Land finance dependence and urban

land marketization in China_ The

perspective of strategic choice of local
governments on land transfer Xin Fan &
Sainan Qiu & Yukun Sun
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 Land Use Policy 99 (2020) 105023

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Land Use Policy

journal homepage: www.elsevier.com/locate/landusepol

Land finance dependence and urban land marketization in China: The T

perspective of strategic choice of local governments on land transfer
Xin Fana,b, Sainan Qiuc, Yukun Sund,*
a
School of Economics, Renmin University of China, Beijing, 100872, China
b
Center for China Public Sector Economy Research, Jilin University, Changchun, 130012, China
c
School of Economics, Jilin University, Changchun, 130012, China
d
School of Public Finance and Taxation, Zhongnan University of Economics and Law, Wuhan, 430073, China

ARTICLE INFO ABSTRACT

Keywords: In the context of tax-sharing system, the issue of using profits from land transfers to cover local government
Urban land marketization deficits has attracted widespread attention. However, research on how local governments contingently choose
Land finance dependence different types of urban land transfer methods and the transfer volumes remains limited. This paper utilizes
Industrial land China’s transfer of land parcels data from 2007 to 2016 to calculate the marketization level of different types of
Commercial land
urban land, and investigates the driving forces of urban land marketization in China, paying special attention to
Residential land
land finance dependence and urban land marketization. We find that urban land marketization level is in-
creasing. Among different urban land types, residential land has the highest marketization level, while industrial
land has seen the largest increase in marketization. The results of a spatial lag model also show that when local
governments increase the level of land marketization, governments in neighboring regions react correspond-
ingly. Judging from the status quo of economic development in most cities, local governments usually tackle
financial deficits by vigorously promoting urban land marketization, but they tend to prioritize residential and
commercial land transfers for their own interests given the degree of land finance dependence. This study
broadens our understanding of the heterogeneous nature of land marketization and the role of local government
behavior in the urban land market in China.

1. Introduction
Under China's current fiscal and tax systems, the local government
deficit and the political promotion system are primary driving forces for
land finance. On the one hand, the reform of China’s tax-sharing system
has decentralized the responsibility of financing local government
programs. For example, firms that originally paid taxes to local gov-
ernments are now taxed by the central government, indicating a plunge
in local government revenue: in the first year under the reform, the
ratio of local government fiscal revenue to the national fiscal revenue
dropped from 78 % to 44.3 %. As the reform of the tax-sharing system
continues, the aim of economic growth causes increasing pressure on
local governments (Tao et al., 2010; Zhang, 2006). The fiscal deficit of
the local government rose from 1.47 trillion yuan in 2007 to 7.31
trillion yuan in 2016, an increase of nearly 400 % (Fig. 1). Changes in
deficits increase the demand for government revenue at the local level
(Pan et al., 2015). Among all feasible approaches, land transfer fees
have become the primary source of extra-budgetary income to cover the
fiscal deficit resulting from decreases in funding from the central gov-
ernment (Lichtenberg and Ding, 2009; Lin, 2007; Lin and Yi, 2011; Fu,
2015), with amount increasing from 1.22 trillion yuan to 3.65 trillion
yuan during the period from 2007 to 2016; although their proportion
has fluctuated greatly, land transfer fees have provided up to 36 % of
local government revenue.1
One the other hand, as local economic growth and government
revenue are the two basic criteria on whether the local government

Corresponding author at: 182 Nanhu Avenue, East Lake High-tech Development Zone, Wuhan, 430073, China.
⁎

E-mail address: syk1208@gmail.com (Y. Sun).

1
Land transfer fees are considered as informal fiscal revenue. Before 2006, land transfer fees were listed as non-budget income; since the promulgation of the
Management Measures on the Revenue and Expenditure of the Transfer of State-owned Land Use Rights in 2006, they have been included in one of the governmental
funds and are freely controlled by the local government and require no submission to the central government. It should be noted that land-related tax revenue may
also constitute a large segment of the local government revenue. However, the land-related tax revenue is included in the total budget of the local government,
combined with other taxes and cannot be completely controlled by local government. Therefore, local governments do not have sufficient incentives to pursue land-
related tax revenues (Liu et al., 2016).

