State-owned developers are rushing to the rescue of cash-strapped local governments in China by stepping to the fore at land auctions previously dominated by private sector groups.

Over the past three months state developers have bought three-quarters of residential land sold at auctions in 22 big cities by value, according to a Financial Times analysis of public records. They had previously purchased only about 45 per cent of land plots sold at auctions, which is the biggest source of income for local governments.

A year-long drive by Beijing to reduce leverage across the property sector, which is estimated to account for about one-third of total output in the world’s second-largest economy, has driven Evergrande and other private-sector Chinese developers to the brink of bankruptcy. That, in turn, has damped buyer demand at land auctions, hitting local government finances hard.