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Fiscal Vulnerabilities and Risks from Local Government Finance in China

Author

Listed:
  • Yuanyan S Zhang
  • Steven A Barnett

Abstract

China weathered the global financial crisis better than most, thanks to a large and timely stimulus. This stimulus, however, was mainly in the form of off-budget infrastructure spending and thus not visible in the headline fiscal data. We construct a time series for the augmented fiscal deficit and debt—augmented to include off-budget activity—that better illustrates the counter-cyclical role of fiscal policy. The results also show that the augmented fiscal deficit and debt are both considerably higher than the headline government data suggest. Nonetheless, at around 45 percent of GDP, the augmented debt is still at a manageable level.

Suggested Citation

  • Yuanyan S Zhang & Steven A Barnett, 2014. "Fiscal Vulnerabilities and Risks from Local Government Finance in China," IMF Working Papers 14/4, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:14/4
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=41204
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    References listed on IDEAS

    as
    1. Easterly William R., 2001. "Growth Implosions and Debt Explosions: Do Growth Slowdowns Cause Public Debt Crises?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-26, February.
    2. Easterly, william, 2001. "Growth implosions, debt explosions, and my Aunt Marilyn : do growth slowdowns cause public debt crises?," Policy Research Working Paper Series 2531, The World Bank.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Yin and the Yang of Shadow Banking in China
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-09-08 17:38:23

    Citations

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    Cited by:

    1. repec:taf:pocoec:v:28:y:2016:i:2:p:232-248 is not listed on IDEAS
    2. Chen, Zhuo & He, Zhiguo & Liu, Chun, 2018. "The Financing of Local Government in the People’s Republic of China: Stimulus Loan Wanes and Shadow Banking Waxes," ADBI Working Papers 800, Asian Development Bank Institute.
    3. Serhan Cevik & Carolina Correa-Caro, 2015. "Growing (Un)equal; Fiscal Policy and Income Inequality in China and BRIC+," IMF Working Papers 15/68, International Monetary Fund.
    4. Guo, Shen & Liu, Lezheng & Zhao, Yan, 2015. "The business cycle implications of land financing in China," Economic Modelling, Elsevier, vol. 46(C), pages 225-237.
    5. repec:eee:ecmode:v:67:y:2017:i:c:p:248-260 is not listed on IDEAS
    6. repec:eee:chieco:v:50:y:2018:i:c:p:218-239 is not listed on IDEAS
    7. Shalendra D. Sharma, 2014. "Shadow Banking, Chinese Style," Economic Affairs, Wiley Blackwell, vol. 34(3), pages 340-352, October.
    8. Oleg Deev & Martin Hodula, 2016. "Sovereign default risk and state-owned bank fragility in emerging markets: evidence from China and Russia," Post-Communist Economies, Taylor & Francis Journals, vol. 28(2), pages 232-248, April.
    9. Yi Huang & Marco Pagano & Ugo Panizza, 2016. "Public Debt and Private Firm Funding. Evidence from Chinese Cities," EIEF Working Papers Series 1611, Einaudi Institute for Economics and Finance (EIEF), revised Aug 2016.
    10. Rod Tyers & Ying Zhang, 2014. "Short Run Effects of The Economic Reform Agenda," Economics Discussion / Working Papers 14-16, The University of Western Australia, Department of Economics.
    11. Xiang Xu & Alice Siqi Han, 2018. "Will China Collapse: A Review, Assessment And Outlook," Economics Working Papers 18104, Hoover Institution, Stanford University.
    12. Vipin Arora & Rod Tyers & Ying Zhang, 2014. "Reconstructing the Savings Glut: The Global Implications of Asian Excess Saving," CAMA Working Papers 2014-20, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Zhuo Chen & Zhiguo He & Chun Liu, 2017. "The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes," NBER Working Papers 23598, National Bureau of Economic Research, Inc.
    14. Yi Huang & Marco Pagano & Ug Panizza, 2016. "Local Crowding Out in China," CSEF Working Papers 450, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 13 Nov 2017.
    15. repec:taf:apbizr:v:23:y:2017:i:1:p:27-43 is not listed on IDEAS

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