Local Government Financing Platforms in China: A Fortune or Misfortune?

By Yinqiu Lu, T. Sun. Social Science Research Network, 2013

125 citations recorded by the source corpus.

China’s rapid credit expansion in 2009–10 brought local government financing platforms (LGFPs) into the spotlight. This paper discusses their function, reasons behind their recent expansion, and risks they are posing to the financial sector, local governments, and sovereign balance sheet. This paper argues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if the causes of the rapid expansion of LGFPs are not addressed promptly. In this context, the paper proposes ways to avoid misfortune by: acknowledging and addressing the revenue and expenditure mismatches at the local government level; establishing a comprehensive framework to regulate and supervise local government budgets; ensuring the sustainability of the financial resources obtained from the sale of land use rights; and developing local government bond markets and promoting financial reforms.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/8297f02744815094f6bc8e7745232e83e067e430

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Economics and Econometrics

In Political Science and International Relations

Citations in the corpus

Local Crowding‐Out in China (2020, unknown): “…that municipal debt grew rapidly in the wake of the global financial crisis, when local governments were asked to contribute to the central government’s massive fiscal stimulus but were not accorded additional fiscal resources with which to do so (Lu and Sun, 2013, and Zhang and Barnett, 2014).”
Developing by borrowing? Inter-jurisdictional competition, land finance and local debt accumulation in China (2017, background): “triggered by the 1994 fiscal reform and further compounded by the fiscal stimulus package, led local governments to resort to additional financial resources, as the fiscal gap increased drastically in the 2000s (Lu and Sun, 2013).”
Land financialisation and the financing of urban development in China (2019, result): “The introduction of Chengtou Bonds suggests a new pattern of land infrastructure leverage which is different from the findings of earlier studies (Lu & Sun, 2013; Tsui, 2011).”