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Understanding local government debt financing of infrastructure projects in China: Evidence based on accounting data from local government financing vehicles

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  • Bao, Helen X.H.
  • Wang, Ziyou
  • Wu, Robert Liangqi

Abstract

This study develops an analytical framework to investigate the complex relationship between local government debt issuing for infrastructure financing, state control, land finance, and development activities in the private sector in China. Using local government financing vehicles’ accounting data, we find that local governments are working creatively to meet infrastructure development targets handed down by the central government. Moreover, local government financing vehicles became more responsive to development activities from the private sector in their debt-issuing decisions after the regulations of local government debt issuing in 2013/14. By modelling the effect of three distinct forces, i.e., the central government, local governments, and the market, in one unified framework, our study provides reliable evidence of how infrastructure financing works in China. Our research extends the studies of land finance into the infrastructure development domain. The findings are also helpful for studies on China's land use policy under its leasehold land right system, particularly the impacts of different land planning uses on infrastructure development.

Suggested Citation

  • Bao, Helen X.H. & Wang, Ziyou & Wu, Robert Liangqi, 2024. "Understanding local government debt financing of infrastructure projects in China: Evidence based on accounting data from local government financing vehicles," Land Use Policy, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:lauspo:v:136:y:2024:i:c:s0264837723004301
    DOI: 10.1016/j.landusepol.2023.106964
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    More about this item

    Keywords

    Urbanisation; Local government financing vehicles; Fiscal decentralisation; China;
    All these keywords.

    JEL classification:

    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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