https://doi.org/10.1016/j.landusepol.2020.105023
Received 31 December 2019; Received in revised form 23 June 2020; Accepted 14 August 2020
Available online 02 September 2020
0264-8377/ © 2020 Elsevier Ltd. All rights reserved.
X. Fan, et al.
Fig. 1. Land transfer fees, local government fiscal deficit and the ratio of land transfer fees to local government revenue.
official can receive promotion, land finance has been a popular tool of
governments because in the short term it creates an impressive ac-
complishment for both the jurisdiction and its officials (Oi, 1995; Chen,
2004; Maskin et al., 2000; Chen et al., 2005). In addition, empirical
studies have shown that for every one percentage pointincrease in
China's regional economic growth rate, the probability of promotion for
provincial officials increases by 15 percentage points (Li and Zhou,
2005).
The continued acceleration of industrialization and urbanization
has increased the demand for urban land (Liu, 2018). Under the public
land ownership system in China, the primary land transfer market is
monopolized by local governments, which can selectively implement
land management policies authorized by the central government
(O’Brien and Li, 1999; Ran, 2013; Liu et al., 2014) as well as make self-
interest oriented land transfer decisions that affect land marketization.
As China continues marketization reform, the role of market mechan-
isms in the allocation of land resources is becoming more important.
Because local governments cannot create more land, its effective use
will benefit China's economic growth and urban development (Mo,
2018; Halleux et al., 2012).
Different from market-oriented land allocation systems in developed
countries (Alonso, 1964), China's urban land allocation system is both
market-oriented and government-monitored (Haila, 2007; Xu and Yeh,
2009). During the planned economy period, the government made the
urban land in China available at no cost. After the economic reform and
the opening up of the country, China's urban land available for devel-
opment gradually changed from free allocation to paid transfer. In the
1990s, the initial land transfer method in China was primarily based on
closed-door negotiations between government officials and land users
(xieyi),2 a system that incentivized rented use and other problems as-
sociated with economic inefficiency (Cai et al., 2013) as well as led to
inefficient uses and waste of land resources. Compared with commer-
cial and residential land, the transfer of industrial land is more complex
and chaotic. Because of China's regional economic competition, local
governments have successively transferred industrial land by attracting
investors with low, zero or even negative (considering subsidies for
infrastructure support) land prices. To achieve efficient use of land
resources and to be in line with the reform of the economic system, the
central government began to vigorously promote land market reforms.
From the beginning of the 21 st century, China's land marketization
process has accelerated; since the Ministry of Land and Resources of the
2
There is only one assignee in the closed-door negotiation, and the land
transfer price is determined by the government and the transferee in private. It
is not a formal market-based transfer method.
2
Land Use Policy 99 (2020) 105023
People's Republic of China explicitly promoted land market reform in
2002,3 China's urban land marketization level has shown a steady up-
ward trend (Liu et al., 2016).
Looking back on the development of China's land marketization, it
has been a gradual process pushed forward by the central government
from top to bottom. However, the degree of implementation of land
marketization requirements vary significantly among local govern-
ments, providing a rich basis for the differential analysis, which is the
focus of this paper. As China’s economy has developed, local govern-
ments now face greater financial pressure. They must decide on how to
effectively relieve this pressure using both government intervention and
the market power in various types of land market (Yang et al., 2015;
Wang and Hui, 2017); however, the relationship between the land
transfer behavior dominated by local governments and urban land
marketization is dynamic. As an important source of financial revenue
for local governments, local governments’ dependence on land transfer
revenue not only has a positive impact on land prices (Zhang et al.,
2016), especially on the prices of commercial and residential land (Pan
et al., 2015), but also increases the amount of land transfers (Shu et al.,
2018). Such growth in land transfers has a clear driving effect on the
development of the land market, subsequently accelerating the reform
of land marketization. However, our data also demonstrate that in
economically underdeveloped regions, the fiscal deficit has inhibited
the level of urban land marketization (Liu et al., 2016), in other words,
the dependence on land finance caused by local government fiscal
pressure has inhibited the level of urban land marketization. With the
above discussion in mind, so far scholars have not reached a consensus
on the relationship between land finance and urban land marketization.
If we consider the differences in the land strategies of the local gov-
ernments, their relationship will become more unclear.
3
In 2002, the Ministry of Land and Resources of the P.R.C issued the
Regulations on the Transfer of State-owned Land Use Rights by Public Trending,
Auctioning and Listing of Quotation, stating that “All kinds of commercial,
tourism, entertainment, and commercial housing must be sold by public
trending (zhaobiao), auctioning (paimai), and listing of quotation (guapai)
(MLRC, 2002 Ministry of Land and Resources of China, 2002).” In August 2006,
the Notice of the State Council on Strengthening Relevant Issues Concerning
Land Regulation and Control clearly stated: “Industrial land must be sold by
means of public trending, auctioning and listing of quotation, and the selling
price must not be lower than the published minimum price standard.” In March
2007, the Property Right further stipulated that: “Management land for in-
dustrial, commercial, tourism, entertainment and commercial housing, and
those with more than two intentional land use in the same land shall be auc-
tioned utilizing public bidding, public tendering and auctioning (Ministry of
Land and Resources of China, 2007).”
X. Fan, et al.
Using a multi-scale, multi-mechanism framework to analyze the
strategic choices of local governments in the face of central policy, this
research aims to improve our understanding of China's industrial,
commercial, and residential land market reforms. We use detailed
Chinese land transfer information from 2007 to 2016 and apply a
spatial lag model to examine the relationship between land finance
dependence and urban land marketization, paying special attention to
the heterogeneity of these effects among different types of land.
This paper contributes to the existing literature in two aspects. First,
it appears to be the first paper to use a unique and comprehensive
database of urban land transactions to measure the general urban land
marketization and the marketization level of different types of land.
Existing research primarily uses macro-data from the China Land and
Resources Statistical Yearbook in calculating land marketization (Liu
and Lin, 2014; Liu et al., 2016; Wu et al., 2015). However, since 2008
the government has not released the sub-item data of “public tendering,
auctioning and listing of quotation,” so land marketization cannot be
accurately measured. Second, considering the spatial spillover effects of
land marketization (Brueckner, 2003) and the contingency choices of
local governments for different types of land transfer, we use a spatial
econometrics model to investigate the relationship between land fi-
nance dependence and marketization of different types of land to pro-
vide empirical evidence on the hypothesis that policy choices of local
governments vary for different types of land transfer (Kong et al.,
2018).
The rest of the paper is organized as follows: In Section 2, we
measure the level of urban land marketization and the degree of land
finance dependence while conducting a corresponding trend analysis
based on the analysis of the internal mechanism of land finance de-
pendence and urban land marketization. We introduce relevant vari-
ables and data sources and construct a spatial econometrics model in
Section 3. Section 4 considers the impact of land finance dependence of
local governments on the overall and different types of urban land
marketization and Section 5 concludes with a discussion on implica-
tions of this study and suggestions for future research.
2. The evolution of land finance dependence and urban land
marketization
2.1. Urban land marketization from the perspective of the strategic choice of
the local government in China
In 1994, China actively began to implement the tax-sharing system,
dividing the tax system into the central tax, local tax, and central-local
shared tax and classifying all consumption taxes and 75 % of value-
added tax (VAT) as central fiscal revenue; the reform of the income tax
sharing system introduced in 2002 changed the corporate income tax
and the personal income tax from local tax to central-local shared tax,
thus reducing the income tax received by local governments by 40 %
since 2003. The change from a business tax to a VAT fully implemented
in 2016, further reduced the local government's financial resources by
reducing both the VAT and the double taxation. The implementation of
the tax-sharing system increased the share of central government rev-
enue, shifted the public expenditure responsibility to the local gov-
ernments at the same time (Wu et al., 2015). Local government revenue
rose from 2.38 trillion yuan to 8.72 trillion yuan, and fiscal expenditure
rose from 3.83 trillion yuan to 16.04 trillion yuan from 2007 to 2016,
the increase in fiscal expenditure was significantly greater than the
increase in fiscal revenue. Among the 283 prefecture-level cities stu-
died, only Suzhou, Hangzhou and Wuxi have sustained fiscal surpluses.
Land transfer fees is controlled by local government instead of the
central government (Guo and Shi, 2018). Therefore, local governments
with large fiscal deficits request both transfer payments from the cen-
tral government and land fees to cover deficits, with the latter being the
most common way for local governments in China to increase their
fiscal revenue (Ding, 2003).4 For regions with small fiscal deficits or
3
Land Use Policy 99 (2020) 105023
even fiscal surpluses, the motivation to make up for the fiscal deficits is
weaker, but these cities are concentrated in economically developed
areas such as the southeast coast. Due to the pressure of officials’ pro-
motion competition and the performance evaluation by superior gov-
ernments, local governments are often in a state of rivalry and inter-
action with each other, especially in regions that are geographically
adjacent or have similar economic development levels. These local
governments not only have to ensure the economic growth rate, but
also have to seek higher rankings over their “peers”. Consequently, they
have a strong incentive to pursue land finance (Oi, 1995; Chen, 2004;
Maskin et al., 2000; Chen et al., 2005).
China has formed a three-level structure for its land market, namely
the agricultural land acquisition market, the primary land market, and
the secondary land market. The primary land market is monopolized by
local governments, which can selectively implement the land manage-
ment policies established by the central government (O’Brien and Li,
1999; Ran, 2013) or develop land transfer decisions for their own in-
terests. Both approaches directly affect urban land marketization. To
address financial pressure and achieve long-term economic growth in
the region, local governments have gradually implemented a develop-
ment routine that relies on the sale of land to obtain extra-budgetary
income. Land finance has become typical of local governments under a
decentralization policy.
China has experienced rapid urbanization at an unprecedented rate
since the 1978 reform and the opening of the economy (Bai et al.,
2014). With the continued acceleration of industrialization and urba-
nization, the demand for urban land in China has increased rapidly. But
the land resources of local governments are limited. To maximize their
interests, local governments implement land transfer strategies based
on various degrees of land finance dependence.
Local governments adopt different methods of land transfer and
require different land transfer income. At the beginning of the market-
oriented reform of urban land transfers, the only market-based method
for land transfers stipulated in government documents was “public
tendering and auctioning.”5 In 2002, the Ministry of Land and Re-
sources introduced the “listing of quotation” transfer method.6 Al-
though the central government clearly stipulated that industrial, com-
mercial and residential land must be sold through market-based
methods such as “public tendering, auctioning, or listing of quotation”,
it is easy for local governments to intervene in the “listing of quotation”
to obtain profits in corruption (Xu et al., 2009). Therefore, the gov-
ernment is more inclined to transfer land through “listing of quotation”.
4
Transfer payments are divided into general transfer payments and special
transfer payments. Local governments need to use special transfer payments for
the purposes specified by the central government. Special transfer payments
still account for a large proportion. On the one hand, the special transfer pay-
ment does not form the disposable financial resources of the local government;
on the other hand, too many local special fund packages required in special
transfer payments (such as the transfer payment for agriculture, education,
science and technology, etc. requires the corresponding infrastructure of the
local government) increase the burden of local finances, forcing many places to
crowd out normal fiscal expenditures and also affected the overall balance of
local fiscal budgets.
5
Auctioning refers to that the assignor first sets the floor price, bidders take
turns to quote prices, and the bidder with the highest price obtains the land use
right. Public tendering refers to bidding for the right to use a piece of land in a
written bidding within a prescribed period. Unlike the public price system of
auctions, bidders involved in public tendering do not know one another’s bids,
and the land use right lender chooses the highest price to transfer land.
6
The listing of quotation is equivalent to a two-stage auction. The bidders in
the first stage publicly offer prices in a sequence. If there are two or more
bidders after the first stage, they are transferred to the live auction, which is the
same as the auction. Unlike auctions, where there are more than three bidders,
there is no requirement for the number of bidders to be listed, as long as the
bidder's bid is not lower than the listed base price, the transaction can be
completed.
X. Fan, et al.
As local governments still have considerable monopoly power and a
strong willingness to intervene in the market in the transfer of industrial
land, the use of various strategies to transfer this type of land at low
prices through “listing of quotation” to attract corporate investment
still exists today (Tao et al., 2010). As a result, the transfer price of
industrial land is significantly lower than the price of commercial and
residential land, and lower than the market price.
Local governments make strategic choices on the land transfer types
and on the land transfer income. Selling commercial and residential
land through “public tendering, auctioning, or listing of quotation” may
quickly alleviate financial pressure by obtaining land transfer fees.
Since industrial zoning is correlated with long-term employment, po-
pulation growth, and increased business tax revenue streams, there is
an incentive for local officials to offer industrial land at a low price
(Wang, 2014; Wassmer, 2002; Langer and Korzhenevych, 2018). As a
general rule, local governments are incentivized to engage in a mixed
strategy, offering different types of land at different prices.
The data show that to ease financial pressure, local governments
tend to use more land for commercial and residential purposes, selling
it through the highly market-oriented “public tendering, auctioning, or
listing of quotation” option (Li, 2014). Han and Kung (2015) examined
the relationship between fiscal revenue, the land transfer area and the
sales income from commercial and residential land, finding in their
sample that every 1 % decrease in fiscal revenue retained by local
governments was the result of an increase of 6.4 %–11.0 % in the
transfer area of commercial and residential land. Such increment in
transfer area causes land transfer revenue to increase by 10.0 %–16.3
%. In other words, in regions where land finance dependence is higher,
local governments tend to sell commercial and residential land in a
highly marketable way to compensate for fiscal deficits quickly; how-
ever, it is difficult to project the long-term economic development. The
opposite is true for areas with lower land finance dependence. Due to
differences in the economic development stages and the advantageous
features of the land resources in cities, the strategic choices of local
governments with the same land finance dependence are also different,
indicating heterogeneous impacts of land finance dependence on urban
land marketization.
2.2. Measurement of land financial dependence and urban land
marketization
Faced with the pressure of fiscal deficits, local governments urgently
need to increase revenues to compensate for them. As an effective way
of rapidly increasing revenues, land transfers are prevalent across
China. From the perspective of the income sources of local govern-
ments, land transfer income primarily includes land transfer fees and
land-related taxes. However, the complexity of local tax systems and
the delayed stream of land taxation complicate the measurement of the
true tax revenue benefit of land transfers. Land transfer fees are one of
the most effective ways to address local government deficits as they are
the largest and most easily controlled component of fiscal revenue (Shu
et al., 2018). By contrast, land-related tax revenue streams, while im-
portant, are less easily attributed to a particular land transfer. In this
study we use the land transfer fee to measure land finance dependence
(Mo, 2018; Lu et al., 2019), which is calculated as
ltf
lfd =
ltf + gbr (1)
where lfd represents land finance dependence, ltf represents the land
transfer fee, and gbr represents the local government’s intra-budgetary
revenue. As calculated, land finance dependence fluctuates, but the
overall trend declined during the 2007–2016 sample period (Fig. 2). On
average, the financial dependence of the local government on land in
2016 was 0.2695, around 0.0692 less than the average annual land
finance dependence. The trend of land finance dependence is coincident
with such factors as tax-sharing reform and economic fluctuations.
4
Land Use Policy 99 (2020) 105023
Due to the differences in natural environment, population density
and economic development level, there are large geographic differences
in land use policies (Wang et al., 2018b). This also leads to a large
spatial difference in China’s land finance dependence. Observing the
degree of land finance dependence of various cities in 2016, it can be
found that cities in eastern developed regions such as Nanjing,
Changzhou, Jinan, and Jiaxing have a higher degree of land finance
dependence, respectively 0.6063, 0.5944, 0.5265, and 0.5163, much
higher than the average value in 2016 (0.2695). The land finance de-
pendence of Longnan in the western region is the lowest, only 0.0086.
The developed regions in the east have less financial pressure and
weaker land resource endowment, but the land finance dependence is
the highest; the underdeveloped regions such as the western and central
regions have greater financial pressures and stronger land resource
endowment, but their land finance dependence is relatively weak. The
eastern regions are densely populated with limited land area, resulting
in scarce land resources, but because of their better economic and
technological conditions, the degree of land use and land prices are
relatively high (Wang et al., 2018a).
Although the average fiscal deficits between 2007 and 2016 in the
eastern region was 8.75 billion yuan, which was much smaller than
10.63 billion yuan in the central region and 10.54 billion yuan in the
western region, land sales revenue in the east was 13.84 billion yuan,
higher than that in the central region (6.55 billion yuan) and the
western region (5.21 billion yuan). For the central and western regions,
the market mechanism has a weak role in regional development, the
abundant land resources are not effectively used and the land transfer
revenue is relatively small. Despite the heavy financial pressure, the
central government's transfer payments are mainly inclined towards the
central and western regions, so land finance dependence is relatively
low.
In China, the rural land market and the urban land market are di-
vided, with the market-oriented transactions such as “public tendering,
auctioning or listing of quotation” primarily targeting urban land, while
the secondary market of land is close to a completely competitive
market. Therefore, we use the level of land marketization in the pri-
mary market as the measurement of urban land marketization. The
most common methods for land marketization are the direct calculation
method (Wang and Tan, 2020; Yuan et al., 2019) and the weighting
method (Liu and Lin, 2014; Liu et al., 2016; Wu et al., 2015). The direct
calculation method directly measures the level of land marketization
using indicators such as the price, area, and number of land transfers;
the weighting method, although based on the direct calculation
method, gives different price weights to those obtained through closed-
door negotiation, public tendering, auctioning, and listing of quotation.
Compared with the direct calculation method, the weighting method
not only considers the land transfer method but also takes into account
the deviation between the actual supply price of the land and the
marketization standard and thus the weighting method can be con-
sidered as a more comprehensive measurement the level of land mar-
ketization.
We use the weighting method in this study to measure the mar-
ketization level of the overall and the different types of land using
various administrative land transection data in China. Specifically, this
paper uses the detailed information on more than 1.673 million land
transfers in China between 2007 and 2016,7 including land supply,
project location, area, land use, land supply method, transaction price,
7
China Land Website: www.landchina.com. In 2006, the “Regulations on the
Transfer of State-owned Land Use Rights for Public Tendering, Auctioning and
Listing of Quotation” clearly require that the municipal and county-level gov-
ernment land authorities must publish the results of the transfer of the various
land on the “Results Publicity” column of the China Land Website. The in-
troduction of this specification provided a basis for us to use micro-data to
measure urban land marketization.
X. Fan, et al.
Fig. 2. The trend of urban land marketization and land finance dependence in Chinese cities.
and the date of signing the contract, among others. We compiled the
data for the cities based on the 2007 jurisdiction codes.8 Considering
that different land transfer methods have different levels of market-
ization, according to the analysis of China's land market transactions
between 2007 and 2016, the average price of land transferred by auc-
tion is the highest, so it is used as the market-based benchmark price,
and the price weight is set to 1.
The price weights of other transfer methods are determined by the
relative value of the average price of the land transferred through
public tendering, listing of quotation and closed-door negotiation
compare with the average price of the land transferred through auction.
According to this calculation, the public tendering, listing of quotation,
and closed-door negotiation price weights are 0.94, 0.62, and 0.3, re-
spectively. Finally, the price weight data and the transfer area of each
transfer method are calculated using Formula (2) to obtain the mar-
ketization level of the overall and the different types of land. Taking
into account the trends in the land market and the marketization of sub-
type land, the land marketization level of industrial land, commercial
land, and residential land, is calculated as follows:
Qi Wi
lmitn =
Qi (2)
where lmitn is the marketization level in city i, year t and type n; Qi is the
land area of the city i sold in the land market by public tendering,
auctioning, listing of quotation and closed-door negotiation; and Wi is
city i’s price weight of the land sold by public tendering, auctioning,
listing of quotation and closed-door negotiation.
Fig. 2 shows the marketization level of the overall and the different
types of land in China from 2007 to 2016. The overall land market-
ization in China showed an upward trend during this period. More
specifically, total land marketization grew dramatically in 2008, in-
creasing from 0.5324 in 2007 to 0.6035 in 2008, an increase of nearly 7
percentage points. After 2008, the overall land marketization level in-
creased steadily, reaching to 0.6303 in 2016. Residential land exhibits
the highest level of marketization, with little fluctuation during the
period from 2007 to 2016 when the marketization level of residential
land increased by only 1 percentage point. In 2007, the marketization
level of commercial land was 0.612, reaching 0.6372 in 2016. In-
dustrial land exhibits the lowest level of marketization, although the
8
Since the land data of the farmer's corps and the corps are listed separately
in the China Land and Resources Statistical Yearbook, they are not counted in
the prefecture-level cities. Therefore, the data of the farmer's corps and the
corps are excluded. In the 283 prefecture-level cities based on 2007, Sanya and
Lhasa were missing data during the sample period, and Chaohu was merged
with Hefei in 2011. Therefore, Sanya and Lhasa were excluded, and the data of
Chaohu was merged with the Hefei for calculation.
5
Land Use Policy 99 (2020) 105023
degree grew dramatically in 2008, increasing by approximately 13
percentage points from 0.4471 in 2007 to 0.5733 in 2008. After 2008,
the marketization level of industrial land showed a steady upward
trend, increasing to 0.6248 in 2016. From the perspective of time, the
trend and amplitude of the overall and the different types of land
marketization levels are closely related to the market-oriented reform
process of different types of land.
To explore the spatial pattern of urban land marketization, we also
analyze the overall and different types of land marketization in cities of
different locations (see Figs. 3–6). For the timeframe investigated here,
the regions with a higher level of land marketization are primarily
concentrated in key cities in the southeastern coastal areas and the
capitals of provinces, a trend consistent with the economic develop-
ment and population distribution of the country. The marketization
level of commercial and residential land exhibits similar urban dis-
tribution. However, inland cities gradually become regions with a high
level of marketization of industrial land, perhaps because of higher
labor costs and fewer land resources in the coastal areas.
From 2007 to 2016, the construction land area per capita for 33
prefecture-level cities showed negative growth, and most of these cities
were concentrated in coastal areas. The coastal region sales the com-
mercial and residential land at high prices, and the urban land mar-
ketization level has reached a high level. Since the construction land in
coastal areas shifted from the incremental phase to the stock phase, the
amount of land that can be sold by local government is relatively lim-
ited, so the marketization of various types of land slowly improved and
the local governments needed to find other local revenue sources. Areas
with low land resources tended to be more economically developed
with fewer central transfer payments. These governments’ intra-bud-
getary revenues at this time primarily came from indirect taxes though
land transfers (e.g. business tax, corporate income tax, etc.) created by
the construction and real estate industries due to urban expansion, and
an increase in direct taxes though land transfer (e.g. stamp tax, land
appreciation tax, farm land occupation tax, house property tax and
urban land use tax, etc.) (Lian et al., 2019). These accounts for 35.18 %
and 11.01 % of local government revenue during the period of
2007–2016. At this time, the adjustment and optimization of the
structure of urban land became particularly important.
3. Methods and data
The land transfer strategy of local governments can be affected by
the actions of local governments in other regions. This competitive
strategic interaction between local governments will have a spatial
spillover effect in urban land marketization. To address this issue, we
use the spatial lag model to investigate if the level of land marketization
is affected by spatial spillover effects. According to the spatial
X. Fan, et al. Land Use Policy 99 (2020) 105023

