Report published September 7, 2026

China: Property Downturn Keeps Straining Local Government Finances – Goldman Sachs Analysis

Goldman Sachs · September 7, 2026

China's local government funding remains under severe pressure as property-related revenue has fallen 70% from its mid-2021 peak and is projected to fall 80-90% overall by 2027 or beyond. While central transfers and deficit financing offset around 80% of the spending drag nationally in 2025, regional divergence is wide, leaving less developed provinces with high property exposure vulnerable to further fiscal distress.

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Finvaulta summarizes Goldman Sachs's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.

Key Takeaways

1.Land sales revenue has fallen 70% from its mid-2021 peak, reducing property-related revenue from 37% of gross local government revenue in 2020 to 20% in 2025, and potentially to around 16% in 2026.
2.The downturn is expected to accelerate with land sales revenue projected to drop 30% or more in 2026 and extend into 2027 or beyond, ultimately declining 80-90% from peak.
3.Nationally, falling property-related revenue reduced gross local government expenditure by roughly 25% in 2025 versus counterfactual, though higher central transfers, deficit financing, and other channels offset roughly 80% of the gross drag.

The property downturn has weighed on local government finance for over five years...
...and the drag is not over yet
Land sales downturn to continue, likely at a faster pace
Estimating the impact from falling property-related revenue on local government spending
Property-related revenue declined unevenly across regions
Gauging the combined impact of falling property-related revenue and some offsets across provinces
Assessing regional exposure to further declines in property-related revenue

Report data

Exhibit 5: Falling property-related revenue reduced gross local government expenditure by roughly one-quarter nationwide in 2025, but offsets absorbed roughly 80% of the drag

Metric	Estimate	Context
Decline in land sales revenue from mid-2021 peak	70%	Land sales revenue cumulative decline estimated based on quarterly data for different land sales measures
Share of property-related revenue in gross local government revenue	37%	Combines off-budget land sales revenue and on-budget property-related tax revenue
Projected full-year contraction in land sales revenue	30 or more%	Revised down from prior projection of a 20% decline, compared to a 17% annualized drop during 2022-25
Gross drag on local government spending from falling property-related revenue	8.9 RMB tn	Counterfactual local government expenditure estimated at RMB36.1tn vs actual RMB34.6tn
China Augmented Fiscal Deficit (AFD) forecast	11.5 % of GDP	Goldman Sachs proprietary catch-all gauge of China's fiscal stance (2026: 11.5% of GDP, 2027: 10.5% of GDP)

Source: MOF, Wind, CREIS, Goldman Sachs Global Investment Research; Wind, MOF, Goldman Sachs Global Investment Research; Goldman Sachs Global Investment Research; MOF, Wind, Goldman Sachs Global Investment Research. This is a dated model snapshot, not a live forecast.

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Authors / Editors

Lisheng Wang · Primary AuthorAndrew Tilton · Team MemberHui Shan · Team MemberXinquan Chen · Team MemberYuting Yang · Team MemberChelsea Song · Team Member