Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China
Abstract
:1. Introduction
2. Institutional Background and Literature Review
2.1. Local Government Debt and Chengtou Bonds
2.2. Land Finance, Real Estate Market and Local Government Debt Risk
3. Methodology
3.1. Description of Variables and Descriptive Statistics
3.2. Model Development
4. Empirical Results
4.1. Basic Results
4.2. Robustness Test
4.3. Heterogeneity Test
4.4. Endogeneity Test
5. Real Estate Market Downturn and Local Government Debt Repayment Risk
6. Further Discussion: Considering Macroeconomic Trends
7. Conclusions
Author Contributions
Funding
Data Availability Statement
Conflicts of Interest
1 | Data sources: wind database, https://www.wind.com.cn/ (accessed on 12 May 2022). |
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Variables | Quantitative Index | Obs | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|---|
Local government debt | Chengtou bonds | 2240 | 3.901 | 1.839 | 0 | 8.456 |
Real estate market | Commercial housing sales area | 2240 | 5.896 | 0.909 | 1.275 | 8.812 |
Land finance | Land sale revenue | 2240 | 13.45 | 1.331 | 6.77 | 17.157 |
Economic growth | Per GDP | 2240 | 55.101 | 14.835 | 22.28 | 100 |
Capital input | Fixed investments/GDP | 2240 | 5.925 | 0.813 | 2.277 | 7.923 |
Regional total population | Regional total population | 2240 | 10.975 | 0.571 | 9.076 | 13.885 |
Industrial structure | Tertiary industry production value/GDP | 2240 | 6.031 | 0.634 | 3.784 | 8.067 |
Urbanization rate | Urban population/total population | 2240 | 46.48 | 11.102 | 14.01 | 82 |
Population density | Population density | 2240 | 0.052 | 0.149 | 0.002 | 1.25 |
Local government competition | General public budget expenditure/GDP | 2240 | 0.164 | 0.098 | 0.011 | 2.702 |
(1) | (2) | (3) | (4) | (5) | |
---|---|---|---|---|---|
Variables | Local Government Debt | Local Government Debt | Land Finance | Local Government Debt | Local Government Debt |
Real estate market | 0.422 *** | 0.385 *** | 0.390 *** | 0.407 *** | |
(0.0518) | (0.0428) | (0.0527) | (0.0534) | ||
Land finance | 0.125 *** | 0.0851 *** | 0.0811 *** | ||
(0.0268) | (0.0270) | (0.0271) | |||
Real estate market × land finance | 0.0378 ** | ||||
(0.0190) | |||||
Urbanization rate | 0.0145 ** | 0.0221 *** | −0.018 *** | 0.0161 *** | 0.0169 *** |
(0.00615) | (0.00618) | (0.00508) | (0.00615) | (0.00616) | |
Population density | −0.299 | −0.481 | 1.803 *** | −0.452 | −0.485 |
(0.436) | (0.443) | (0.360) | (0.437) | (0.437) | |
Economic growth | 0.252 *** | 0.451 *** | 0.214 *** | 0.234 ** | 0.250 *** |
(0.0960) | (0.0926) | (0.0793) | (0.0959) | (0.0962) | |
Regional total population | 0.418 | 0.797 ** | −0.343 | 0.447 | 0.400 |
(0.329) | (0.330) | (0.272) | (0.329) | (0.329) | |
Industrial structure | 0.00254 | 0.00256 | 0.274 | 0.00322 | −0.621 ** |
(0.00421) | (0.00426) | (0.221) | (0.00420) | (0.267) | |
Capital input | −0.586 ** | −0.515 * | −0.008 ** | −0.609 ** | 0.00309 |
(0.268) | (0.270) | (0.00348) | (0.267) | (0.00420) | |
Local government competition | −0.483 ** | −0.551 ** | −0.0503 | −0.479 ** | −0.488 ** |
(0.214) | (0.216) | (0.177) | (0.213) | (0.213) | |
Constant | −5.175 ** | −8.414 *** | 3.051 | −5.435 ** | −5.268 ** |
(2.544) | (2.541) | (2.102) | (2.540) | (2.539) | |
Year | Control | Control | Control | Control | Control |
City | Control | Control | Control | Control | Control |