Fig. 3. The change of urban land marketization in China, 2007 and 2016.

Fig. 4. The change of marketization level of industrial land in China, 2007 and 2016.

Fig. 5. The change of marketization level of commercial land in China, 2007 and 2016.

autocorrelation test, the urban land marketization for each year and the
Moran’s I of the marketization level of different types of land are all
significant at the 1 % level, indicating that urban land marketization
has a positive spatial spillover effect and the spatial econometrics
model is more reasonable. The p-value of the LM error is 0.005, and the
p-value of LM lag is 0.001, indicating that both pass the significance
test; the p-value of the R-LM error is 0.191, meaning that the sig-
nificance test is not passed; the p-value of R-LM lag is 0.025, passing the
significance test at the 1 % level; therefore, we use the spatial lag model
(SLM).
Due to the time lag of local government's land finance dependence
on its transfer behavior, we choose land finance dependence with one
period lag as the explanatory variable.9 We use the following model:
9
One may concern with the possible reversal causality relationship between
land finance dependence and urban land marketization. Theoretically, greater
land financial dependence will cause higher urban land marketization, with a
view to alleviate the local government's dependence on land finance in the
future by increasing land sales prices. If the empirical results also support this
theoretical analysis, the reversal causality issue tends to weaken our estimation
of the coefficients concerned, rather than create a fake relationship. That is to
say, our estimates of both the causes and effects of the urban land marketization
provides a lower bound on the true relationship (Wang and Hui, 2017). Hence,
lagging land financial dependence by one year can also alleviate the potential
endogeneity issue.

6
X. Fan, et al.
Fig. 6. The change of marketization level of residential land in China, 2007 and 2016.
lmitn = c +
N
wij lmnjt + lfdi, t + Xit +
j=1 1 it
where lmitn represents the marketization level of city i in the year t
and type n; lfd is land finance dependence; i, j represents prefecture-
level city, i j , N = 280; wij is a spatial weighting matrix processed by
row standardization10 is the spatial weight coefficient measuring the
degree of influence of the land marketization level in neighboring re-
gions on the marketization level of local land; is the coefficient of land
finance dependence; Xit is the vector of control variables; is the re-
gression coefficients of a vector of control variables; c is the constant
term; and ε is a random disturbance term. To test whether there is a
nonlinear relationship between land finance dependence and urban
land marketization level, we introduce a quadratic term of land finance
dependence, in the model:
N
lmitn = c +
j=1
wij lmnjt + lfdi, t 1 + lfdi2, t 1
+ Xit +
The control variables of this study include the average income (ai),
the land resource endowment (lrd), and the traffic accessibility (ta).
Average income is measured by the average wage of urban employees.
Existing research reveals that the income level of employees will affect
the city’s demand for land and the development of the land market (Wu
and Heerink, 2016). While the level of land marketization is related to
the land resource endowment, the increasingly prominent contradiction
between people and land shifts the attention of local governments to
the effective use of land (Lin and Ho, 2003). In this paper, the per capita
construction land area is used as the control variable reflecting the
regional land resource endowment. As many studies have highlighted
the role of traffic accessibility in driving land use change (Verburg
et al., 2004; Borzacchiello et al., 2010), this paper uses the per capita
road area to represent traffic accessibility. In addition, the collinearity
test is used in this study to prevent multi-variable collinearity between
the control variables. The results show that the variance inflation factor
(VIF) of all control variables is less than 1.5, indicating no significant
collinearity in the model (Belsley et al., 2005).
Data for these variables come from the 2007–2016 China City
Statistical Yearbook, the China Land and Resources Statistical
Yearbook, the China Land Market Website and statistical yearbooks or
news releases from the various provinces and cities in China. The
output value of the per capita wage is adjusted based on 2007 price
levels to eliminate any potential impact of inflation on the results. The
study sample set includes 2800 sample observations from 280 pre-
fecture-level cities in China from 2007 to 2016. The statistical de-
scription of each variable is shown in Table 1.
10
This study used the geographically adjacent spatial weighting matrix for
analysis; if the two regions are geographically adjacent, the value is “1”;
otherwise the value is “0”.
Land Use Policy 99 (2020) 105023
4. Empirical analysis
(3)
4.1. Impact of land finance dependence on urban land marketization
Table 2 shows the impact of the land finance dependence of local
governments on urban land marketization under different circum-
stances. Specifically, Models 1 and 2 show the influence of land finance
dependence on urban land marketization without taking the spatial
spillover effect into consideration, while Models 3 and 4 show the in-
fluence of land finance dependence on urban land marketization while
including the spatial spillover effect in the model. To further verify the
robustness of our models, we add the ratio of the land area, indicated by
public tendering, auctioning and listing of quotation, to the total land
transfer area by substituting the explained variable. Models 5 and 6
show the effect of the local government’s land finance dependence on
it
(4) urban land marketization under the different explained variable. From
the empirical results, the coefficient significance and direction of the
core explanatory variables are basically consistent, and the model has
strong robustness.11
The results indicate a spatial agglomeration effect in the urban land
marketization. Based on Models 3 and 4, the coefficient of ρ is sig-
nificantly positive at the 1% level, indicating a positive spatial ag-
glomeration effect. The coefficient values of ρ are 0.3489 and 0.3472,
respectively, indicating that the urban land marketization level in
neighboring regions will have a 34.89 % or 34.72 % increase associated
with a 100 % increase in the local urban land marketization level.
Under the dual pressure of economic growth and government deficits,
adjacent municipal governments often select the amount and price of
land transfer to attract investment. This model suggests that urban land
marketization in one region will increase the rate of urban land mar-
ketization in geographically adjacent regions.
Although an inverted U-shape is found in the relationship between
the degree of land finance dependence and urban land marketization,
urban land marketization still can be considered to have facilitated
economic development in most cities. As seen in Models 1 and 3, the
coefficients of land finance dependence are both significantly positive
at the 1% level, indicating that the increase of land finance dependence
is significantly associated with higher levels of urban land market-
ization. In Model 4, the coefficient of the linear term of land finance
dependence is significantly positive, and the coefficient of the quadratic
term is significantly negative, indicating that land finance dependence
and the land marketization have an inverted U-shaped relationship,
11
Regarding the heterogeneity of the impact of land finance dependence on
urban land marketization, we have also found mixed effects under time and
space differences and fiscal pressure differences. Due to space limitations, we
will not list them one by one. If necessary, it can be obtained from the author.
7
X. Fan, et al. Land Use Policy 99 (2020) 105023

Table 1
Summary statistics.
Variables Definition Obs Mean Std. Dev. Min Max

lm Urban land marketization level 2800 0.6114 0.0827 0.3108 0.9953

lmi Marketization level of industrial land 2800 0.5872 0.0857 0.300 0.982
lme Marketization level of commercial land 2800 0.6244 0.0991 0.300 1
lmr Marketization level of residential land 2800 0.6670 0.1136 0.300 1
lfdt-1 Land finance dependence lagged by one year 2800 0.3436 0.1492 0.0027 0.9862
ai The average wage of employed persons in urban units (10 thousand yuan / per person) 2800 2.2491 0.5104 0.221 4.577
lrd Per capita construction land area 2800 0.3246 0.4009 0.005 5.3587
(square kilometers / 10 thousand people)
ta Per capita road area 2800 0.0122 0.0086 0.0002 0.1144
(square meters /per person)

Table 2
Regression results of the full sample.
Variable Ordinary panel model Spatial lag model Replace the explained variable

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

0.3489*** 0.3472*** 0.5729*** 0.5706***

(18.04) (17.92) (36.70) (36.47)
lfdt 1 0.0342*** 0.0783** 0.0296*** 0.0866** 0.1087*** 0.3412***
(3.18) (2.37) (2.92) (2.66) (4.39) (4.16)
lfdt2 −0.0572 −0.0755* −0.3122***
1
(-1.40) (-1.84) (-2.97)
ai 0.0029 0.0026 0.0235*** 0.0229*** 0.0295*** 0.0282***
(0.64) (0.56) (4.95) (4.82) (3.04) (2.90)
lrd −0.0179** −0.0176*** −0.0063 −0.0059 −0.017 −0.014
(-3.35) (-3.30) (-1.12) (-1.05) (-1.39) (-1.14)
ta −0.0637 −0.0643 0.6427** 0.6267** 2.139*** 2.0676***
(-0.25) (-0.25) (2.49) (2.43) (3.81) (3.69)
C 0.5209*** 0.5147*** 0.3316*** 0.3251*** 0.2354*** 0.2041***
(47.92) (43.92) (21.10) (20.22) (9.52) (7.62)
R2 0.202 0.1999 0.0661 0.0658 0.1499 0.1612
Obs 2800 2800 2800 2800 2800 2800

Note: The t or z values are in parenthesis. ***, **, and* represent significant levels of 1%, 5%, and 10 % respectively.

