How does urbanization affect farmland protection? Evidence from China

China’s urbanization and farmland protection problem has attracted attention from around the world. However, the relationship and mechanism between urbanization and farmland protection have not been yet fully understood. We address this gap by examining the impacts of urbanization on farmland area, based on Chinese prefecture-level cities’ panel data over 1990–2013. We employ the instrumental variable method and satellite nightlight data for robust analysis. Our findings reveal that urbanization has significant negative effects on farmland area. Urbanization causes much higher rates of farmland loss in medium-sized cities and in the more developed eastern area of China. China’s farmland dynamic balance policy has a significant positive effect on farmland area. We further test the impact channels and find that land financing and urban sprawl reinforce the negative impact of urbanization on farmland area. The problem of farmland quality loss is needed to study in future research.