China's LGFV Crisis 2011: The Conflict between Local Autonomy, National Interest and Financial Reforms

Leo F. Goodstadt
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Leo F. Goodstadt: Hong Kong Institute for Monetary Research and Trinity College, University of Dublin and The University of Hong Kong

No 32012, Working Papers from Hong Kong Institute for Monetary Research

Abstract: 2011 saw China overtaken by alarming financial fallout from the 2008 economic stimulus package to counter the global financial crisis. This paper shows how the decision to rely on local governments to fund the bulk of the package imposed serious strains on the banking system and reversed a decade of reform initiatives. The analysis indicates that this costly outcome was predictable and caused by a long-standing failure to deal with the extraordinary fiscal and financial autonomy exercised by local officials at the expense of sound banking and stable property markets.

Keywords: Local Government; Banks; Fiscal Autonomy; Legal and Financial Infrastructures (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-01
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