with the inflection point at 0.5735. During this period, the land finance
dependence in most cities in China did not reach this inflection point,
suggesting that land finance dependence has played a role in promoting
the urban land marketization level during the sample period (Fig. 7).12
The inclusion of the spatial matrix in the model confirms that the
magnitude of the effect of land finance dependence on urban land
marketization relies on the presence of geographically adjacent land.
Comparing Models 1 and 3, we may discover that the effect of land
finance dependence on urban land marketization is 0.0342 and 0.0296,
respectively, indicating that if spatial spillover effect is not considered,
our coefficient estimates on the land finance dependence variable will
be positively biased.
In addition, in model 4, among other relevant factors, average in-
come is associated with higher levels of urban land marketization, in-
dicating that higher average income will not only increase the demand
for residential land but also affect the demand for commercial land and
improve the urban land marketization level. Higher land resource en-
dowment is associated with lower levels of urban land marketization.
Areas with poor land resources require more efficient means of allo-
cating land resources and hence governments may actively cultivate
and develop the land market, while renting land and wasting land re-
sources are seen more frequently in areas with abundant land resources.
Our result is consistent with the above hypothesis. The coefficient of
12
From the correlation analysis, the land finance dependence of China’s 147
prefecture-level cities still primarily plays a positive role in promoting land
marketization. Due to space limitations, the coefficients are not listed here.
They are, however, available upon request. In the following research, we only
examine the linear relationship between land finance dependence and urban
land marketization.
traffic accessibility is significantly positive at the 5% level, indicating
that transportation accessibility will accelerate the concentration of
factors and increase the level of urban land marketization.
4.2. Analysis of the influence of land finance dependence on the
marketization level of different types of land
Faced with the increasing fiscal deficit, local governments often use
their own discretion in selecting the types of land to transfer. As shown
in Table 3, all ρ values are positive and significant at the 1 % level,
indicating that the marketization level of different types of land in
prefecture-level cities in China exhibits a significant spatial agglom-
eration effect, which is consistent across the entire sample. Compared
with the model without considering the spatial spillover effect, the
contribution rate of land finance dependence to urban land market-
ization decreased when considering the spatial spillover effect, in-
dicating that the effect of land finance dependence on different types of
land marketization level may be overestimated without considering the
spatial spillover effect.
As can be seen in Model 2, Model 4 and Model 6 in Table 3, the
coefficients of degree of land finance dependence are all significant and
positive, indicating that land fiscal dependence on land transfers in-
creases the level of marketization of all types of land. The acceleration
effect of land finance dependence on the marketization level of in-
dustrial land is, however, less than that of commercial and residential
land. As a result of fiscal decentralization, local governments prefer to
reduce the proportion of industrial land transferred by closed-door
negotiations but increase the price of industrial land by increasing the
amount of industrial land transferred by “public tendering, auctioning
and listing of quotation”. According to the data, of the industrial land

8
X. Fan, et al. Land Use Policy 99 (2020) 105023

Fig. 7. The relationship between land financial dependence and urban land marketization in 280 prefecture-level cities.

Table 3
Regression results for the molecular terms.
Variable lmi lme lmr

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

0.492*** 0.122*** 0.1804***

(29.07) (5.25) (7.70)
lfdt-1 0.0202* 0.0183* 0.041*** 0.0383*** 0.0335** 0.028**
(1.89) (1.72) (2.89) (2.92) (2.43) (2.16)
ai 0.0051 0.0259*** 0.0087 0.017*** 0.0055 0.0085
(1.21) (5.47) (1.47) (2.95) (0.85) (1.40)
lrd −0.0047 0.0117** −0.0257*** −0.0227*** −0.01 −0.0047
(-0.92) (2.03) (-3.71) (-3.24) (-1.39) (-0.66)
ta −0.1379 0.4799* 0.0246 0.4015 −0.7489** −0.5031
(-0.58) (1.84) (0.07) (1.25) (-2.16) (-1.55)
C 0.4327*** 0.2272*** 0.5756*** 0.5003*** 0.6525*** 0.5272***
(43.85) (15.78) (41.32) (25.57) (41.98) (24.86)
R2 0.4195 0.1661 0.1469 0.0673 0.1512 0.0466
Obs 2800 2800 2800 2800 2800 2800

Note: The t or z values are in parenthesis. ***, **, and* represent significant levels of 1%, 5%, and 10 % respectively.

transferred from 2007 to 2016, the proportion transferred by closed-
door negotiations decreased from 67.62 % to 3.43 %, improving the
marketization level of industrial land. However, based on the goal of
attracting investment and long-term regional economic growth, the
selling price of “public tendering, auctioning and listing of quotation”
of industrial land was lower than that for commercial and residential
land.
During the period from 2007 to 2016, the average selling prices for
industrial land for the public tendering, auctioning, and listing of
quotation methods were 3.3938 million yuan per hectare, 2.6916 mil-
lion yuan per hectare and 2.1733 million yuan per hectare, respec-
tively, while the average prices for commercial land were 31.8554
million yuan per hectare, 35.0659 million yuan per hectare and
17.2209 million yuan per hectare, respectively. For residential land, the
prices were 39.6336 million yuan per hectare, 26.854 million yuan per
hectare and 18.7586 million yuan per hectare, respectively, reflecting
that the local governments differ in their contingency selections of the
types of transferred land.
5. Conclusions
The implementation of the tax-sharing reform in 1994 improved the
central government’s macro-control capabilities, but due to the mis-
match of the local government’s financial power, responsibilities, and

9
X. Fan, et al.
financial resources, the scale of the local fiscal deficit continued to
expand. Data show that the scale of local government fiscal deficits in
2016 was as high as 7.31 trillion yuan, and the fiscal deficit of 99.65 %
cities continued to expand. This is also an important reason why the
central government has further increased transfer payments and dee-
pened tax reform in recent years. Facing the widening fiscal deficits,
China has actively promoted the reform of urban land marketization
(Xie et al., 2002; Lin, 2007), with the local government also playing an
important role in this process (Li et al., 2015). The reform of urban land
marketization is not only beneficial to local economic development but
also an important approach for alleviating the financial pressure of
local governments. Therefore, we must focus on the socio-economic
effects of urban land marketization as well as include the important role
played by government actions and institutions in the reform of urban
land marketization (Wei and Lin, 2002; Liu et al., 2014; Li et al., 2015).
However, compared with the policy research on the reform of the urban
land marketization, the nature and dynamics of the urban land market
have received little research attention (Yuan et al., 2019).
This paper analyzes the spatiotemporal dynamics of overall and
individual types of land marketization in China from 2007 to 2016
using 1.673 million pieces of land transfer data. During this period,
China's urban land marketization saw rapid growth, with an average
annual growth rate of 1.89 %. The average annual growth rates of in-
dustrial, commercial and residential land were 3.79 %, 0.67 % and 0.05
%, respectively. The land marketization level of residential land was the
highest, while the land marketization of industrial land was the lowest,
a trend consistent with economic development and policy orientation.
At the same time, areas with higher levels of urban land marketization
were primarily concentrated in key cities, such as those located in the
southeast coastal area and the capitals of provinces. The distribution of
land marketization level in general is therefore consistent with regional
economic development levels and population distribution. The urban
distribution characteristics of the marketization level of commercial
land and residential land are similar, but inland cities began to have
industrial land marketization level. This trend implies that governments
should adapt to local conditions and implement land market reform,
especially industrial land market reform based on the location.
The empirical results using the spatial lag model show that the land
transfer strategies adopted by local governments are spatially inter-
dependent. The increasingly close relationship between urban land
marketization and regional development may suggest that China's
urban land market is becoming more mature (Liu et al., 2016) and the
strategic choice is the result of regional competition brought about by
decentralization. At the current stage of development, land finance
dependence is associated with higher levels of urban land market-
ization, a relationship that is found in most cities. However, if the fi-
nancial pressure on the local government exceeds a tolerable range, it
will cause negative effects. This relationship explains why the central
and local governments have focused on land use efficiency in recent
years. Undoubtedly, due to the differences in the nature of the various
types of land, local governments often choose the land type, method
and amount to be transferred based on contingency, and the con-
tribution rate of commercial and residential land is significantly higher
than that of industrial land. Although local governments have increased
the proportion of “public trending, auctioning, and listing of quotation”
in industrial land transfers, their prices are still relatively low compared
to commercial and residential land. In addition, regional competition
leads to uncoordinated regional development (He et al., 2014), leading
to the heterogeneous impact of land finance dependence on urban land
marketization. At this time, a “regional coordinated development
strategy” seems particularly important.
This research helps us to understand the role of local government in
the marketization of urban land in China in the context of fiscal de-
centralization. However, it is only an initial study in the area of land
marketization. There are many issues that merit further exploration.
First, we expect a systematic theoretical explanation of how the actions
10
Land Use Policy 99 (2020) 105023
of local governments affect land marketization. Although we have
provided theoretical explanations regarding the choice of different
types of land transferred by local governments based on the con-
tingency of financial pressure, a more systematic discussion is still
needed to enrich our understanding of how the behavior of local gov-
ernments affects urban land marketization. Second, further research
may explore how local governments contingently choose different
types, methods and amounts of land transfer by fully considering fac-
tors such as geographical location and the promotion of officials.
Finally, because local governments have not disclosed detailed data on
extra-budgetary income, transfer payment, and land-related taxes at the
prefecture-level city level, further research is need to explore whether
local governments with scarce land resources have other local sources
of income available for them without the actual transfer of land parcels.
CRediT authorship contribution statement
Xin Fan: Conceptualization, Methodology, Software, Visualization.
Sainan Qiu: Data curation, Writing - original draft. Yukun Sun:
Investigation, Validation, Writing - review & editing.
Declaration of Competing Interest
The authors report no declarations of interest.
Acknowledgements
We thank the editor for the valuable comments and suggestions.
This research was funded by the National Natural Science Foundation
of China (71703053), the China Postdoctoral Science Foundation
(2018T110171, 2017M620080), and the International Innovation Team
Project of Philosophy and Social Sciences of Jilin University
(2019GJTD03), and supported by the Fundamental Research Funds for
the Central Universities (2722020JCG020).
Appendix A. Supplementary data
Supplementary material related to this article can be found, in the
online version, at doi:https://doi.org/10.1016/j.landusepol.2020.
105023.
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when the Pethericks' bread account remained unpaid, and would have stopped the supply,
but for Salome.

"The poor little maid looks half-starved as it is," he remarked to his wife when she
expressed surprise that he took no steps to obtain his rights. "Josiah's drinking what ought
to be spent on his child; but it shall never be said that we begrudged her bread."

CHAPTER XIII.
Mrs. Fowler and Salome.

WHEN Mrs. Lute returned to N—, she asked and obtained permission for Margaret to visit
her. The little girl had not appeared very well lately, and it was thought a change would do
her good, which it certainly did, for she came back at the end of a fortnight decidedly
better in health and spirits.

Mrs. Fowler greeted Margaret on her return with no very great show of pleasure, though
secretly, she was delighted to see her looking so well. She never told her how glad she was
to have her at home again, or that she had missed her, as she had actually done. And
consequently, Margaret was not a little disappointed, and the kiss she gave her governess
was far warmer than the one she imprinted on her mother's fair cheek—a fact Mrs. Fowler
did not fail to notice.

"I have forfeited her respect and affection," thought the mother bitterly.

"She does not care for me, she never did," thought the child.

So the estrangement between the two grew, till it was patent to everybody. Perhaps Mr.
Fowler and the governess guessed the cause of it; but the servants blamed their mistress,
and declared she was so wrapped up in Master Gerald, that she had no love to spare for
her daughter.

On her return to Greystone, Margaret resumed her organ lessons; but she was obliged to
practise in the afternoons now, as the evenings were dark.

The golden touch of autumn was upon everything; the orchards were being cleared of their
fruit; and the village children scoured the country around Yelton for blackberries, and
sloes, and mushrooms. At the end of September, the fine weather broke up, and was
followed by the equinoctial gales, which did great damage in the Greystone gardens, the
fierce wind tearing up shrubs by the roots, and the heavy rains beating down the summer
flowers which had lingered late in bloom. Mr. Fowler braved the fury of the elements, and
was out of doors every day; but the weather was too rough for the other inmates of
Greystone, who remained in the house till the gales had passed.

