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State-led Growth and Domestic Debts

In: State Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012

Author

Listed:
  • Yazhuo Zheng

    (Beijing Enlightenment Institute for Economic and Social Research)

  • Kent Deng

    (London School of Economics)

Abstract

This chapter deals with China’s trap in a mounting debt burdendebt burden , especially why and how government debts grow so fast. Beijing’s single-minded policy of pushing for GDP growth has created incentives for bureaucrats and cadres to initiate novel ways to generate more and more GDP for personal deeds. Projects best suited for government are land-intensive, capital-intensivecapital-intensive but relatively low-tech city-building ones. Local governments then need money. They cash coffers from land leases and hoard newly nationalised land a collateral whereby money loans to be made from state-owned banks. As their investment returns are too low to pay off debts, many local governments face bankruptcy.

Suggested Citation

  • Yazhuo Zheng & Kent Deng, 2018. "State-led Growth and Domestic Debts," Palgrave Studies in Economic History, in: State Failure and Distorted Urbanisation in Post-Mao's China, 1993–2012, chapter 7, pages 123-133, Palgrave Macmillan.
    • Handle: RePEc:pal:palscp:978-3-319-92168-6_7
    DOI: 10.1007/978-3-319-92168-6_7
    as

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