Local Government Financing Platforms in China

Lu, Yinqiu; Sun, Tao

doi:10.5089/9781475599671.001

“…This is when local governments were asked to contribute to the massive …scal stimulus implemented by the Chinese government but were not given additional …scal resources (Lu andSun, 2013, andBarnett, 2014).…”

Section: Discussionmentioning

confidence: 99%

“…Our data show that local government debt started growing rapidly after the global …nancial crisis, when local governments were asked to contribute to the massive …scal stimulus implemented by the Chinese government but were not given additional …scal resources (Lu andSun, 2013, andBarnett, 2014). Between 2006 and2010, outstanding local government debt grew six-fold, going from RMB1.2 to RMB7.2 trillion (Table 1), and trebled relative to GDP, from 5.8% to 18.1%.…”

Section: Asmentioning

confidence: 93%

Public Debt and Private Firm Funding: Evidence from Chinese Cities

Huang

¹

,

Pagano

²

,

Panizza

³

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn China, local public debt issuance between 2006 and 2013 crowded out investment by private manufacturing …rms by tightening their funding constraints, while it did not a¤ect state-owned and foreign …rms. Using novel data for local public debt issuance, we establish this result in three ways. First, local public debt is inversely correlated with the city-level investment ratio of domestic private manufacturing …rms. Instrumental variable regressions indicate that this link is causal. Second, local public debt has a larger negative e¤ect on investment by private …rms in industries more dependent on external funding. Finally, in cities with high government debt, …rm-level investment is more sensitive to internal funding, also when this sensitivity is estimated jointly with the …rm's likelihood of being credit-constrained. Altogether, these results suggest that, by curtailing private investment, the massive public debt issuance associated with the post-2008 …scal stimulus sapped long-term growth prospects in China.

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“…As a result, the imbalances between local government revenue and expenditure have widened and vary among provinces. Such mismatch is relatively high compared with other countries (Lu and Sun 2013).…”

Section: Transfers From the Central Government To Local Governmentsmentioning

confidence: 95%

Causes and Remedies for Japan's Long-Lasting Recession: Lessons for the People's Republic of China

Yoshino

¹

,

Taghizadeh–Hesary

²

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractJapan has suffered from sluggish economic growth and recession since the early 1990s. In this paper, we analyze the causes of the prolonged slowdown of the Japanese economy (the lost decade). Economics Nobel laureate Paul Krugman has argued that Japan's lost decade is an example of a liquidity trap. However, our empirical analysis shows that stagnation of the Japanese economy comes from its vertical IS curve rather than a horizontal LM curve, so the Japanese economy faces structural problems rather than a temporary downturn. The structural problems mainly come from the aging demographic, which is often neglected in other studies, and also from the allocation of transfers from the central government to local governments, and the unwillingness of Japanese banks to lend money to startup businesses and SMEs, mainly because of Basel capital requirements. Many countries, like the People's Republic of China, are expected to face similar issues, particularly the aging population, and so are very much concerned about the long-term recession that Japan has experienced. This paper will address why the Japanese economy has been trapped in a prolonged slowdown and will provide some remedies for revitalizing the economy. JEL Classification: E12, E62ADBI Working Paper 554Yoshino and Tagh...

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“…According to an IMF report (Lu and Sun, 2013), while Chinese local governments have accessed and used LGFP to finance and restructure debt, in the medium term they may find this route to accessing financing is limited due to the new direction pointed out by the new State Budget Law. Hence it is increasingly important for the central government to provide policy guidance that encourages municipalities to establish a strategic approach to managing municipal assets and physical properties.…”

Section: Conclusion and Recommendationsmentioning

confidence: 99%

Municipal asset management in China’s small cities and towns: Findings and strategies ahead

Camparano¹,

Masic²

2018

J Infrastruct Policy Dev

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Chinese municipalities have developed a large stock of capital assets during a period of rapid growth and urbanization, but have yet to modernize asset management practices. Cities face challenges such as premature decline of fixed assets and spiking liabilities related to operating and maintaining assets. This paper evaluates the asset management practices in three selected small cities and towns in China, using a benchmarking assessment tool followed by an in-depth field assessment. The paper finds that overall performance is below half the international benchmark for good practice in all three cities. Management practices are considerably more advanced for land than for buildings and infrastructure. Key deficiencies in data availability and reporting, governance, capacity, and financial management indicate increased risks for local government finance and the delivery of public services. For small cities and towns where public revenues are often uncertain and limited, urban public services will be at risk of deterioration unless good asset management practices are put in place. The paper recommends strategic actions for upper and lower levels of government, to advance local asset management practices and facilitate the reform agenda.

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Local Government Financing Platforms in China

Cited by 65 publications

References 5 publications

Public Debt and Private Firm Funding: Evidence from Chinese Cities

Public Debt and Private Firm Funding: Evidence from Chinese Cities

Causes and Remedies for Japan's Long-Lasting Recession: Lessons for the People's Republic of China

Municipal asset management in China’s small cities and towns: Findings and strategies ahead

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