The fiscal performance of China's local governments could be pressed by the decline of land sales, a Fitch Ratings report said Thursday.

Sales of land-use rights in China fell by 21.4 percent in 2015, the most substantial shrinkage since a 14-percent decline in 2012, according to the report.

"Land sales, representing around 27 percent of local governments' aggregated revenue in 2015, play a critical role in funding Chinese local infrastructure projects," said the report, adding that land is also a major collateral for local governments to borrow from banks.

The stagnant land sales or dwindling prices could either result in a reduction of capital expenditures or in higher deficits, it said.

However, thanks to recovery in property sales, a deceleration trend in the decline of land sales -- from a 36.2 percent year on year decline in the first two months of 2015 to 21.4 percent by the year end -- has been shown to relieve the pressure.

In 2015, Chinese local governments issued nearly 600 billion yuan (91.43 billion U.S. dollars) in new bonds and converted another 3.2 trillion yuan in outstanding debts to low-interest bonds under a bond-for-debt swap program.

The central authorities have introduced the swap program and put a cap on new debts to defuse risks, and are trying to increase the incomes of local governments.

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