Thus it was, that Margaret and Salome did not see as much of each other as they had
done hitherto. But one fine October afternoon, the former paid the latter a visit, and was
shocked to see how worried and ill her lame friend was looking.
The truth of the matter was, the bad weather had prevented any fishing being done, and
Josiah Petherick, having no money in hand, it had been extremely short commons for him
and Salome. Of course, Salome did not intimate this to Margaret, she would have been
ashamed to do so; she merely said, when questioned, that she had not been very well,
and turned the conversation to Margaret's late visit to N—.

"Mrs. Lute gives up the house shortly, and returns to London," Margaret explained. "But
she likes Cornwall so much, that she says she shall try to come again next year, if not to N
—, then perhaps to some place near. By the way, Salome, mother and father are going to
London for a few days soon. Shan't we be lonely at Greystone without them? Mother says
she hopes you will come and see her before she goes. Will you?"

Salome assented. She liked Mrs. Fowler, who had always been very kind to her, and
admired her as much as she had ever done; she considered her the nicest, prettiest lady
she knew.

So one afternoon, a few days later, found the lame girl entering the Greystone grounds.
She approached the house slowly, marking the havoc the late gales had worked, and went
around to the back door, where she inquired of the servant who opened it in response to
her knock, if Mrs. Fowler was at home. She was answered in the affirmative, and invited
into the big, front kitchen to wait, whilst it was ascertained if the mistress was disengaged
at present.

"Sit down, my dear," said the cook—a stout, middle-aged woman, with a round, red face,
and a pair of sharp though not unkindly eyes. "There, take that easy-chair and rest
yourself; maybe the pull up the hill has tired you."

She fetched a glass of milk and a big slice of cake, which she placed before her visitor.
"You'll be better after a little refreshment," she added. "I know the mistress would wish
you to have it."

"Oh, thank you!" Salome replied gratefully, flushing with pleasure, for she had had a
scanty dinner. She drank the milk and ate the cake, and did certainly feel better
afterwards.

"Miss Margaret's out," the cook remarked. "She's gone for a walk with Miss Conway and
Master Gerald. But I daresay, she'll be back before long. She'd be sorry to miss you, my
dear, for you're a rare favourite of hers, I can tell you."

Salome smiled happily, as she replied, "I am so glad to hear you say that, for I love her
dearly. I expect you're very fond of her yourself, aren't you?"

"I believe she's a general favourite—but no, I'm wrong there. There's one in the house who
doesn't appreciate her, and that's her own mother. Yes, you may well look surprised, but I
assure you it's true. Mrs. Fowler doesn't make half as much of Miss Margaret as she does
of Master Gerald—tiresome boy that he is. She wanted to take him to town with her, if you
please, but the master won't allow that. I heard them talking about it in the garden. 'We'll
take Margaret, if you like,' he said. 'No,' said she, 'I don't want Margaret.' She never does
want her, and that's the fact, and yet, I believe there's not anything Miss Margaret would
not do for her."

The cook, who was an extremely garrulous person, paused breathlessly for a few
moments, then proceeded: "And such a pretty, nice-mannered little girl Miss Margaret is
too. I declare it's a shame her own mother shouldn't love her more. It puzzles me, that it
does, why it should be so."
Salome had listened in pain and surprise, wondering if this accounted for the sad
expression which she had so often noticed on Margaret's pretty face. Was this the trouble
that could not be told?

Before, however, she had time to make a reply, Ross entered the kitchen, and said her
mistress would like Salome to join her in the drawing-room.

The lame girl found Mrs. Fowler alone, sitting by the fire, for though the weather was not
actually cold, the day was dull, and the warmth was pleasant. Mrs. Fowler was very glad to
have a visitor, and made Salome sit down near her and talk.

"My husband and I are going up to town the day after to-morrow," she said, "and I wanted
to see you before I went. You must stay until the others return and have some tea."

Salome explained that the cook had already given her milk and cake; but Mrs. Fowler
smilingly declared she knew she would be ready for tea when tea-time came, which would
not be for another hour. She continued to talk pleasantly and easily, whilst the lame girl
listened; and by-and-by, when Salome was questioned kindly and sympathetically as to
the reason of her wan looks, she confessed, with some hesitation, however, that it was
very tight times with her and her father at home.

"The weather has been so bad that no boats have been able to go out," she said; "and—"
lowering her voice and colouring scarlet—"father's been worse than usual lately, and—and
—he owes money to Silas Moyle, and how can we ever hope to pay it, if he spends so
much at the 'Crab and Cockle'? It almost seems as though he doesn't care. And every day,
I'm afraid Silas will say he won't let us have any more bread. Oh, it's dreadful—it's all
through the drink, ma'am. Father'd be such a dear, good father if it wasn't for that."

"And you really love him in spite of the way in which he goes on?" Mrs. Fowler asked
wonderingly.

"Oh, yes, ma'am, indeed I do!" was the earnest reply. "Whatever father did, I think I
should love him just the same."

"I don't know how you can, I'm sure; I believe if I were you, I should lose all patience with
him. Think how selfish he is, how inconsiderate for your comfort, how violent—"

"Ah, but that's only when he's been drinking!" Salome interposed hastily. "Father isn't like
that really; it's only when the drink's in him, that he's all you say. If he would but give up
the drink, he and I should be as happy as the day is long. Oh, I shall never cease hoping
and praying that some day he may become a teetotaler! If I could get him to take the
pledge, I believe all would be well."

"Meanwhile, he is wearing you to death, poor child. Well, don't cease to pray for him. God
knows he needs all your prayers."

Mrs. Fowler sighed deeply, whilst she gazed sadly and thoughtfully into the fire. She was
silent so long that Salome thought she must have forgotten her presence; but suddenly
she glanced at her with a smile and asked, "How is Margaret getting on with her knitting?"

"Oh, very well, ma'am!" was the reply. "But I am afraid she will not come so frequently
now the winter days are at hand. Besides, father is oftener at home."

Mrs. Fowler nodded. She put her hand into her pocket and drew therefrom her purse, as
she inquired, "How much is it your father owes Silas Moyle?"
"Nearly eighteen shillings," Salome admitted. "I know it's a lot of money," she added
deprecatingly.

"A lot of money!" Mrs. Fowler echoed with a faint, amused smile as she opened her purse
and took out a sovereign. "Here, my dear," she said, pressing the coin into her visitor's
hand, "you will be able to pay your bread account now. Yes, it is for you—a present—put it
in your pocket."

Salome was so astonished that she could find no words in which to speak her thanks; but
her expressive eyes spoke for her, and told how deeply thankful she felt. She tied the
sovereign up in one corner of her handkerchief, which she placed inside the bosom of her
frock for greater safety. And then, having overcome her first sensation of intense surprise,
she exclaimed, "Oh, ma'am, thank you! How good and kind you are! Oh, what will father
say when he knows! It will be such a relief to be able to pay Silas Moyle, for we never
owed him quite so much before. Oh, I shall be grateful to you as long as ever I live!"

"There, there, say no more about it. I am glad it is in my power to lift a little of the load of
trouble from your young shoulders; your heaviest trial is beyond the reach of human aid.
But oh! Go on loving your father, child, if you can, for he must want all your affection, I am
sure."

To Salome's astonishment, she saw there were tears in Mrs. Fowler's blue eyes, and that
her face was quivering with strong emotion. Before more could be said, however, Gerald
flung open the door and rushed into the room, followed at a more decorous pace by his
sister and Miss Conway, and a little later the master of the house appeared upon the
scene.

No one would hear of Salome's leaving, till she had had tea, so she remained. And
afterwards, she willingly consented to sing, so that it was quite dark before she left
Greystone; and Mrs. Fowler insisted on sending a servant to see her home in safety.

Josiah Petherick was not sober that night, but the next morning, his daughter told him of
the present Mrs. Fowler had made her, and expressed her determination of paying the
baker that day. Nor would she hear of her father's settling the account, for, alas! she knew
that he was not to be trusted. And that if she let him have the money, he would be more
likely to betake himself to the "Crab and Cockle" than to Silas Moyle's shop.

"The truth is, you won't trust me," he said bitterly.

"I can't, father," she answered, the sound of tears in her voice. "You know I can't. Mrs.
Fowler gave me the money on purpose for our bread account, and I must know it's paid.
Oh, it was kind of her!"

"Yes, it was," he admitted, adding with unexpected candour, "There never should have
been need for her to do it; but your father's a good-for-naught. Yes, Salome, that's what
everybody says. Folks pity you an' blame me. I know Mrs. Fowler has done this for your
sake."

"And for yours too, father. Oh, yes, I am certain of that. She told me to go on loving you,
and—"

"Did she though?" Josiah interposed in extreme surprise. "Well, you do amaze me. She's a
real kind lady, anyway, and has proved herself our true friend."
 CHAPTER XIV.
A Stormy Night.

"HARK! What's that, Miss Conway? It sounds like a dog howling. There it is again!" And the
speaker, Margaret Fowler, put down the book she had been reading, and rising from her
chair by the fireplace, went to the window, and peered into the darkness.

The governess and her two pupils were spending the hours between tea-time and supper
in the schoolroom at Greystone. A very pleasant apartment it was, comfortably carpeted
and curtained, with a bright wood fire burning in the grate. Miss Conway glanced up from
her needlework as Margaret spoke, whilst Gerald ceased playing with the cat on the
hearthrug and listened for a few moments.

"I don't hear anything," the latter said.

He turned his attention to his playfellow again, but puss was tired and had no desire to
prolong the game. In vain, he dangled a piece of string before her eyes to entice her to
spring at it. She had had enough of him, and sat on the hearthrug, complacently washing
her face and blinking in the firelight.

"Selfish thing!" he exclaimed, "I—oh, yes, I do hear something now!" And he joined his
sister at the window.

The sound which fell upon the ears of the listeners was like the low wail of some animal in
distress. Margaret's fair cheeks paled as she listened, for there was something eerie in the
faint, indistinct sound.

"I don't think it's a dog," said Miss Conway doubtfully. "No, I believe it's the wind rising. If
so, we shall have a wild night. Let us open the window and make certain what it is."

They did so; and then ascertained that it was indeed the wind which they heard. The night
was pitch dark, with heavy clouds overhead. It had been a still, sombre, autumn day, with
that hush in the air which generally portends a storm. Now, the wind was rising, whilst the
breakers could be heard dashing against the base of the cliffs.

"Yes, it is only the wind," Miss Conway decided. "How mournful it sounds. Shut the
window, children, and come back to the fire. How thankful we should be that we have a
good roof over our heads! Gerald, don't tease the cat, my dear; she doesn't want to play
any more."

"Josiah Petherick said this afternoon that we were going to have a storm," Gerald
remarked. "I saw him on the beach, tarring his boat. None of the fishermen had gone to
sea."

"I suppose they considered the weather too uncertain?" Miss Conway interrogated.

"Yes," the boy replied. "Father says they are all very weather-wise. I don't mind a storm,
do you, Miss Conway? I wonder if there will be a wreck."

"Oh, I sincerely trust not!" the governess exclaimed hastily.

"I should like to see a wreck," Gerald informed her. "Josiah Petherick has seen several, and
he has saved the lives of heaps of people. He must be a very brave man. I don't believe
he's afraid of anything. Can't we have our supper upstairs to-night instead of in the dining-
room? It's so jolly and cosy here."

Miss Conway assented. Mr. and Mrs. Fowler were in London, and the house seemed dull
without them. Margaret had taken up her book again; but she was not reading, for the
sound of the rising gale distracted her attention and made her feel restless and uneasy.

"If we have a storm, perhaps there will be a wreck," Gerald proceeded presently. "It is so
dark, that I should not be surprised, should you, Miss Conway, if a ship ran on the rocks?"

"Oh, Gerald, pray don't suggest such a probability!" she cried, with a shudder.

"If there was a wreck, would you let me go down to the beach?" he inquired eagerly. "Say
you would, Miss Conway!"

"I shall certainly say no such thing. If there was a wreck—which God forbid!—I should
insist on your remaining in the house. Nothing would induce me to give you permission to
go out in a storm. But we need not speak of it. Ring the bell, Gerald, and I will order
supper."

