Cash-strapped local governments in China artificially boosted their revenues last year by selling swaths of land to their own investment vehicles, an official think-tank said, raising concerns about the extent of their financial woes.More than half of the Rmb2.2tn ($316bn) in residential property plot sales by local Chinese authorities in 2022 were made to local government financing vehicles (LGFVs), according to a report published last week by the Chinese Academy of Fiscal Sciences, which warned some transactions “might be fake”.

The report suggested local governments had overstated their revenue after LGFVs, which are responsible for financing infrastructure construction, stepped in as the biggest land buyer. “Local authorities have a strong incentive to sell assets at inflated prices or have LGFVs purchase land to artificially prop up fiscal revenue,” the think-tank said.

Land sales are a crucial source of revenue for China’s local governments, which are responsible for everything from roads to healthcare and education but whose budgets have been hit hard by the Covid-19 pandemic and a property market crisis.