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Eurozonization of the ChineseEconomy:

How Do Intergovernmental TransfersAffect Local Government Debt in China? 

 

出版源:

Lu, Ming, and Huiyong Zhong, 2018, “Eurozonization of the Chinese Economy: How Do Intergovernmental Transfers Affect Local Government Debt in China?” Asian Economic Papers, vol. 17 (1), 1-18.

 

 

 

Ming Lu

Antai College of Economics and Management, Shanghai Jiaotong University

No.1954, Huashan Road, Xuhui District, Shanghai, China

luming1973@sjtu.edu.cn

Huiyong Zhong (corresponding author)

School of Finance, Shanghai University of International Business and Economics

No.1900, Wenxiang Road, Songjiang District, Shanghai, China

zhonghuiyong@gmail.com


 

Abstract: China’s local government debt has risendramatically, which brings risks to China’s fiscal sustainability and long termeconomic growth, and intergovernmental fiscal transfers are of criticalimportance to it. From the lens of Urban ConstructionInvestment Bonds (UCIBs) issued by Local Government Financing Vehicles (LGFVs),we study how intergovernmental fiscal transfers impact the issuance of UCIBsunder China’s unitary system. After the application of instrumental variableestimation, we find special-purpose fiscal transfer per capita is positivelyassociated with the issuance of UCIBsspecificallyan increase in the special-purpose fiscal transferper capita by one yuan RMB is associated with an increase in the issuance ofUCIBs per capita by 0.282 yuan RMB; whereas, regular fiscal transfer (includingtax rebate and general fiscal transfer) has nothing to do with the issuance ofUCIBs. Furthermore, the effect of special-purpose fiscal transfer on theissuance of UCIBs mainly exists in the inland cities instead of coastal cities.This imposes the risk of Eurozonization for the Chinese economy. A furtherstudy also finds the deterioration of refinancing in terms of issuing moreUCIBs.

 

Keywords: Intergovernmental Fiscal Transfers, LocalGovernment Debt, UCIBs,Eurozonization

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上海交通大学安泰经济与管理学院特聘教授、中国发展研究中心主任。曾作为富布莱特学者工作于美国哈佛大学和国家经济研究局(NBER),作为兼职(客座)研究员受聘于北京大学林肯研究院和日本一桥大学。曾担任世界银行和亚洲开发银行咨询专家。研究领域为劳动经济学、城乡和区域经济发展。

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