Observations | 2240 | 2240 | 2240 | 2240 | 2240 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Variables | Local Government Debt | Local Government Debt | Local Government Debt | Local Government Debt |
Real estate market | 0.385 *** | 0.305 *** | 0.390 *** | |
(0.0573) | (0.0608) | (0.0528) | ||
Land finance | 0.140 *** | 0.121 *** | 0.0851 *** | |
(0.0336) | (0.0271) | (0.0270) | ||
Land finance (through bidding, auction, and listing) | 0.266 *** | |||
(0.0435) | ||||
Undue Chengtou bonds | 0.000160 | |||
(0.000153) | ||||
High growth pressure | 0.000133 | |||
(0.00296) | ||||
Control variables | Control | Control | Control | Control |
Constant | −3.989 | −15.66 *** | −8.049 *** | −5.426 ** |
(2.892) | (1.113) | (2.565) | (2.548) | |
Year | Control | Control | Control | Control |
City | Control | Control | Control | Control |
Observations | 1890 | 2240 | 2240 | 2240 |
Level of Economic Development | Local General Public Budget Revenue | ||||||
---|---|---|---|---|---|---|---|
Tier-1 City | Tier-2 City | Tier-3 City | Tier-4 City | Tier-5 City | High Income | Low Income | |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | |
Variables | Local Government Debt | Local Government Debt | Local Government Debt | Local Government Debt | Local Government Debt | Local Government Debt | Local Government Debt |
Real estate market | 1.377 *** | 0.741 *** | 0.422 *** | 0.389 *** | 0.231 ** | 0.411 *** | 0.309 *** |
(0.203) | (0.194) | (0.122) | (0.116) | (0.0962) | (0.0895) | (0.0857) | |
Land finance | 0.260 *** | 0.296 ** | 0.256 *** | 0.0439 | 0.0408 | 0.243 *** | 0.0187 |
(0.0861) | (0.138) | (0.0656) | (0.0596) | (0.0562) | (0.0501) | (0.0458) | |
Control variables | Control | Control | Control | Control | Control | Control | Control |
Constant | −34.77 *** | −30.69 *** | −21.16 *** | −19.94 *** | −12.05 *** | −14.12 *** | −13.28 *** |
Year | Control | Control | Control | Control | Control | Control | Control |
City | Control | Control | Control | Control | Control | Control | Control |
Observations | 190 | 300 | 650 | 680 | 420 | 1120 | 1120 |
(1) | (2) | |
---|---|---|
Variables | Land Finance | Local Government Debt |
L. local government debt | 0.729 *** | |
(0.0339) | ||
L. land finance | 0.650 *** | |
(0.0284) | ||
Land finance | 0.0987 * | |
(0.0541) | ||
Real estate market | 0.143 *** | 0.0506 ** |
(0.0422) | (0.0249) | |
AR (1) | 0.000 | 0.000 |
AR (2) | 0.066 | 0.588 |
Hansen | 0.956 | 0.953 |
Control variables | Control | Control |
Constant | −1.110 | −2.447 *** |
(0.708) | (0.790) | |
Year | Control | Control |
City | Control | Control |
Observations | 2016 | 2016 |
(1) | (2) | (3) | (4) | (5) | |
---|---|---|---|---|---|
Variables | Real Estate Market | Land Finance | Local Government Debt | Debt Ratio | Local Government Debt |
−0.158 *** | −0.277 *** | −0.139 * | 21.29 * | −0.120 | |
(0.0296) | (0.0579) | (0.0764) | (11.64) | (0.0768) | |
Land finance | 0.0646 ** | ||||
(0.0288) | |||||
Control variables | Control | Control | Control | Control | Control |
Constant | −8.220 *** | −0.911 | −7.099 *** | −666.2 *** | −7.209 *** |
Year | Control | Control | Control | Control | Control |
City | Control | Control | Control | Control | Control |
Observations | 2240 | 2240 | 2240 | 2240 | 2240 |
0.395 | 0.251 | 0.467 | 0.406 | 0.699 |
Baseline Model | All DID Controls | Bounding Values | ||||||
---|---|---|---|---|---|---|---|---|
Panel A: DID with real estate market | ||||||||
