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Heterogeneous Effects of Local Government Financing Channels on Industrial Structure: Evidence from Provincial-Level Panel Data in China

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Listed:
  • Shi, Liangkun
  • Wu, Huanqi
  • Yang, Hanfei

Abstract

Local government financing channels provide an essential perspective for understanding the investment decisions of local governments and their economic effects. In China, broadly defined local government debt includes two categories: statutory debt and the debt incurred by local government financial vehicles (LGFVs). This paper uses provincial-level panel data from 2016 to 2025, constructs a data-driven industrial structure index, and estimates a two-way fixed-effects model controlling for the overall debt scale. The empirical evidence suggests that the different financial channels on industrial structure are associated with different and opposing changes in industrial structure. When the debt composition shifts toward LGFV debts, the share of relatively high-productivity efficiency industries increases, particularly that of the tertiary sector. In contrast, when the debt composition shifts toward statutory debt, the share of relatively low-production efficiency industries increases, particularly that of the secondary sector. Therefore, the composition of local government debt, rather than its scale alone, is relevant to changes in regional industrial structure.

Suggested Citation

  • Shi, Liangkun & Wu, Huanqi & Yang, Hanfei, 2026. "Heterogeneous Effects of Local Government Financing Channels on Industrial Structure: Evidence from Provincial-Level Panel Data in China," SocArXiv 3waq5_v1, Center for Open Science.
    • Handle: RePEc:osf:socarx:3waq5_v1
    DOI: 10.31235/osf.io/3waq5_v1
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    References listed on IDEAS

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    1. Shan-Li Wang & Feng-Wen Chen & Bing Liao & Cuiju Zhang, 2020. "Foreign Trade, FDI and the Upgrading of Regional Industrial Structure in China: Based on Spatial Econometric Model," Sustainability, MDPI, vol. 12(3), pages 1-16, January.
    2. Kunyu Tao, 2015. "Assessing Local Government Debt Risks in China: A Case Study of Local Government Financial Vehicles," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(5), pages 1-25, September.
    3. Ming Wang & Weiming Liu, 2023. "An empirical analysis of the impact of Chinese government investment on high-quality economic development——A study based on spatial Dubin model," PLOS ONE, Public Library of Science, vol. 18(3), pages 1-22, March.
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