Land Finance as a Double-Edged Sword for Urbanization Efficiency in China

Land finance (LF) in China reflects a short-term, growth-oriented development model. Given the systematic and complex impact of LF on urbanization efficiency (UE), this paper decomposes UE into urbanization technical efficiency (UTE) and urbanization scale efficiency (USE). Using panel data from 281 prefecture-level cities in China from 2004 to 2017, we employ a dynamic spatial Durbin model for empirical analysis. The results show that (1) LF and UTE exhibit a positive U-shaped relationship. LF exerts a direct and spatial spillover effect on UTE that shifts from inhibition to promotion, with stronger long-term effects. (2) LF and USE display an inverted U-shaped relationship. LF’s direct and spatial spillover effects on USE change from promotion to inhibition, and the long-term effects are more pronounced. (3) Real estate investment amplifies LF’s positive impact on UTE and strengthens its spatial spillover on USE but fails to mitigate LF’s negative direct effect on USE. (4) Industrial structure enhances LF’s promotion of USE but temporarily weakens its spatial spillover on UTE—a negative effect that turns positive in the long run. These findings provide empirical support for optimizing LF’s revenue and expenditure structure, improving the long-term assessment system for officials, accelerating industrial upgrading, and alleviating development pressure from the overheated real estate sector to promote sustainable urbanization.