Subnational Debt of China: The Politics-Finance Nexus

Gao, Haoyu; Ru, Hong; Tang, Dragon Yongjun

doi:10.2139/ssrn.2783125

Cited by 12 publications

(40 citation statements)

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“…Recent government measures have contributed to the slower expansion of off-budget spending. Further efforts will involve reining in new avenues of off-budget borrowing (e.g., government-guided funds and misuse of public-private partnerships) (Gao, Ru, and Tang 2017). At the same time, the bond financing quota for local governments should be set large enough to ensure all off-budget…”

Section: • Fiscal Reformsmentioning

confidence: 99%

China's Local Government Bond Market

Lam

Wang²

2018

IMF Working Papers

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Local governments play a significant role in China's public finance and fiscal operations. The size of local government debt has grown rapidly over the past years, exceeding the stock of sovereign debt in China. How does this development compare to other countries and what policies can foster the sound development of the bond markets? This paper finds that despite its rapid growth, the local government bond market is still underdeveloped. Severe impediments-low liquidity, weak credit discipline, structural fiscal deficit in local governments-have become more visible. Reforms to develop a sound local government bond market should harmonize tax and regulations, build liquidity, and advance fiscal reforms to tighten off-budget borrowing and address intergovernmental imbalances.

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Section: • Fiscal Reformsmentioning

confidence: 99%

China's Local Government Bond Market

Lam

Wang²

2018

IMF Working Papers

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“…In contrast, on average each commercial bank in China accounts for less than 3% of total local government debt. Even the big five commercial banks contribute approximately 6% each to total local government debt (Gao, Ru, and Tang ()).…”

Section: Background: the Cdb And Local Government Financing In Chinamentioning

confidence: 99%

Government Credit, a Double‐Edged Sword: Evidence from the China Development Bank

2017

The Journal of Finance

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137

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Using proprietary data from the China Development Bank (CDB), this paper examines the effects of government credit on firm activities. Tracing the effects of government credit across different levels of the supply chain, I find that CDB industrial loans to state-owned enterprises (SOEs) crowd out private firms in the same industry but crowd in private firms in downstream industries. On average, a $1 increase in CDB SOE loans leads to a $0.20 decrease in private firms' assets. Moreover, CDB infrastructure loans crowd in private firms. I use exogenous timing of municipal politicians' turnover as an instrument for CDB credit flows.

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“…We adopt "Municipal Corporate Bond" from the English translation the "Cheng-Tou-Zhai" index provided by the China Securities Index Company Limited (CSI), which is the leading index provider in China (e.g., CSI300 index) and is jointly owned by the Shenzhen Stock Exchange and the Shanghai Stock Exchange. In the literature, papers have been using different translations; for instance, local government bonds by Huang et al (2016) , Chengtou bonds by Ang et al (2017), and urban construction and investment bonds by Gao et al (2018). Some practitioners' articles also use the term LGFV bond.…”

Section: Introductionmentioning

confidence: 99%