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Real estate market regulation and local government debt risk

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  • Xiao, Zeliang
  • Zhang, Houli

Abstract

China's real estate market regulations influence local government debt risk by altering fiscal conditions and government behavior. This paper uses an intensity difference-in-differences model with panel data from prefecture-level cities to assess the impact of stricter real estate policies since 2021. The findings show that these regulations have increased debt risk. The primary mechanism is the real estate market downturn that sharply reduces land-related fiscal revenue. In response, local governments have increased reliance on municipal investment bonds, further heightening debt risk.

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  • Xiao, Zeliang & Zhang, Houli, 2025. "Real estate market regulation and local government debt risk," Finance Research Letters, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006233
    DOI: 10.1016/j.frl.2025.107362
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    1. Fengxia Hao & Yuqin Wang & Yong Li, 2026. "From complexity to resilience: the role of regional knowledge in reducing China’s local government debt risk," Economics of Governance, Springer, vol. 27(1), pages 1-28, December.

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