents a crucial revenue source for local governments, having peaked at approximately 8.7 trillion yuan in 2021. Subsequently, impacted by a sluggish property market, both the volume and price of local land sales have fallen, with revenue nearly halving to about 4.2 trillion yuan by 2025. The contraction intensified in the first quarter of this year. The primary cause for the drop remains the ongoing weakness in the real estate market and developers' cautious stance towards land acquisition. Data from the National Bureau of Statistics indicates that in the first quarter, national real estate development investment fell by 11.2% year-on-year, sales area of newly built commercial housing dropped by 10.4%, and funds received by real estate developers decreased by 17.3%. In March, new residential property prices in first-tier, second-tier, and third-tier cities declined by 2.2%, 3.3%, and 4.0% respectively, compared to the previous year. Beyond weak demand, local governments have adjusted land supply strategies to stabilize the market, which also affected first-quarter revenue. Unlike the large-scale, concentrated land releases seen during previous planned supply periods, local governments are now proceeding steadily, aligning with changes in land market supply-demand dynamics and the practical circumstances of developers. Consequently, governments have widely shifted their supply rhythm from bulk, concentrated offerings to a model of "small, quick steps" with frequent, smaller batches, adapting to developers' limited funding capacity and precise investment needs. Developers are exercising high prudence in their investment strategies, predominantly focusing on "safe plots" in core first and second-tier cities, with more flexible and dispersed acquisition timing. Furthermore, analysis suggests that stimulus policies introduced in the fourth quarter of 2024 boosted land transfer revenue in the first quarter of 2025, creating a relatively high base that magnifies the year-on-year decline for the first quarter of this year. As the low-base effect from the second quarter onward gradually materializes, a technical, marginal narrowing of this decline is anticipated. The situation varies significantly across provinces. Based on publicly available information from provincial finance departments, Jiangxi Province saw its land transfer revenue fall by 12.7% year-on-year in the first quarter; affected by declining land sales income, Inner Mongolia's government fund revenue decreased by 32%; Hainan's relevant income dropped by 29.6%. In contrast, Jilin Province reported a 169.2% year-on-year increase in land transfer revenue, primarily due to concentrated treasury deposits from land sales in its central city. There is typically a lag of about one to three months between developers signing land transfer contracts and the actual funds entering the state treasury, meaning the reported land transfer revenue data reflects market transactions from the preceding period. Therefore, the first-quarter data is seen as more indicative of the relatively subdued transaction activity in the land market towards the end of 2025. However, land transaction quality in key cities across various regions was reportedly higher in the first quarter of this year, particularly for premium residential land, including some high-demand plots and active trading, which provided underlying support to the land market. Nevertheless, statistics from major institutions indicate a substantial drop in industry-wide land transaction data for the first quarter, underscoring the urgency for the land market to stabilize and recover. It is believed that with subsequent changes in the base period, support from a gradually improving real estate sector, and increased demand for land as a factor of production amid socio-economic development, indicators related to land-use right transfers are expected to show improvement this year. Full-year land transfer revenue is projected to potentially exceed 3.8 trillion yuan, representing a decline of approximately 5% compared to the previous year. An economist previously analyzed that the land market is expected to see marginal improvement in 2026, with the rate of decline in land transfer revenue narrowing compared to 2025, though a return to positive growth may remain challenging. Budget reports from some provinces reveal markedly different expectations for this year's land sales income. For instance, Guangdong anticipates a 5% growth in local land transfer revenue; Henan, Hebei, and Jiangxi project growth in their government fund budget revenues of about 57%, 22%, and 2% respectively, while Zhejiang expects a 16.2% decrease. Given the unpredictability of the property market, actual land transfer revenue may differ significantly from projections. The transition away from land-dependent public finance is gaining attention. Several local fiscal officials noted that the decline in land sales revenue in recent years has reduced locally available financial resources, exacerbating the矛盾 between local fiscal revenue and expenditure. An academic stated at a seminar analyzing China's first-quarter fiscal operations that the widened year-on-year decline highlights the significant fiscal pressures local governments continue to face. The traditional model of relying on land finance to fuel investment-led growth is no longer suited to the current macroeconomic environment, necessitating a shift in local development models and revenue generation methods. This involves moving away from over-reliance on land finance towards revitalizing state-owned capital and assets to enhance independent fiscal capacity. The growth in non-tax revenue in the first quarter, partly driven by local efforts to leverage assets, corroborates this trend. The impact of falling land transfer income is not as severe as the nominal figures might suggest. Since this revenue represents gross income, a reduction is accompanied by a corresponding decrease in related expenditures. Furthermore, after deducting cost-based outlays such as land demolition and compensation, the actual effect on the usable financial resources of local governments is considerably mitigated. Previously disclosed data suggested that a hypothetical 2 trillion yuan reduction in land transfer revenue would impact local general public budget resources by only about 300 billion yuan, indicating the net effect is less dramatic. To counter the impact of reduced land sales income, local governments have increasingly focused on revitalizing existing assets and resources, leading to growth in non-tax revenues. National non-tax revenue increased from approximately 2.98 trillion yuan in 2021 to 3.97 trillion yuan in 2025, an increase of about 1 trillion yuan, primarily fueled by growth in income from the compensated use of state-owned resources (assets) and from state capital operations. Additionally, policy directives call for "reasonably increasing the proportion of state capital收益 collected." The central government has already taken the lead in 2025 by significantly raising the proportion of after-tax profits collected from central SOEs, increasing the rate for sectors like tobacco, petrochemicals, power, telecommunications, and coal to 35%. This has directly led to a substantial increase in state capital operation budget revenue, subsequently boosting the amount transferred into the general public budget. Data shows that national state capital operation budget revenue reached a record high of 854.7 billion yuan in 2025, up 25% year-on-year. Of this amount, 574.1 billion yuan was transferred into the general public budget to support and improve public welfare. An economist anticipates that local governments may subsequently refer to the central SOE profit submission requirements to further increase the profit submission ratios of local SOEs. Assuming local SOEs adjust their ratios similarly, based on 2024 submission figures, local profit submission income could increase by approximately 80% year-on-year, representing an additional contribution of around 180 billion yuan. To alleviate local fiscal strains, central government transfer payments to local governments continue to exceed 10 trillion yuan this year, with particular emphasis on increasing general fiscal capacity transfers. Pilot programs are being explored in select provinces to integrate and统筹 the use of transfer payment funds, enhancing local governments' overall planning capacity. Beyond exploring multiple avenues to increase revenue at the grassroots level, efforts on the expenditure side include deepening pilot reforms for scientific fiscal management. These initiatives, promoting zero-based budgeting reforms and budget performance evaluations, aim to optimize fiscal expenditure structure, directing more funds towards human capital investment and improving the efficiency of fiscal fund utilization.