Financing China’s unprecedented infrastructure boom: the evolution of capital structure from 1978 to 2015

Jerry Zhirong Zhao, Guocan Su and Dan Li

Public Money & Management, 2019, vol. 39, issue 8, 581-589

Abstract: The authors examine the sources of the funds that have financed China’s infrastructure development since 1978. They define the five periods in which this development has taken place in terms of predominant financing: fiscal funds, build-operate-transfer (BOT), treasury bonds, the land financing, and local bonds. The system is characterized by a heavy reliance on debt financing and one-off revenues. These approaches have raised widespread concerns about fiscal sustainability in China. The authors explain why a shift towards the more conventional approach of fiscal funds is necessary.China’s infrastructure development since 1978 has been characterized by a heavy reliance on debt financing and one-off revenues. The model raises the concern about the country’s long-term fiscal sustainability. China should shift towards the more conventional approach of using fiscal funds to support infrastructure.

Date: 2019
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DOI: 10.1080/09540962.2019.1621049

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