Evolutionary game and risk decision-making of four core participants of land finance in China

In order to balance the interests of land finance participants and maintain the stability of their capital chain, this paper combines the two levels of local government debt financing and real estate development, incorporates local governments, real estate developers, urban residents and commercial banks into a unified analytical framework, systematically constructs a behavioral game evolution model of the four core participants to analyze the stability of the equilibrium points and the system stability strategies. Meanwhile, the numerical simulation is used to explore the impact of parameter changes on the behavioral game evolution trend and risk profile of each participant. The results show that: (1) The land transfer revenue and other costs of investing in local development have greater impacts on the strategic choices of local governments than the cost of land-transferring, and excessively low land transfer revenue and high costs of investing in local development will trigger a series of financial risks, which is not conducive to the systemic stability. (2) The rise in commercial banks' lending rate will increase the difficulty of real estate developers' capital turnover, so that they have to bear the risks of loan default, delay in construction and so on, however, improving the autonomous repayment rate of real estate developers can alleviate it. (3) The cost of house purchase and the benefits from quality resources acquired by urban residents from purchasing a house have different degrees of influence on the strategic choices of urban residents and work in opposite directions, so the relationship between the two factors should be adequately balanced to help urban residents avoid risks such as increased pressure in life. (4) The probability of commercial banks choosing the “lending to real estate developers” strategy is positively correlated with real estate developers' autonomous repayment rate and commercial banks' lending rate, and the inappropriate value of the two may lead to credit risk. Finally, from the perspective of the game participants, targeted risk decision-making and policy recommendations are put forward.