Outcome | ||||||||
DID smoothing coefficient | −0.1360 | 0.3650 | −0.1580 | 0.3950 | 0.5135 | 0.7900 | −0.2449 | −0.4480 |
Oster bounds () | [−0.1627, −0.0129] | |||||||
95% confidence interval | [−0.2455, −0.0800] | |||||||
Excludes 0 | Yes | |||||||
Panel B: DID with land finance | ||||||||
Outcome | ||||||||
DID smoothing coefficient | −0.1690 | 0.3610 | −0.2770 | 0.2510 | 0.3263 | 0.5020 | −0.0061 | −0.1956 |
Oster bounds () | [−0.2545, −0.1298] | |||||||
95% confidence interval | [−0.4281, −0.0809] | |||||||
Excludes 0 | Yes | |||||||
Panel C: DID with local government debt | ||||||||
Outcome | ||||||||
DID smoothing coefficient | −0.385 | 0.5355 | −0.1390 | 0.4673 | 0.6075 | 0.9346 | −0.6446 | −1.8246 |
Oster bounds () | [−0.4978, −0.3339] | |||||||
95% confidence interval | [−0.7522, −0.2435] | |||||||
Excludes 0 | Yes | |||||||
Panel D: DID with debt ratio | ||||||||
Outcome | ||||||||
DID smoothing coefficient | 43.8000 | 0.5470 | 21.2900 | 0.4060 | 0.5278 | 0.8120 | 55.4998 | 86.1060 |
Oster bounds () | [107.2019, 113.2455] | |||||||
95% confidence interval | [50.0461, 184.4442] | |||||||
Excludes 0 | Yes |
Monetary Expansions | Deficits | Geopolitics Uncertainty | |||||||
---|---|---|---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | |
Full Sample | Tightening Period | Slack Period | Full Sample | High Deficits | Low Deficits | Full Sample | Before 2016 | After 2016 | |
Real estate market | 0.432 *** | −0.326 | 0.428 *** | 0.331 *** | 0.387 *** | 0.580 ** | 0.328 *** | 0.160 ** | −0.0245 |
(0.0523) | (0.260) | (0.0596) | (0.0611) | (0.0881) | (0.0843) | (0.0533) | (0.0698) | (0.148) | |
Monetary expansions | 0.0653 ** | 0.623 ** | 0.202 *** | ||||||
(0.0289) | (0.294) | (0.0420) | |||||||
Deficits | −0.209 *** | −0.0978 ** | 0.672 *** | ||||||
(0.0374) | (0.0383) | (0.172) | |||||||
Geopolitics uncertainty | 0.904 *** | ||||||||
(0.252) | |||||||||
Real estate market × monetary expansions | 0.0765 *** | ||||||||
(0.0216) | |||||||||
Real estate market × deficits | −0.0944 *** | ||||||||
(0.0263) | |||||||||
Real estate market × geopolitics uncertainty | 0.246 *** | ||||||||
(0.0378) | |||||||||
Control variables | Control | Control | Control | Control | Control | Control | Control | Control | Control |
Constant | −5.450 ** | −42.16 ** | −22.63 *** | −32.01 *** | −22.77 *** | −25.47 *** | 0.53 | 5.653 | −2.622 |
Year | Control | Control | Control | Control | Control | Control | Control | Control | Control |
City | Control | Control | Control | Control | Control | Control | Control | Control | Control |
Observations | 2240 | 448 | 1792 | 2240 | 1120 | 1120 | 2240 | 1568 | 672 |
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Chen, M.; Chen, T.; Ruan, D.; Wang, X. Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China. Land 2023, 12, 1597. https://doi.org/10.3390/land12081597
Chen M, Chen T, Ruan D, Wang X. Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China. Land. 2023; 12(8):1597. https://doi.org/10.3390/land12081597
Chicago/Turabian StyleChen, Mengkai, Ting Chen, Debao Ruan, and Xiaowei Wang. 2023. "Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China" Land 12, no. 8: 1597. https://doi.org/10.3390/land12081597
APA StyleChen, M., Chen, T., Ruan, D., & Wang, X. (2023). Land Finance, Real Estate Market, and Local Government Debt Risk: Evidence from China. Land, 12(8), 1597. https://doi.org/10.3390/land12081597