Fiscal Vulnerabilities and Risks from Local Government Finance in China

30 Pages Posted: 11 Feb 2014

See all articles by Y. Sophia Zhang

Y. Sophia Zhang

International Monetary Fund (IMF)

Steven A. Barnett

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: January 2014

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.

Keywords: Fiscal risk, China, Government expenditures, Infrastructure, External financing, External borrowing, Budget deficits, Public debt, Debt sustainability, Fiscal policy, Fiscal Vulnerabilities, Fiscal Risks, Local Government Finance, Land Finance, Gross Financing Needs, fiscal deficit, fiscal debt, fiscal data, fiscal activity, fiscal revenue, fiscal position, fiscal reform, government deficit, quasi-fiscal activity, government budget, fiscal costs, fiscal revenues, fiscal space, government spending, fiscal expenditure, fiscal system, central government budget, tax rates, local government spending, fiscal adjustment, fiscal statistics, aggregate demand, primary deficit, intergovernmental fiscal

JEL Classification: H50, H60, H70

Suggested Citation

Zhang, Y. Sophia and Barnett, Steven Alan, Fiscal Vulnerabilities and Risks from Local Government Finance in China (January 2014). Available at SSRN: https://ssrn.com/abstract=2393604 or http://dx.doi.org/10.2139/ssrn.2393604

Y. Sophia Zhang (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Steven Alan Barnett

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

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