Search Results (8)

Government debt can potentially enhance high-quality economic development, yet its effects and risks diverge substantially under the interplay of scale economies and diseconomies. Against the backdrop of the 20th CPC Central Committee’s Third Plenary Session, which emphasized coordinated development-security integration and local debt risk resolution, this study investigates the debt-development nexus through the lens of dual-scale economies in explicit/implicit local government debt. We innovatively incorporate resource allocation efficiency and investment levels as mediating factors. Empirical results demonstrate the following: (1) An inverted U-shaped relationship between local debt scale and economic development quality during two debt rectification periods, with implicit debt exhibiting a more pronounced curvilinear pattern; (2) Both resource allocation efficiency and investment levels significantly moderate the scale economies of explicit/implicit debt, yet paradoxically constrain development quality. Key obstacles include short-term adjustment costs, income disparity, and innovation suppression. Notably, while government debt currently operates within scale economies, implicit debt possesses greater borrowing capacity than explicit debt. Debt-driven economies of scale exhibit significant regional heterogeneity. In coastal areas, these effects are more sustainable, whereas in inland areas it is relatively weak. Policy implications suggest the following: (1) Recognizing debt’s nonlinear developmental impacts; (2) Optimizing resource allocation to improve investment quality; (3) Clarifying central-local fiscal responsibility demarcation; (4) A regionally differentiated collaborative strategy is needed for coordinating debt, investment, and resource allocation. Full article

Confronted with the expansion of local governments’ implicit debt and the associated risks induced by the practice of “land-based financing”, substantial alterations occurred in China’s land reserve financing policy during 2016–2017. These modifications led to an entire cessation of land reserve loans and the initiation of specialized bonds designated solely for land reserves. Empirical evidence, gathered through the approximate application of the difference-in-differences method, reveals that the reform of the land reserve financing policy can markedly reduce local governments’ implicit debt level. Based upon this foundation, the results of the triple-difference regression demonstrate that the diminution effect of the land reserve financing policy reform on local governments’ implicit debt is more pronounced in regions characterized by lower levels of marketization and more substantial legal financing constraints. This research enriches the comprehensive understanding of the impact of land reserve financing policy reform, possessing considerable referential value for the prevention and resolution of local governments’ implicit debt. Full article

This article analyzes the risk contagion mechanism of local government implicit debt from the perspective of multi-subject collaboration, considering interaction effects among different influencing factors. On this basis, with the help of complex network theory and mean field theory, a risk contagion model of local government implicit debt is constructed, and then the evolution characteristics and control strategies for risk contagion of local government implicit debt are analyzed theoretically and simulated. The main findings obtained from the study are: (1) A scale-free network is not conducive to the risk contagion of local government implicit debt, while the opposite is true for a random network. (2) Information openness accuracy and information disclosure strategy both exhibit a positive “U” shaped relationship with the risk contagion of local government implicit debt. Debt management level, emotional tendency, risk preference level, credit policy robustness, accountability mechanism soundness, and perfection of laws and regulations are all negatively correlated with the risk contagion of local government implicit debt. (3) In order to effectively reduce the risk contagion intensity of local government implicit debt, local governments at all levels should continuously strengthen their debt management capabilities and information openness, and the central government should continuously improve accountability mechanisms, laws, and regulations. At the same time, financial institutions and the media should actively play the role of “stabilizers”. However, the local government implicit debt risk is an inherent risk, and its control focus should be on reducing rather than eliminating the risk. Full article

Public–private partnership (PPP) projects have the features of extended investment cycles, diminished returns, and high demand for technology. Inadequate utilization of these projects may result in an accumulation of new implicit debt for the government. Consequently, it becomes imperative for the government to manage and mitigate implicit debt risks associated with urban rail transit PPP projects, which is a crucial prerequisite for ensuring the progression of such projects and the unhindered functioning of the financial system. The objective of this study is to investigate the factors that influence government implicit debt risks in urban rail transit PPP projects from the perspective of policy. This study employs the grounded theory method to develop a comprehensive framework model that identifies the influencing factors of government implicit debt risk in urban rail transit public–private partnership (PPP) projects. The contributions of this study are twofold: (1) it highlights the role of policy as a significant determinant of implicit debt risks of urban rail PPP projects, which contain governmental subsidies, external environmental risk sharing, and supporting measures. Specifically, government subsidies directly contribute to the government’s implicit expenses, thereby impacting the level of implicit debt risks associated with urban rail transit PPP projects. Supporting measures exert an indirect influence on the implicit debt risks of the government, thereby imposing a significant burden on local fiscal expenditure. External environmental risk sharing, as an external factor, leads to an increase in fiscal expenditure due to the government’s social responsibility; and (2) it provides a qualitative method that examines the government implicit risk factors associated with urban rail trait PPP projects based on grounded theory. The model that examines the influencing factors of government implicit debt risk in urban rail transit PPP projects adopts a policy perspective, which can inform policymakers on a heretofore unexplored adverse effect of guarantee policy. Full article