The boy obeyed, though with a cloud on his brow; he realised argument was of no avail
when his governess spoke in that decided tone. After supper, he went to bed at his usual
time, and forgetful of the rising storm, and the prospect of a wreck, was soon asleep. Miss
Conway and Margaret sat up till ten o'clock, alternately talking and listening to the wind,
which was now howling dolefully around the house, almost driving in the window-panes,
and mingling its sobs and wails with the angry roar of the sea; and then they, too, retired
to their respective rooms. The gale increased in fury however, and then came the rain.

Meanwhile, the villagers were all alert, for there was little rest for anyone at Yelton on such
a night as this, with a westerly gale raging, and the sea like great walls of foam. The
fishermen hesitated to seek their beds, whilst some of the most venturesome braved the
furious wind and the heavy rain, which was now descending in torrents, and kept watch by
the sea-shore, their hearts anxiously expectant, as they recalled similar occasions when
their assistance had been required to help those in peril on the sea.

In the Pethericks' cottage, Salome stood by the kitchen window, listening to the storm,
and patiently waiting for her father. He was not at the "Crab and Cockle," she was certain
of that, but on the beach; and she felt no anxiety about him. He was accustomed to rough
weather; and on such a night as this, she knew he would be his true self—brave, fearless,
and reliable. As was her custom when alone, she was singing softly:

"Lead us, heavenly Father, lead us

O'er the world's tempestuous sea;
Guide us, guard us, keep us, feed us,
For we have no help but Thee,
Yet possessing every blessing
If our God our Father be."

Seen by the subdued light of the lamp in the centre of the table, the little girl's face wore a
look of great contentment. For the time, she had forgotten how troublous was her life, as
her soul rose on the wings of faith to an altitude which set her far above the trials of this
world. She sang the hymn from beginning to end in a soft undertone, with the wailing wind
for an accompanyment; then, opening the window, she thrust out her head and listened.
She heard hurrying footsteps passing the cottage, and men's hoarse voices shouting.

"Who goes there?" Salome cried. "Is anything amiss?"

"I hope nothing is wrong," she thought, as she received no answer; "but I suppose they
are obliged to shout to make themselves heard."

She tried in vain to pierce the darkness.

"If a vessel had been in distress, the crew would fire guns, or send up rockets," she
reflected.

The rain beat against her face, so she drew back from the window, which she shut, and
turned her attention to the fire, remembering that her father would certainly return
drenched to the skin. Suddenly the cottage door was flung open, and Margaret Fowler,
hatless, and with her fair hair hanging around her face, stood before her.

"Oh, Salome!" she gasped breathlessly. "Is he here? Have you seen Gerald?"

"No, miss. What is wrong?"

"We've lost Gerald, and I thought he might have come here. All the servants are looking
for him, and Miss Conway too. Oh, what shall we do? He went to bed as usual, and was
fast asleep at ten o'clock, but when Miss Conway peeped into his room half-an-hour ago,
to see if the storm had disturbed him, his bed was empty. He had dressed, and we believe,
he must have gone out."

"Perhaps he is somewhere hiding in the house," Salome suggested. "Surely he would not
go out on a night like this."

"Yes, I think he would. He wanted so much to see a wreck—he seemed to have made up
his mind there would be one to-night—and he is quite fearless."

"I expect he is safe. Oh, how wet you are, Miss Margaret!"

"Yes, and the wind blew away my hat coming down the hill, but no matter. Oh, where can
Gerald have gone? I believe he must be on the beach."

"If he is, father will be sure to notice him and take care of him," Salome said consolingly.
"Don't be frightened, miss; I feel sure Master Gerald will come to no harm."

"If he does, it will kill mother!" Margaret cried, despairingly. "She loves him so dearly. No, I
mustn't stay; I must go and find Gerald if I can;" and opening the door, she rushed away
into the darkness again.

After a few minutes of indecision, Salome put on her jacket, tied a shawl around her head,
and leaving the cottage door unlocked, hastened towards the beach. She had not gone far,
however, before she came upon a group of fishermen, one of whom was her father. She
explained that the little boy from Greystone was missing from his home, but no one had
seen him. Her father was vexed that she had ventured out in such a storm, and
peremptorily ordered her to return.

"I'll look around an' see if I can find Master Gerald," he said. "But he'll come to no harm, I
warrant."
"Oh, I am so glad to hear you say that!"

It was Margaret who spoke. She had been led in the direction of the group by the sound of
voices; and clutched Josiah by the arm to steady herself, as a fierce gust of wind nearly
took her off her feet.

"Do you go back with Salome, miss," he said. "This is no fit place for you two little maids. I
promise I'll look for Master Gerald, and find him, too, if he's hereabouts."

"Oh, thank you!" Margaret replied earnestly.

She was really nearly done up with battling against the wind and the rain, so she raised no
objection to returning with Salome. The little girls reached the cottage in safety, and upon
entering, found Miss Conway in the kitchen. Having knocked in vain at the door, she had
tried to open it, and finding it unlocked, had gone in; she too had thought it possible that
Gerald might be there.

"If he's on the beach, father will find him, you may depend upon that," Salome assured
her. "And he will bring him straight here. I fear you will both catch dreadful colds," and she
glanced commiseratingly from Margaret to the governess.

"We shan't mind that, so long as Gerald is safe," Margaret returned. She was shivering and
her teeth were chattering, as much with fright on her brother's account as with cold. "Oh,
Miss Conway, what shall we do if anything has happened to him? Mother will never forgive
us if—"

"Dear Margaret, don't be morbid; neither you nor I have been to blame," Miss Conway
reminded her. "If harm has come to your brother, it has been through no fault of ours.
Who would imagine that he would deliberately get up and dress and steal out of the house
unknown to anyone? Whatever the result of this mad freak of his proves to be, will have
been his own doing."

"It is terrible to think what may have happened to him. The wind is high enough to blow
him into the sea if he is really on the beach. Oh, mother will hate the sight of me for ever,
if Gerald is drowned!" And Margaret burst into tears.

"Don't, dear, don't!" Miss Conway said imploringly.

"You know it is true," Margaret cried passionately. "If I was killed, mother would not care—
not much; but Gerald is as the apple of her eye."

Before any answer could be made to this, the cottage door opened, and Josiah strode into
the kitchen, bearing Gerald in his arms. He had discovered the little boy crouched in the
shelter of a boat which had been drawn high up on the beach, out of the reach of the tide.

"There is no wreck," Gerald said disgustedly, as Josiah set him down on the floor, "and I'm
cold and wet, and should like to go home."

CHAPTER XV.
Trouble at Greystone.
FOR once, Gerald had gone too far, as he discovered on the following day, when, for
punishment, his governess insisted on keeping him locked up in his bedroom. In vain, he
cried and protested against such treatment, Miss Conway was like adamant, and the boy
had perforce to endure twenty-four hours of solitary confinement with no one to speak to,
no one to play with, and nothing to do. A more salutary mode of punishment could not
have been devised; and in consequence, Gerald appeared at the breakfast-table on the
morning following his imprisonment, in a subdued and repentant frame of mind. He said he
was sorry for his past conduct; but he could not extract a promise from either Miss Conway
or Margaret that his father should not be informed of the anxiety and trouble he had
caused the whole household.

Margaret had caught a severe cold on the night of the storm, and spent the next few days
shivering over the schoolroom fire, too unwell for lessons. Gerald's escapade had been a
shock to her; she was overwrought and languid, and when, on the morning of the day that
Mr. and Mrs. Fowler were expected home, she began to dress she felt so shaky that she
went back to bed again.

"Not up yet, Margaret?" asked Miss Conway's voice outside the door, half-an-hour later.

"No," was the reply. "I am so sorry, but my cold is very bad, and I have such a dreadful
headache."

The governess entered the room immediately on hearing this and approached the bed.
After kissing Margaret with affectionate concern, she felt her pulse and declared her to be
a little feverish.

"Stay where you are, my dear," she said kindly. "Why, you're shivering. Ross shall bring
you a hot-water bottle for your feet and light the fire; then, I have no doubt, if you lie in
bed and nurse your cold, you will soon be better."

"I am so vexed, because mother and father are coming home to-night," Margaret sighed.

"I daresay you will be well enough to get up by the evening," Miss Conway responded
hopefully. "I shall be with Gerald as usual, but I shall tell Ross to devote herself to you. If
you want me, do not hesitate to send for me."

Margaret could eat no breakfast, but she took a few sips of the milk Ross brought her a
short while later, and afterwards fell into an uneasy sleep. The maid, moving about softly,
lit the fire and dusted the room, then turned her attention to the flushed face on the
pillow.

"Poor little thing, she does look poorly," she murmured. "And it's all on account of that
tiresome child, Master Gerald. 'Tis a shame of the mistress to spoil him so; everyone can
see but her that she's ruining him, allowing him his own way as she does."

Margaret moved restlessly and began to mutter. Ross bent over her, and caught the sound
of Gerald's name. She laid her cool hand softly against the little girl's cheek and felt how it
burnt.

"She's very feverish," she thought. "I do hope she isn't going to be really ill. A nice home-
coming it will be for master, if she is. I wonder if the mistress would trouble much?"

Roes moved away to the fireplace, and taking up some sewing-work, stitched industriously,
every now and again glancing towards the restless sleeper.
Suddenly the little girl uttered a shriek and sprang up in bed, whereupon Ross dropped her
work and hastened to the bedside.

"What is it, dear?" she asked, putting her arms around Margaret's quivering form. "You've
had a bad dream, I expect—but it was only a dream. See, now, don't tremble so, you're
perfectly safe with Ross."

"Where's Gerald?" Margaret demanded in a strange, hoarse voice.

"Doing his lessons with Miss Conway."

"Where's Gerald?" the little girl reiterated.

Ross repeated her former answer, but it did not appear to satisfy Margaret.

"Let me go and look for him," she said in a tone of distress.

"No, dear; you're not well, you must lie down again."

"You won't let me go!" Margaret struggled a minute in Ross' restraining arms, then sank
back on the pillow. "I know why you won't let me go," she cried; "he's dead. He's
drowned."

"No, no, darling, he's perfectly safe. Dear Miss Margaret, you've been dreaming."

"He's drowned!" the little girl insisted. "And who's going to tell mother? Oh, it will kill her!"

"Miss Margaret, I solemnly declare Master Gerald's living and well," said Ross, growing
more and more concerned. "I wouldn't tell you a story, why should I? You're poorly, dear,
and you've had a bad dream."

But Margaret wandered on: "Listen to the rain beating against the window, and the wind
howling. And Gerald is out in it all! If he is on the beach, he will be blown into the sea.
Look at that great wave! Oh, it has carried him away!" and she uttered a heartrending cry.

"It is a lovely day," Ross assured her; "the sun is shining, and the sea is quite blue and
calm. You've been dreaming about the storm, miss, and fancying all sorts of horrors that
never happened."

Margaret's blue eyes, wide open, were fixed upon Ross' face, but she evidently had not
followed what the woman had said, for after a short silence she began to mutter
distressfully about Gerald again.

Ross was now exceedingly alarmed. She rang the bell, and sent for Miss Conway, who, in
her turn, tried to pacify the sick child. But Margaret paid no more attention to her
governess than she had to Ross.

"I am afraid she is going to be very ill," Miss Conway said in much distress. "All her trouble
seems to be about her brother. Fetch him, Ross; perhaps the sight of him will satisfy her."

So Gerald was brought to his sister's bedside. He was somewhat frightened when told
Margaret was ill; but in obedience to Miss Conway, he stooped over the bed to kiss her.
She, however, pushed him away with feverish strength, and covered her eyes with her
hand.

"Take him away!" she cried. "What is that strange boy doing here?"
"It's Gerald, dear Margaret," said the governess softly. "Your own brother come to show
you that he is quite well, and—"

"No, no; Gerald's drowned, I tell you! Oh, what will mother say? She loves him so."

At this point, Gerald, realising that there was something very strange and unusual about
his sister, began to cry, and was hurried out of the room.

Thoroughly shocked, Miss Conway sent a groom to N— immediately, to fetch a doctor; and
within a few hours, the news had spread through the village of Yelton that the little girl at
Greystone was very ill. Mr. Amyatt, as soon as he heard the tidings, considerately invited
Gerald to spend the remainder of the day at the Vicarage; and Salome Petherick arrived at
the back door of Greystone in the afternoon to make inquiries.

