LAND ASSETS, URBAN INVESTMENT BONDS, AND LOCAL GOVERNMENTS' DEBT RISK, CHINA

Juanfeng Zhang,Ting Yu,Haizhen Wen,Lele Li,Jie Gu

doi:10.3846/ijspm.2020.13834

Abstract

As the collateral for the issuance of urban investment bonds (UIBs), land leasing revenue is the fund that is used to repay the debt with large-scale land hoarding and increasing land price due to China’s rapid urbanization. This paper employs the fixed effect model and panel data from 2006 to 2015 to analyze the influence of land hoarding and price on debt scale and risk of local governments. Results reveal that both land hoarding scale and land price exhibit a positive influence on the UIBs’ scale and risk. However, regional differences are evident. In the Eastern region, the correlation between land asset and UIBs can be testified.

Highlights

After China’s tax-sharing reform between central and local governments in 1996, high-quality tax sources are allocated to the central government, thereby affecting the fiscal revenue of local governments (Hu, 1998; Zheng et al, 2014)
The residential land hoarding area is positive on the debt scale of local governments
This study focuses on the land hoarding scale and land price’s effect, which is controlled by local governments in China

Summary

Introduction

After China’s tax-sharing reform between central and local governments in 1996, high-quality tax sources are allocated to the central government, thereby affecting the fiscal revenue of local governments (Hu, 1998; Zheng et al, 2014). Under the new tax-sharing system, the local governments’ tax resource and revenue were reduced. The expenditure in local public goods and service increased. The imbalance between fiscal revenue and expenditure has inevitably increased financial pressure on local governments (Wong, 2000; Chen, 2008; Chen & Liu, 2015; Liu & Zhao, 2011; Tanya et al, 2017). Local governments should find new revenue sources to complete substantial economic development plans and supply public goods (Ho & Lin, 2003; Huang & Chan, 2018). Local governments hold land acquisition and land leasing rights and use land revenue to stimulate regional economic development (Sun & Zhou, 2014; Wu et al, 2015a; Xu, 2019; Zhang et al, 2019a)

Results

Discussion

Conclusion