This paper investigates the impact of government land supply on new residential construction. By estimating a housing supply equation using a panel data set covering 35 major Chinese cities for the period of 1999 to 2010, it is found that the quantity of the land sold by the government is tightly associated with the number of housing starts. Two -or three - year lag of land sales has a larger impact on new construction than one- year lag , which is consistent with the fact that there is normally a two- to three-year interval between the date of land transaction and the date when construction is initiated. It is also found that the decrease in land sales accounts for a large proportion of the decrease in new construction in Beijing, Shanghai and Shenzhen. The estimates of city -specific supply elasticities are provided based on the housing supply model, it is found that housing price appreciation tends to be more considerable in cities with inelastic supply