The cook, who had been stewing beef-tea, insisted on Salome's coming inside and resting
in her easy-chair.

"Mrs. Moyle told me of Miss Margaret's illness," the lame girl said, her face expressive of
the deepest concern. "I hope it is nothing serious?"

"I am afraid it is, my dear," was the grave rejoinder. "It's inflammation of the lungs. Dr.
Vawdry has been here from N—, and he's coming again this evening. He says she's very
ill; and if Mr. and Mrs. Fowler had not been returning to-night, they'd have been
telegraphed for. Oh, dear, dear, I do trust the poor child's life may be spared! She's not
been well for days, not since the night of the storm, when Master Gerald led us all such a
dance after him. He's the one to be blamed for this. For once, I should think the mistress
would see that."

And the woman poked the fire viciously, as though the act was a vent for her feelings.
"She's the nicest, sweetest, little creature I ever knew is Miss Margaret," she proceeded,
"with always a kind word for us servants. Ross says she doesn't recognise anyone; she
didn't know Master Gerald, and her incessant cry is that he is drowned. If only Miss
Conway had turned the key in his bedroom door on the night of the storm. She kept him
locked up the next day, and it broke his rebellious spirit—quite. She'd soon get him under
subjection if his mother didn't pamper him so. Don't you take on, now, about Miss
Margaret, my dear; maybe she'll get over this attack all right. She's young and healthy,
and she'll have good nursing, and everything money can buy. I ordered some lean, gravy
beef the minute I heard she was ill, but the doctor won't allow her anything but milk and
soda water, so there's plenty of strong beef-tea going begging, and you'd better have a
cupful. Will you have bread with it? Yes. I'm sure it will do you good."

Salome was very glad of some refreshment. She took the beef-tea, whilst the cook talked
on without waiting for replies; but when she rose to go, having learnt all there was to
know, her heart was very heavy indeed. Her eyes were full of unshed tears as she passed
out of the Greystone grounds, and commenced her descent of the hill. As she went by the
church, she wondered if she would ever hear Miss Margaret practising on the organ again.

And she was so engrossed with her sorrowful thoughts, that she was startled when, on
reaching the Vicarage gate, a voice addressed her from inside. "Hi, Salome! Where have
you been?"

She paused and looked at the speaker, Gerald Fowler, who was peering at her laughingly
between the bars of the gate. The boy was in high spirits at being the Vicar's guest, and he
had not been informed that his sister was really seriously ill. He had been frightened when
Margaret had failed to recognise him, but the impression he had then received had passed,
and he was delighted at having this unexpected holiday.

"YOU'D BETTER MIND YOUR OWN BUSINESS,

SALOME PETHERICK."

"I've been to Greystone, Master Gerald," Salome returned quietly.

"To see Margaret, I suppose? She's ill, you know."

"Yes, and I am so grieved and sorry."

"Oh, I expect she'll soon be better!" Gerald remarked confidently.

"I hope so," the lame girl replied dubiously. "But the doctor says she has inflammation of
the lungs."

"Does that ever kill people, Salome?"

"Yes, Master Gerald, very often."

"But Margaret won't die, will she? You don't think that, do you?"

"No one can tell—but God. We must ask Him to take care of her. Oh, Master Gerald, see
what has come of your ill conduct!"

"What do you mean?" he inquired in amazement. "It isn't my fault that Margaret's ill."

"Oh, yes, indeed it is! If you had not gone down to the beach on the night of the storm,
she would not have got drenched to the skin and have caught such a dreadful cold. Oh,
yes, it was your fault!" And Salome looked at him severely.

His blue eyes filled with sudden tears, and his rosy cheeks paled as he gasped, "Oh, I
never thought—I never thought—"

"No, I don't suppose you did, Master Gerald, or if you did, it was yourself you thought of
and no one else," Salome cried indignantly. "You 're the most selfish little boy I know."

"You 're very unkind, and—and nasty."

"I daresay you think I am; but I love Miss Margaret, and I know you've been the cause of
her illness. I wonder what your mother and father will say."

"Mother will say it was not my fault," Gerald declared stoutly. "I couldn't tell Margaret
would be silly enough to go to look for me; and I think you'd better mind your own
business, Salome Petherick," he concluded.

He was impressed by the lame girl's plain speaking, and put on a show of anger to hide
the fact.

She shook her head at him gravely, as she turned away from the Vicarage gate and went
down the hill.

When she reached home, she lit the fire and boiled the kettle for tea, and by that time her
father had appeared upon the scene, having had a good catch of fish. His face grew grave
when Salome told him of Margaret's illness, and he expressed great regret, for he was
grateful to the Fowlers for the notice they had taken of his child. And he volunteered to go
to Greystone later on and inquire for the poor little sufferer. This he accordingly did, and
brought back the news that Dr. Vawdry had visited the patient again, and had declared her
to be dangerously ill, but that Mr. and Mrs. Fowler had not yet come. The carriage had
gone to N— to meet them at the railway station, as had been arranged, and they were
expected very soon now.

"Don't take on so, my dear," said Josiah kindly, as he noticed Salome's brown eyes full of
tears. "The little maid'll pull through, please God. I am grieved about her though—s'pose
'twas you," and he looked at his child with great affection as he reflected on the
uncertainty of life. And because it would please her, and with the laudable desire of
keeping her from dwelling too much on the thought of Margaret's illness, he spent the
evening in her company, and that night his associates at the "Crab and Cockle" looked for
him in vain.
 CHAPTER XVI.
Days of Sickness.

IT was nearly ten o'clock when Mr. and Mrs. Fowler reached Greystone that autumn night.
Without waiting for assistance, the latter sprang out of the carriage and ran into the house,
and almost into the arms of Miss Conway, who had come down from the sick-room to meet
the travellers.

"What is this I hear about Margaret?" Mrs. Fowler inquired, excitedly clutching the
governess by the arm, and scanning her pale countenance with anxiety. "I am told she is
ill. It is nothing much, I suppose? What ails her? A cold?"

"She certainly did catch cold," Miss Conway rejoined in a grave tone, looking from Mrs.
Fowler to her husband, who had quickly followed her. "She has been poorly for several
days, but this morning she was taken much worse, and I sent immediately for Dr. Vawdry
from N—. He has been twice during the day, and—and—" this in a faltering voice—"she is
very ill with inflammation of the lungs. We are poulticing her; Ross is with her now, and—
and—I'm so very glad you've come!" And, overwrought with anxiety, she burst into tears.

"Come into the drawing-room, Miss Conway," Mr. Fowler said kindly. "No, my dear," he
continued, laying a restraining hand upon his wife who had turned to rush upstairs, "let us
hear all details about Margaret first of all. Besides, you must not allow her to see you
looking frightened and distressed."

"She would take no notice," Miss Conway said mournfully. "She recognises nobody, and is
quite delirious. Dr. Vawdry says that need not alarm us, though, for it's frequently the case
in inflammation of the lungs."

"What has caused her illness?" Mrs. Fowler asked, as she followed the others into the
drawing-room.

Miss Conway wiped away her tears, and in a few minutes was sufficiently composed to
explain all that had happened. When she had finished her story, Mr. Fowler inquired,
"Where is Gerald now?"

"In bed and asleep, I am thankful to say," Miss Conway answered. "Mr. Amyatt had him at
the Vicarage until eight o'clock, when he brought him home. He begged me to allow him to
sit up to see you, but I insisted on his having his supper and going to bed."

"Quite right." Mr. Fowler's face was very stern, and he would not meet the glance of his
wife's appealing eyes. "We see now the result of indulgence," he added emphatically. "Had
Gerald been taught obedience and consideration for other people, this trouble would never
have come upon us."

Mrs. Fowler quailed beneath the mingled reproach and reproof of her husband's tone; for
once she had no excuse to make for her favourite child. She had spent a very pleasant
time in London, where she had met many old friends, including Mrs. Lute; but she had not
been sorry to return to Greystone, acknowledging to herself that the quiet, healthful life
there suited her. With her husband's presence to strengthen her, it had not been so very
difficult to refuse stimulants when they had been offered to her. She was fully conscious of
her own weakness now, and no longer deceived herself, as she had formerly done, with
the fallacious idea that a little wine or spirit was good for her.

When she recalled how, during her husband's brief absence from home a few weeks
previously, she had been tempted from the mere fact of having taken one glass of wine to
purchase a bottle of brandy, and drink it by stealth, she was obliged to confess that total
abstinence from all intoxicating liquors was the only course for her to adopt to prevent the
ruin of her happiness, and that of those she loved. At Greystone, she felt she was out of
temptation's way. The news of her little daughter's illness, which had been imparted to her
and Mr. Fowler at N—, had startled and shocked her immeasurably; and she had begged
the coachman to drive home as quickly as possible, which he had accordingly done.

Margaret was lying in a kind of stupor when her parents entered her bedroom, and they
were careful not to disturb her. Mr. Fowler saw she was very ill, and his heart ached as he
bent over her and listened to her laboured breathing. Glancing at his wife, he was
astonished at the expression of her countenance, for, like everyone else, he had never
thought she had cared for Margaret overmuch. But all the mother's love was alive in Mrs.
Fowler at that moment, shining in her blue eyes, and illuminating her fair face with
additional beauty.

Anxious days and nights followed, during which Margaret lay between life and death. Her
mother constituted herself head nurse, and showed wonderful ability in that capacity.
Naturally a nervous, excitable woman, it was quite wonderful how she put a check upon
her feelings, and was calm, and capable, and seemingly untiring. It was nothing to
Margaret, at that time, who was attending to her, for she was utterly unconscious,
sometimes in a drowsy condition, sometimes murmuring distressfully, going over again all
that had happened on the night of the storm, always with the impression in her mind that
Gerald had been drowned.

"Who will tell mother?" she demanded again and again in an agony of grief. "She loves him
so! He is her favourite."

Meanwhile Gerald had been taken to task by his father for his conduct on the night of the
storm. Mr. Fowler took no steps to punish him, but he talked to him so seriously, and
pointed out to him that he was responsible for his sister's illness, that Gerald was reduced
to tears, and for the first time in his life, on seeking his mother's support and sympathy,
he found both lacking.

"The blame is all yours," she told him gravely. "What your father has said to you is
perfectly true."

"Oh, mother, don't you think Margaret will get well again?" he asked with quivering lips, for
beneath a veneer of selfishness, he owned an affectionate heart, and he was really much
attached to his sister.

"Only God knows that," was the solemn reply.

"That's what Salome Petherick says," he remarked tearfully. "She was here inquiring for
Margaret at the back door this morning. She comes every day, and she said all I could do
was to pray."
"She was right, Gerald; your sister is in God's hands. The doctor can do nothing for her—
he has acknowledged that; but oh, my son, pray for her! Pray for her!"

The little boy was greatly impressed by the solemnity of his mother's tone, and
impetuously flinging his arms around her neck, he assured her, he would be a better boy
for the future, and that he would pray to God to make his sister well. He was having a
holiday from lessons, for Miss Conway was assisting Mrs. Fowler and Ross with the nursing,
and so he spent most of his time with his father, from whom he had begged and obtained
forgiveness for his past misbehaviour.

"Yes, I forgive you, Gerald," Mr. Fowler had said sadly. "But you see, wrongdoing always
brings its own punishment," he had added, noting the little boy's troubled countenance,
and making a shrewd guess as to the state of his feelings with regard to Margaret.

The servants crept quietly about the house speaking in hushed tones, for the angel of
death seemed hovering near; and those who loved Margaret Fowler waited and watched
unwearyingly. A second doctor from Plymouth had visited the patient. But he had agreed
with Dr. Vawdry that nothing more could be done for her, and that it was merely a question
of whether or not her strength would hold out and vanquish the disease.

At last, the crisis came. And then, the glad news that the little sufferer was sleeping
quietly and naturally was whispered through the house, and spread to the Vicarage, and
from thence to the village, where Salome Petherick heard the good tidings in Silas Moyle's
shop, and returned home with a joyful, thankful heart.

