2026 Budget Draft Interpretation: "Second Account" Target Revenue Remains Flat, Will the Land Market Reach a Turning Point?

The 2026 central and local budget draft reports show that this year’s local government special fund budget revenue target is 52.644 trillion yuan, roughly the same as last year. The largest component of local government special fund revenue is land transfer income from state-owned land use rights, accounting for nearly 80%.

In China’s fiscal budget system, government funds are also called the “second ledger,” ranking after the general public budget. Its income comes from specific fees or funds (such as land transfer fees, civil aviation development funds, etc.). Government funds are the main source of financing for large-scale infrastructure projects and urban expansion by local governments. Due to recent adjustments in the real estate market, land transfer income has declined, increasing the pressure on government fund revenues and expenditures.

This year’s local government special fund revenue target remains unchanged from last year. Does this mean the land market will recover? Analysts suggest that land transfer income may still face downward pressure in 2026, but factors such as stock housing inventory, relaxed purchase restrictions, and improved financing conditions for developers could narrow the decline in land transfer income.

In 2025, land transfer income from state-owned land use rights was 4.1518 trillion yuan, down 14.7% from the previous year, marking four consecutive years of decline. However, the decline rate narrowed by 1.3 percentage points compared to 2024.

“By 2025, the bottom price for land transfers has stabilized somewhat. If the bottom price remains the same in 2026, forecast models estimate that land transfer income will be about 3.8 trillion yuan, a year-on-year decrease of 8.1%, with the decline narrowing by 6.6 percentage points,” said Yuan Haixia, Director of the China Chengxin International Research Institute, to JiJian News.

Nomura’s Chief Economist for China, Lu Ting, told JiJian News that the local government special fund revenue for 2025 is expected to decrease by 8.2% compared to last year, far below the 0.1% growth target set in the March budget draft. Given the uncertain recovery of the real estate market and weak developer land acquisition willingness, land transfer income is expected to continue declining in 2026.

“Data from January to February this year show that the sales of top 100 real estate companies’ commercial housing decreased by about 30% year-on-year, indicating that the real estate market has not yet achieved a true stabilization or recovery, even though prices have been significantly adjusted from their peak,” Lu Ting said.

According to JiJian News statistics, as of now, 27 provinces have announced their land sale revenues for 2025. Only five provinces saw growth, while the rest declined compared to last year, with many experiencing drops of over 10%. Additionally, among the four provinces (Shanxi, Inner Mongolia, Liaoning, Tibet) that did not publicly disclose land sale revenue, at least one (Inner Mongolia) reported a decrease last year.

The five provinces with increased land sale revenue last year were Gansu, Yunnan, Xinjiang, Heilongjiang, and Ningxia. Yunnan saw the largest increase at 15.9%, leading nationwide, followed by Gansu with 8.6%, and Ningxia with 3.5%. However, these provinces’ land sale revenues are generally low, all below 100 billion yuan.

Among the provinces that reported land sale revenue, 13 experienced declines greater than the national average, including several major eastern economic provinces.

Guangdong’s budget report shows that in 2025, land transfer income was 241.581 billion yuan, down 11%. Looking ahead to 2026, Guangdong states that the foundation for a stable real estate market is not yet solid, and fiscal revenue growth faces significant pressure.

Shandong’s budget report indicates that in 2025, land transfer income was 325.836 billion yuan, down 18%, mainly due to reduced land transactions amid real estate market adjustments.

Jiangsu’s budget report shows that in 2025, land transfer income was 558.893 billion yuan, down 23.1%. Jiangsu also noted ongoing deep-seated difficulties and challenges in fiscal operations, including a significant decline in land transfer income.

Additionally, JiJian News reports that 25 provinces have announced their land sale revenue targets for 2025 and 2026. Sixteen provinces expect land sale revenue to exceed last year, with Heilongjiang being the most optimistic, projecting a 42.8% increase this year, followed by Anhui with 28.3% growth.

The government work report this year emphasizes “stabilizing the real estate market.” Compared to last year’s statement of “continuously promoting the stabilization and recovery of the real estate market,” the wording is more concise but reflects a deeper and upgraded policy goal.

Specifically, the report mentions measures such as city-specific policies to control new supply, destock, optimize supply, explore multiple channels to activate stock housing, and encourage acquisitions of existing properties mainly for affordable housing. It also calls for deepening the housing provident fund reform, optimizing affordable housing supply, accelerating renovation of dilapidated housing, and orderly promoting the construction of safe, comfortable, green, and smart “good houses.” Initiatives include implementing quality improvement projects and property management upgrades, further leveraging the “guaranteed delivery” whitelist system, and preventing debt default risks.

Zhongyuan Real Estate Chief Analyst Zhang Dawei told JiJian News that “stability” is the core goal of current real estate regulation. This is not stagnation but a sustainable operation based on clearing risks, restoring expectations, and optimizing structure, aiming to achieve “stabilizing expectations, stabilizing investment, promoting consumption, and ensuring people’s livelihoods.”

He further explained that this involves three implications: first, shifting from purely demand-side stimulation to coordinated supply and demand, strengthening supply-side reforms; second, moving from incremental expansion to activating stock, closely tied to affordable housing construction and urban renewal; third, transitioning from short-term administrative interventions to long-term institutional development, incorporating risk prevention and livelihood protection into the rule of law, and transforming from “cyclical responses” to “strategic restructuring.”

Lu Ting stated that currently, from top leadership to the market, the approach to solving real estate issues is becoming clearer, and all parties are increasingly aware of the impact of the sector’s downturn on the overall economy. An important article published in Qiushi magazine on January 1, 2026, emphasized key points: reaffirming that real estate remains an important part of the national economy; clarifying its financial attributes; highlighting its role as a major component of residents’ wealth; and analyzing the negative impact of the sector’s decline on nationwide debt accumulation. Recognizing the importance, persistent demand, and unresolved issues in real estate is crucial for advancing solutions.

Lu Ting concluded that overall, the real estate industry is showing positive signs, and the probability of genuine stabilization and recovery within the next 2-3 years remains high. However, he emphasized that achieving this depends critically on substantial progress in debt resolution for developers and the sector.