This paper considers the issue of local“land finance”in the context of China’s fast urban expansion.In an analysis of China’s land requisition and public leasing system we argue that low-cost land acquisition is the fundamental cause of land-related distortions that have occurred during China’s urbanization.Granting farmers the power to negotiate directly with land users during urban expansion,combined with coordinated land tax reforms to consolidate local tax bases is the key to China achieving both equity and land use efficiency in urban expansion. This paper considers the issue of local “land finance ” in the context of China’s fast urban expansion. In an analysis of China’s land requisition and public leasing system we argue that low-cost land acquisition is the fundamental cause of land-related distortions that have occurred during China’s urbanization.Granting farmers the power to negotiate directly with land users for urban expansion, combined with coordinated land tax reforms to consolidate local tax bases is the key to China achieving both equity and land use efficiency in urban expansion.