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China's Local Government Bond Market

Author

Listed:
  • Mr. Waikei Raphael Lam
  • Jingsen Wang

Abstract

Local governments play a significant role in China’s public finance and fiscal operations. The size of local government debt has grown rapidly over the past years, exceeding the stock of sovereign debt in China. How does this development compare to other countries and what policies can foster the sound development of the bond markets? This paper finds that despite its rapid growth, the local government bond market is still underdeveloped. Severe impediments—low liquidity, weak credit discipline, structural fiscal deficit in local governments—have become more visible. Reforms to develop a sound local government bond market should harmonize tax and regulations, build liquidity, and advance fiscal reforms to tighten off-budget borrowing and address intergovernmental imbalances.

Suggested Citation

  • Mr. Waikei Raphael Lam & Jingsen Wang, 2018. "China's Local Government Bond Market," IMF Working Papers 2018/219, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2018/219
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    Cited by:

    1. Saganga M. Kapaya, 2019. "Financial System and Economic Development in Africa: A Review and Policy Recommendations," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(4), pages 98-117, October.
    2. M. Yu. Kozhevnikov, 2019. "Debt of Local Governments of China: Assessment Issues and Analysis," Studies on Russian Economic Development, Springer, vol. 30(6), pages 714-716, November.
    3. Michel Aglietta & Camille Macaire, 2019. "Setting the Stage for RMB Internationalisation - Liberalizing the Capital Account and Strengthening the Domestic Bond Market," CEPII Policy Brief 2019-28, CEPII research center.
    4. Cao, Mingyao & Duan, Keyi & Ibrahim, Haslindar, 2025. "Constraining effects of local government debt on bank loan growth," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 371-382.

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