High-speed rail, new town development, and the spatial mismatch of land leases in China

This study estimates the causal impact of the high-speed rail (HSR) on land market outcomes of Chinese counties, from 2004 to 2016. Local governments launch new HSR town projects in suburban areas by leveraging the spatial spillover benefits of HSR stations. This study finds that the average land price increases in urban districts with HSR access. In contrast, the residential land supply and revenue decrease significantly in urban districts but increase significantly in suburban counties of medium and small cities. This suggests large-scale real estate development in HSR new town projects. The study finds that a population moves from suburban counties to urban districts due to HSR development, which indicates a strong spatial mismatch of land leases in new town projects. We argue that the spatial mismatch of land leases is a fundamental reason of the "ghost town " phenomena, which implicates the financial sustainability of private developers and the banking sector.