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
In this paper,we investigate the reasons for the establishment and operation models of China’s Local Government Financing Vehicles(LGFVs).We also outline the current literature on the structural arrangement and the d...In this paper,we investigate the reasons for the establishment and operation models of China’s Local Government Financing Vehicles(LGFVs).We also outline the current literature on the structural arrangement and the developments of LGFVs.Moreover,we employ the empirical analysis to examine the driv-ing factors of the financial performance of LGFVs.Using 1,042 LGFVs that issued debt securities during the period 2011–2016,we find that the financial performance of LGFVs is positively asso-ciated with local tax revenues,local education levels,local saving deposits,and firm size but negatively associated with local gov-ernment spending and firm leverage ratios.Based on our empir-ical findings,we finally propose policy recommendations for the establishment of relevant investment and financing platforms.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.
基金supported by the MOE Project of Key Research Institute of Humanities and Social Sciences at Universities[16JJD790056]Fundamental Research Funds for the Central Universities,and the Research Funds of Renmin University of China[13XNJ003 and 20YYA01].
文摘In this paper,we investigate the reasons for the establishment and operation models of China’s Local Government Financing Vehicles(LGFVs).We also outline the current literature on the structural arrangement and the developments of LGFVs.Moreover,we employ the empirical analysis to examine the driv-ing factors of the financial performance of LGFVs.Using 1,042 LGFVs that issued debt securities during the period 2011–2016,we find that the financial performance of LGFVs is positively asso-ciated with local tax revenues,local education levels,local saving deposits,and firm size but negatively associated with local gov-ernment spending and firm leverage ratios.Based on our empir-ical findings,we finally propose policy recommendations for the establishment of relevant investment and financing platforms.