The golden, autumn days were passing swiftly now, and there was a sharp feeling in the
air in the morning, but a few hardy flowers lingered in Salome's garden; a big bush fuchsia
which grew beneath the kitchen window was still in bloom, and the verbena close to the
porch had not commenced to shed its leaves, whilst the white chrysanthemums which
flourished year by year in the shelter of the wall which protected the garden on the side
nearest to the sea were in full flower. The lame girl gathered a posy, and took it up to
Greystone, where she left it at the back door with a request that it might be given to Miss
Margaret, if she was well enough to receive it. She declined an invitation to rest awhile,
saying she must hurry home to get her father's tea.

So it came to pass, that when Margaret awoke from her refreshing sleep, she was
conscious of a delightful perfume, and opening her eyes, they rested on a homely nosegay,
composed of chrysanthemums, intermingled with sprigs of verbena, and drooping fuchsia
sprays. The flowers lay on the counterpane, but when she tried to put out her hand to
reach them, she found she could not. Then the bed curtain stirred, and she saw a face
bending over her—a beautiful face full of love and a great joy.

"Mother," she said weakly.

"Yes, my dear," was the soft reply. "You have been ill, but you are better, and have had
such a nice, long sleep. I want you to drink this milk and then go to sleep again."

Mrs. Fowler slipped her arm beneath the pillow, and gently raised the little girl's head,
whilst she held a cup to her lips. Margaret took a few sips of milk, but refused more.

"The flowers," she said, as her mother laid her head down again.

"Salome sent them to you with her love."

Mrs. Fowler placed the nosegay close to Margaret's hand, and her thin fingers fastened
around the stems of the flowers, then her tired eyes closed, and she slept once more.
From that hour, Margaret commenced to recover. For days, she was too weak to move
hand or foot—too weak almost to think; but by-and-by, with returning strength, she began
to notice more what was going on around her. The tormenting thought that Gerald was
dead had left her entirely, and she was conscious that it had been her mother who had
nursed her so tenderly all along, and not a figure of her imagination as she had at first
thought.

She watched Mrs. Fowler with an inquiring expression which that lady failed to interpret,
but which made her both anxious and uneasy. It was as though Margaret wondered at her
solicitude, and was trying to find a reason for it. And as the little girl grew better, it was
quite apparent that she preferred to have Miss Conway or Ross in attendance upon her to
Mrs. Fowler. It was always—"Don't trouble, mother, Ross will do it," or "Miss Conway will
read to me, I know." Till, deeply hurt, Mrs. Fowler made up her mind that she had for ever
destroyed her little daughter's affection. And once Margaret had loved her so dearly, too!

On the first occasion on which the patient was allowed to sit out in a chair by the fire, Mrs.
Fowler wrapped her in a dressing-gown made of quilted silk which she had brought home
for her from London. Margaret expressed great pleasure in the pretty garment, and called
everyone's attention to it. Her father sat with her for a short while, and Gerald, at his
earnest request, was permitted ten minutes of her society.

"How white you look!" the latter exclaimed, regarding her with awe. "And your eyes are so
big! But you're heaps better, aren't you, Margaret?"

"Oh, yes!" she answered, smiling brightly.

"That's right. I prayed to God to make you well, and so did everyone, I think."

"That was very kind of everyone," Margaret murmured, much touched.

"Josiah Petherick's drunk nearly every night now," Gerald next informed his sister. "I heard
Mr. Amyatt tell father so."

"Oh, dear!" cried Margaret in much distress. "Poor Salome!" At that moment, she caught
her mother's eyes, and the sensitive colour flooded her face from chin to brow. Noticing
the painful blush, Mrs. Fowler turned away, and walking to the window, gazed out
unseeingly, her mind a tumult of conflicting thoughts.

Meanwhile, Gerald chattered on, passing from Josiah to other of the villagers, until Mrs.
Fowler, suddenly remembering that Margaret must not be allowed to overtire herself,
interrupted the conversation, and sent the little boy away, promising he should come and
sit with his sister again to-morrow.

"Remember to give my love to Salome the next time you see her," Margaret said. "Tell her,
I hope we shall meet again soon."

Then, as the door shut on her brother, she sighed, and her mother guessed aright by the
sad expression of her face that her thoughts were troubled ones and anything but
conducive to peace of mind.

CHAPTER XVII.
 The Shadow Lifted.

NOVEMBER was an unusually mild month that year, so that Margaret, during her
convalescence, was enabled to take long drives without any risk of catching cold. On one
occasion, Salome Petherick was invited to accompany her and Mrs. Fowler when they
drove to N—. And it was pleasant to see how the lame girl's countenance shone with
happiness as, forgetful of her worries for the time, she enjoyed the novelty of viewing
hitherto unknown scenery, for she had never been beyond walking distance of Yelton
before.

"It was quite pathetic to watch the varying expressions on the poor little thing's face," Mrs.
Fowler confided to her husband afterwards. "She shall accompany us again, if all's well.
Have you noticed how she has changed lately? The first time I saw her, she had such a
pretty brown complexion, and now she is so pale, and her eyes so big and hollow. I
wonder what ails the child."

"Privation and trouble, I'm afraid, judging from what I hear," Mr. Fowler responded gravely.
"She is badly fed, works hard, and is always grieving on her father's account."

Mrs. Fowler sighed. She was deeply interested in Salome, but there seemed little she could
do for her. The idea crossed her mind that she might remonstrate with Josiah concerning
his treatment of his little daughter, but she shrank sensitively from doing so.

Meanwhile, there was little fishing being done at Yelton during those mild November days,
when the ocean was as smooth as a duck pond, and there was not a breath of wind
blowing, so that Josiah and his boon companions had plenty of time on their hands. The
"Crab and Cockle" had most of their society, and their homes suffered in consequence.

One night, after the inn was closed and most of the inhabitants of Yelton had gone to rest,
the alarming cry of "Fire!" was heard. And men, women, and children dressed with all
speed, and rushed out of doors exclaiming, questioning, and running against each other in
their excitement and hurry.

"Fire! Fire! Oh, help; for mercy's sake, help my father!"

It was the lame girl who had raised the alarm, and who now stood outside Silas Moyle's
shop, her face livid with terror. She managed somehow to explain that it was her home
that was on fire, and that her father, on his return from the "Crab and Cockle," had
clutched at the table-cloth which had covered the kitchen table, and had thus upset the
lamp and caused the conflagration.

On hearing this, there was a general rush in the direction of the Pethericks' cottage, but
Silas Moyle, who had now arrived upon the scene, insisted upon Salome's staying with his
wife, and lingered to inquire what had become of Josiah.

"He's at home," Salome wailed. "I couldn't get him to leave; he was pouring buckets of
water on the fire; but oh! He couldn't put it out, it was spreading terribly. Please, Mr.
Moyle, do go and see that he's all right. He isn't sober, and oh, I'm so afraid for him."

"There, there, don't you take on," said Mrs. Moyle, kindly. "Silas'll see to Josiah. Come you
in, my dear," and the good woman led Salome into the parlour behind the shop and placed
her in an easy-chair.
Meanwhile, willing hands were helping Josiah in his attempts to put out the fire. But
assistance proved of no avail, and in less than two hours the Pethericks' cottage was
actually gutted, and all their possessions had been burnt. It had been impossible to save
anything, for the woodwork of the cottage being old, and the roof of thatch, the flames
had spread with great rapidity. Daybreak found Josiah, sober enough now, staring
disconsolately at the four stone walls which was the only portion of his home that was left
intact. He was feeling inexpressibly shocked, for his furniture was not insured, and he
realised that he and his little daughter had nothing in the world but the clothes they were
wearing. What was he to do? He could not tell, and he groaned in despair, as he looked at
the smoking ruins, and the erstwhile trim garden, now spoilt by the trampling of many
feet.

"This is a bad business, Petherick."

Turning at the sound of a voice addressing him, he saw Mr. Amyatt. The Vicar had been
there some time, but Josiah had not noticed him amongst the rest.

"Ay," was the gloomy response. "I'm ruined—that's what I am."

"I daresay your landlord will rebuild the cottage, for no doubt it is insured."

"What's the good of a cottage without furniture?" Josiah demanded almost fiercely.
"Salome's homeless, an' through me. I ought to be thrashed."

"Salome can bide with my missus," Silas Moyle interposed at that point. "She's a handy
maid, and can make herself useful, an' you'll be able to get a lodging somewhere, Josiah,
for the time; but you'd best come along with me now, an' get a bit of breakfast."

Josiah hesitated. He was very grateful to the baker for his kindness, but he dreaded the
meeting with Salome. He felt more ashamed of himself than he had ever done in his life
before, and as he turned his back on the smoking ruins, he pictured the pretty, thatched
cottage of which he had been so proud once upon a time. There he had brought his young
bride, there Salome had been born, and his happy married life had been spent, and there
his wife had died. Josiah rubbed his hard, brown hand across his eyes as memory was
busy with him.

"Come," said Silas, "pull yourself together, man. Let's go and get some breakfast. Your
little maid's wanting you, I'll warrant."

Such proved to be the case. For the minute Salome saw her father, she threw herself into
his arms, and whispered how thankful she was that he was safe, and that nothing
mattered besides—nothing.

The first person to convey the news of the fire to Greystone was the postman, and great
was the excitement when it became known that the Pethericks' cottage had been burnt
down. Mr. Fowler started off immediately, with Gerald, to learn all particulars, and, in the
afternoon, Mrs. Fowler, at Margaret's earnest request, went to see Salome. She found the
little girl in better spirits than she had anticipated, though her brown eyes grew very
wistful when she talked of her late home.

"All my plants are trampled into the ground," she said, "but, never mind, father's safe, and
that's the chief thing. I was so afraid for him."

"And so you are to remain here?" Mrs. Fowler questioned, glancing around Mrs. Moyle's
little parlour, which was a picture of neatness and cleanliness.
"Yes, ma'am, for the time. Mrs. Moyle has kindly asked me to stay."

"And your father?"

"He's going to find out if our landlord will rebuild the cottage, and if so, father will get a
lodging somewhere in the village. The worst of it is, all our furniture is burnt; but father
says he'll be able to replace it by degrees, he hopes."

After leaving Salome, Mrs. Fowler thought she would like to see the ruined cottage, so she
turned her footsteps in that direction, and found Josiah leaning over the garden gate in
conversation with the Vicar. The former would have moved away on her approach, but she
stopped him, and explained that she had been to visit his little daughter.

"I'm so sorry for you both," she told him kindly. "It is terrible to be burnt out of house and
home."

"It was my doing," Josiah confessed. "Maybe you've heard how it happened?"

"Yes," she admitted, "you caught hold of the table-cloth, and pulled over the lamp, did you
not?"

The fisherman nodded, whilst the Vicar regarded him attentively.

"I've been talking to Petherick very seriously," the latter said. "And have been trying to
induce him to become a teetotaler and sign the pledge. I do earnestly entreat you,
Petherick, to take warning by last night's work."

"Why won't you take the pledge?" Mrs. Fowler asked, her fair face alternately paling and
flushing. "I am sure it would be for your happiness and well-being if you did. And you
should consider Salome. Oh, drink is a terrible curse! It kills all one's best qualities, and
ruins one's self-respect."

"I'm ashamed of myself," Josiah acknowledged, "but think how folks would laugh if I took
the pledge. I'll be a teetotaler if I can; but no, I won't pledge myself to it."

"Oh, don't say that!" Mrs. Fowler cried imploringly. "Think the matter over. I believe if you
took the pledge, you would keep it, for I am sure you are a man of your word."

Josiah's face expressed irresolution. He had solemnly vowed to himself that he would
never touch intoxicating liquors again, so deeply had the past night affected him, but he
hated the idea of taking the pledge, whilst Mr. Amyatt realised that his so doing would be
the only thing which would hold him to his determination to abstain from drink.

"I'm going to give up drink," Josiah declared decidedly, at length, "but I won't take the
pledge. I understand everyone's a teetotaler at Greystone," he continued, as Mrs. Fowler
was about to speak again, "but, excuse me, ma'am, I don't suppose you've signed the
pledge, have you?"

"No," Mrs. Fowler acknowledged, "I have not."

Josiah was silent. He was evidently thinking, "Then, why should I?"

Mrs. Fowler was silent too, and Mr. Amyatt regarded her a trifle curiously, for he saw she
was struggling with some strong emotion. Presently she said very quietly, "I have made up
my mind. I will certainly take the pledge."