Land Finance Dependence and Urban Credit Expansion: Evidence from Chinese Prefecture-Level Cities, 2007–2022

Land finance is an important funding base through which Chinese local governments promote urban construction and economic development, yet its relationship with urban credit expansion remains insufficiently understood. Using panel data for 287 Chinese prefecture-level cities from 2007 to 2022, this study applies a two-way fixed-effects model to examine the relationship between land finance dependence and urban credit expansion, including its dynamic and structural features. The results show a significant positive association between land finance dependence and urban loan growth: a 0.1 increase in land finance dependence is associated with an average increase of approximately 0.316 percentage points in the urban loan growth rate. This positive relationship is concentrated in the current and following years. Cities with greater land finance dependence also exhibit faster loan growth relative to locally recorded deposit and economic output growth, together with a higher loan-to-deposit ratio. Instrumental-variable estimates are directionally consistent but weak, while robustness checks preserve the positive sign across alternative measurements, samples, and fixed-effects structures. These findings document the magnitude, timing, and balance-sheet structure of the relationship between land finance dependence and urban credit expansion, offering city-level evidence for coordinated monitoring of land finance and urban credit.