 Local Government Financing Platforms in China: A Fortune or Misfortune?Yinqiu Lu and Tao Sun No 2013/243, IMF Working Papers from International Monetary Fund Abstract: China’s rapid credit expansion in 2009–10 brought local government financing platforms (LGFPs) into the spotlight. This paper discusses their function, reasons behind their recent expansion, and risks they are posing to the financial sector, local governments, and sovereign balance sheet. This paper argues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if the causes of the rapid expansion of LGFPs are not addressed promptly. In this context, the paper proposes ways to avoid misfortune by: acknowledging and addressing the revenue and expenditure mismatches at the local government level; establishing a comprehensive framework to regulate and supervise local government budgets; ensuring the sustainability of the financial resources obtained from the sale of land use rights; and developing local government bond markets and promoting financial reforms. Keywords: WP; LGFP debt; transfer-adjusted revenue ratio; LGFP loan; LGFPs secure loan; lending activity; Credit; local government; sovereign risk; fiscal policy; capital markets; LGFP borrowing; LGFPs loan; need support; rapid growth result; Loans; Sovereign bonds; Monetary expansion; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2013/243 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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