BEIJING—Sagging demand at China’s urban land auctions amid a crackdown on borrowing by private developers risks squeezing regional finances, pressuring local authorities to scramble for other income sources to fund investments and support the economy. Land sales soared to a record 8.4 trillion yuan ($1.3 trillion) in 2020, the equivalent of Australia’s annual gross domestic product, bolstering fiscal budgets in a pandemic year. But tighter regulations on borrowing by private developers since the summer of last year are increasingly eroding demand for land. The value of nationwide land sales abruptly fell 17.5 percent on year in August, according to Reuters calculations of finance ministry data, the biggest slide since February 2020. Further falls could force regional governments, who on average depend on land sales for a fifth of their revenue, to cut spending and investment. Many economists have already downgraded China’s 2021 GDP growth forecast, due to a cooling property …