Budgeting for fiscal risks: the challenge for China

Ma, Jun; Zhao, Zaozao; Niu, Meili

doi:10.1080/17516234.2015.1040541

Cited by 7 publications

(3 citation statements)

References 7 publications

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“…One improvement therefore could be to add a balance‐sheet analysis to risk assessment (Easterly & Yuravlivker, ). This is especially true for China whose governments hold a large amount of assets (Ma et al ., ). In addition, many other transitional and developing countries can be classified as rent states (Moore, ), since they hold large amounts of assets.…”

Section: Options and Lessons For Chinese Policy‐makersmentioning

confidence: 97%

The Risks of Chinese Subnational Debt for Public Financial Management

Guess

2015

Public Admin & Development

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This paper examines the important challenge to effective public financial management (PFM) of fiscal risk. In the case of China, a middle-income country with space to borrow, a major source of risk to the central government is exposure from subnational government debts. In order to control this exposure and manage it properly, it is important that the level of debt be included in consolidated balance sheets and that liabilities be recognized. This is important not only for narrow maintenance of financial position (or PFM discipline) purposes but also to increase national welfare. Managing fiscal risks from this broader perspective suggests that governments may want to absorb particular risks for purposes such as: unemployment, old age, and poverty spending. Governments often need to cost-effectively bear some of these risks in order lower social costs and maximize national wellbeing. But to do this properly, the government must know first the stock and flow of its total debt. To date, subnational debts in China have not been properly quantified, and available donor tools such as the Public Expenditure and Financial Accountability (PEFA) framework are weak.key words-measuring public sector fiduciary or fiscal risk; Chinese local government debt; Chinese subnational government; PEFA; aid devolution public administration and development Public Admin. Dev. 35, 128-139 (2015) Published online in Wiley Online Library (wileyonlinelibrary.com)

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Section: Options and Lessons For Chinese Policy‐makersmentioning

confidence: 97%

The Risks of Chinese Subnational Debt for Public Financial Management

Guess

2015

Public Admin & Development

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“…Having given the local governments the authority to borrow under the new Budget Law, this latest decision to impose an annual limit is a step forward in managing local debt. However, in view of the history of local governments concealing their borrowings by keeping them off-budget for years and the Australian experience with Global Borrowing Limits (discussed below), the implementation of annual debt limits in China is likely to be a major challenge, when 70% of local government debt will be due for repayment before 2016 (Ma, Zhao & Niu 2015).…”

Section: Implications For Reformmentioning

confidence: 99%

Local Government Debt in China: Implications for Reform

Grewal,

Cheng,

Rasmussen

2015

Public Finance and Management

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Since the 1994 fiscal reforms, China's national public finances have been in a strong position, but public finances of local governments (including provincial, city and county governments) have been always under stress. This is because local governments in China are responsible for financing the provision of basic economic and social services, as well as for urban infrastructure, but they have limited access to tax revenues, have no power to introduce new taxes or to increase rates of existing taxes, and are prohibited under the 1994 Budget Law from borrowing. Consequently, local governments are heavily dependent on non-tax revenues and fiscal transfers from the central government. In spite of the prohibition on borrowing, most local governments have been borrowing informally for many years and the central government has ignored this breach of the Budget Law. Now the size of local government borrowing has reached levels that are causing concerns for the sustainability of local public finances and the stability of the Chinese banking system. This situation raises many policy issues, some requiring urgent policy interventions and other requiring medium-term policy responses. Thus, there is a need for broadening provincial powers over taxation, reforming intergovernmental fiscal transfers, and formally recognizing provincial borrowing powers. However, the focus of this paper is on the incidence of local debt on provincial and sub-provincial public finances, an aspect of local debt that has not attracted sufficient attention in the literature. The concentration of local debt and contingent liabilities at sub-provincial levels and the new annual limit imposed by the State Council on local debt in 2015 are discussed. Lessons learned from Australia's experience in relation to the management of subnational borrowing are also discussed, as these appear to be highly relevant to China's current situation.

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“…Firstly, public finance deteriorated quickly from a situation of annual surplus in 2007 to the position where the deficit was 2.28% of GDP in 2009 (Figure ). Secondly, domestic debt outstanding rose from 5279.932 billion RMB in 2008 to 5973.695 billion RMB in 2009, to 6698.797 billion RMB in 2010, and to 7141.08 in 2011 (Ma, Zhao and Niu ). However, since the economy continued to grow at a high rate, the debt/GDP ratio did not dramatically increase.…”

Section: Debt System Governmental Liabilities and Fiscal Riskmentioning

confidence: 99%

Hidden Fiscal Risks in Local China (中国地方政府的隐性财政风险)

2013

Aust J Public Adm

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Budgeting for fiscal risks: the challenge for China

Cited by 7 publications

References 7 publications

The Risks of Chinese Subnational Debt for Public Financial Management

The Risks of Chinese Subnational Debt for Public Financial Management

Local Government Debt in China: Implications for Reform

Hidden Fiscal Risks in Local China (中国地方政府的隐性财政风险)

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