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The Local Government Fiscal Imperative and Debt Financing in China

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Fiscal and Debt Policies for the Future

Part of the book series: International Papers in Political Economy Series ((IPPE))

Abstract

This paper argues that the People’s Republic of China (PRC) should be considered alongside European examples as a case study of unsustainable debt policies. It presents a paradox of relatively strong central government fiscal position and profligate local spending behaviour that have generated massive hidden liabilities for local governments and state-owned banks. We will present the most updated knowledge of the scope of local state indebtedness since the massive anti-recession stimulus packages of 2008–11, and examine its root and proximate causes including fiscal incentives inherent in the post-1994 tax system, land use rights, and the urbanization projects associated with China’s export-oriented, rapid-growth developmental model.

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Author information

Authors and Affiliations

  1. Central University of Finance and Economics, PRC

    Yang He

  2. University of Cambridge, UK

    Kun-Chin Lin

  3. Renmin University, PRC

    Ran Tao

Authors
  1. Yang He
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  2. Kun-Chin Lin
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  3. Ran Tao
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Editor information

Editors and Affiliations

  1. University of Cambridge, UK

    Philip Arestis

  2. University of Leeds, UK

    Malcolm Sawyer

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© 2014 Yang He, Kun-Chin Lin and Ran Tao

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He, Y., Lin, KC., Tao, R. (2014). The Local Government Fiscal Imperative and Debt Financing in China. In: Arestis, P., Sawyer, M. (eds) Fiscal and Debt Policies for the Future. International Papers in Political Economy Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137269539_6

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