Strong credit expansion in China after the recent global financial crisis has brought local government financial vehicles （LGFV） into the spotlight. Rapid growth of LGFV has triggered concern about local government ...Strong credit expansion in China after the recent global financial crisis has brought local government financial vehicles （LGFV） into the spotlight. Rapid growth of LGFV has triggered concern about local government indebtedness, banks＇ asset quality and, more broadly, China＇s medium-term financial stability and sovereign risk. This paper constructs a unique frm-level dataset to evaluate the country ＂s local government debt. We find an uneven distribution of LGFV, which are concentrated in the coastal areas, and a deterioration of their debt repaying ability from 2010 to 2012. We use principal component analysis （PCA ） along with multivariate discriminate analysis （MDA） to identify the credit risk of LGFV based on conventional financial variables as well as local governments ＇fiscal status. We also estimate the safe boundaries of debt bearing at the provincial government level. The estimations reveal more severe local government debt risks in the middle-western provinces and higher risks associated with LGFV at the municipal and county levels. Although it is very unlikely that there will be a national debt crisis in China, the high risk of LGFV should be noted and effectively controlled by improving the fiscal transparency of local governments and reforming the fiscal system.展开更多
We study the roles of local financial development and foreign direct investment, and more importantly, their interaction with one another, in local capital allocation, based on Chinese industrial and regional data. Ou...We study the roles of local financial development and foreign direct investment, and more importantly, their interaction with one another, in local capital allocation, based on Chinese industrial and regional data. Our main finding is that, although local financial development and FDI each individually tended to improve the efficiency of local capital allocation during the sample period, they tended to compete and crowd out each other＇s effect, so that one impaired the individual function of the other. In particular, there exists a threshold value for local financial development, above which an increase in FDI reduces the efficiency of local capital allocation, rather than improve it. On the other hand, there exists a threshold value for FDI, above which further development in the local financial system lowers the efficiency of local capital allocation, rather than increase it. Our estimations suggest that the levels of FDI and local financial development in some relatively more developed Chinese regions have already surpassed such threshold values. We provide some interpretations of our findings and we discuss potential policy implications.展开更多
文摘Strong credit expansion in China after the recent global financial crisis has brought local government financial vehicles （LGFV） into the spotlight. Rapid growth of LGFV has triggered concern about local government indebtedness, banks＇ asset quality and, more broadly, China＇s medium-term financial stability and sovereign risk. This paper constructs a unique frm-level dataset to evaluate the country ＂s local government debt. We find an uneven distribution of LGFV, which are concentrated in the coastal areas, and a deterioration of their debt repaying ability from 2010 to 2012. We use principal component analysis （PCA ） along with multivariate discriminate analysis （MDA） to identify the credit risk of LGFV based on conventional financial variables as well as local governments ＇fiscal status. We also estimate the safe boundaries of debt bearing at the provincial government level. The estimations reveal more severe local government debt risks in the middle-western provinces and higher risks associated with LGFV at the municipal and county levels. Although it is very unlikely that there will be a national debt crisis in China, the high risk of LGFV should be noted and effectively controlled by improving the fiscal transparency of local governments and reforming the fiscal system.
文摘We study the roles of local financial development and foreign direct investment, and more importantly, their interaction with one another, in local capital allocation, based on Chinese industrial and regional data. Our main finding is that, although local financial development and FDI each individually tended to improve the efficiency of local capital allocation during the sample period, they tended to compete and crowd out each other＇s effect, so that one impaired the individual function of the other. In particular, there exists a threshold value for local financial development, above which an increase in FDI reduces the efficiency of local capital allocation, rather than improve it. On the other hand, there exists a threshold value for FDI, above which further development in the local financial system lowers the efficiency of local capital allocation, rather than increase it. Our estimations suggest that the levels of FDI and local financial development in some relatively more developed Chinese regions have already surpassed such threshold values. We provide some interpretations of our findings and we discuss potential policy implications.