The rapid growth of local government debt size in China has aroused the attention of academia and policy circles due to its impact on environmental pollution. This paper aims to explore the impact of local government debt size on corporate pollution emissions and its mechanism. This paper uses the China Local Government Debt Database, Industrial Enterprise Database, and Industrial Enterprise Pollution Database from 2006 to 2013, and adopts the two-way fixed effect model and difference-in-differences method to conduct an empirical analysis of industrial enterprises in 31 provinces of China. The results show that the local government debt size has a significant positive impact on corporate pollution emissions, and each unit increase in the local government debt size leads to an increase of 0.002 units in corporate pollution emissions. Further mechanism tests show that this effect is realized through the expansion of regional fixed asset investment and the reduction of enterprise R&D investment. In addition, there is significant heterogeneity among enterprises of different ownership, location, and industry. This paper provides practical references for local governments and micromarket actors to improve environmental protection and debt governance in the new era. Full article

Under the general trend of reducing leverage and strictly controlling new implicit debts of local governments, the risk of nonstandard defaults by urban investment and development companies (UIDCs) continues to be released, which will increase the credit risk of UIDCs. This paper examines the impact of nonstandard default events of municipal investment platform companies on the urban investment bond (UIB) market through event analysis using 252 nonstandard default events of 32 municipal investment companies from 2018 to 2021 as sample data. The findings show that the UIB market is ineffective and affected by nonstandard defaults and that bond returns show abnormal short-term significant negative fluctuations. This study has important implications regarding the early warning of UIB default risk and the improvement of the sustainable development of urban investment enterprise financing. Full article

In recent years, local governments have boosted their local economies by raising large amounts of debt. Even though the state further strictly controls local government debt, the hidden debt formed by the local government borrowing in disguised form can infect systemic financial risks, creating an urgent need to carry out risk warning based on local government hidden debt. The paper uses the macro indicators of local government implicit debt risk at the prefecture-level city level, and introduces the micro indicators of PPP projects, financing platform bank debt, and urban investment debt to establish a BP neural network model. We not only study the contagion effect of local government hidden debt on systemic financial risks, but also predict the systemic financial risks in 2019 and construct an early warning risk system based on the prefecture-level city data from 2015 to 2018. In addition, the early warning effect of local government implicit debt on systemic financial risk under different stress scenarios is investigated. The study found that the implicit debt risk of local governments, the scale of financing platform bank debt, the scale of PPP, and the scale of urban investment bonds have a significant impact on systemic financial risks. The neural network model constructed by introducing these four variables at the same time can better predict the level of systemic financial risk. The model can also accurately predict the changes in systemic financial risks under the stress test of the increase in hidden debt of different local governments, and has a good early warning effect. Full article

Local state-owned enterprises (SOEs) working together with local governments can promote economic growth. However, an increase in the implicit contingent liabilities of local governments due to implicit guarantees given to SOEs has a negative effect on economic growth. The classical socialist theories and the economic stability in each financial crisis of China show that the macroeconomic efficiency of SOEs is more important than the microeconomic efficiency, and microeconomic efficiency in neoclassical economic theory cannot reflect the nature of SOEs. It is of great practical and theoretical significance to make a more comprehensive and accurate judgment on the efficiency of SOEs. This paper constructs an index of local governments’ implicit contingent liabilities in 31 provinces based on the 488 local SOEs to study the impact of implicit contingent liabilities, and the time period is the year 2007 to the year 2020. Our findings show that an increase in local SOEs’ assets suppresses economic fluctuations at the cost of increasing government’s implicit contingent debt and has a negative impact on economic growth. Unlike the fiscal influence path of explicit debt, implicit contingent debt restrains local economic growth through financial markets. The deleveraging of local SOEs and improving their efficiency can improve the overall efficiency of local funds and reduce the negative effect of local governments’ implicit contingent liabilities on economic growth. Full article