Has the Reform of Land Reserve Financing Policy Reduced the Local Governments’ Implicit Debt?

Zhifeng Wang, Xuening Ge (), Yunxia He and Shuting Li
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Zhifeng Wang: School of Management Science and Engineering, Central University of Finance and Economics, Beijing 102206, China
Xuening Ge: School of Management Science and Engineering, Central University of Finance and Economics, Beijing 102206, China
Yunxia He: School of Management Science and Engineering, Central University of Finance and Economics, Beijing 102206, China
Shuting Li: School of Management Science and Engineering, Central University of Finance and Economics, Beijing 102206, China

Land, 2023, vol. 12, issue 11, 1-21

Abstract: Confronted with the expansion of local governments’ implicit debt and the associated risks induced by the practice of “land-based financing”, substantial alterations occurred in China’s land reserve financing policy during 2016–2017. These modifications led to an entire cessation of land reserve loans and the initiation of specialized bonds designated solely for land reserves. Empirical evidence, gathered through the approximate application of the difference-in-differences method, reveals that the reform of the land reserve financing policy can markedly reduce local governments’ implicit debt level. Based upon this foundation, the results of the triple-difference regression demonstrate that the diminution effect of the land reserve financing policy reform on local governments’ implicit debt is more pronounced in regions characterized by lower levels of marketization and more substantial legal financing constraints. This research enriches the comprehensive understanding of the impact of land reserve financing policy reform, possessing considerable referential value for the prevention and resolution of local governments’ implicit debt.

Keywords: land reserve; local governments’ implicit debt; land financing policy (search for similar items in EconPapers)
JEL-codes: Q15 Q2 Q24 Q28 Q5 R14 R52 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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