Abstract
This study first analyzes how local governments’ land-leasing behaviors affect Chinese cities’ debt risk then examines the impact of officials’ promotion mechanisms on debt risk in China’s urban land bank system. The land-leasing behavior is reflected through three indicators, namely, land-leasing revenue, land-leasing scale, and land financial dependence level. Two new indicators are constructed to measure the local government’ debt risk from the perspective of debt scale and debt repayment: the debt scale risk and debt burden risk. Empirical analyses are based on the data of 281 prefecture-level cities from 2006–2015. The main findings are twofold. First, the debt scale risk is positively affected by the land-leasing revenue, and officials’ promotion pressure. The debt burden risk is positively affected by the land financial dependence and officials’ promotion pressure. Second, the officials’ promotion pressure significantly enhances the positive effect of land-leasing revenue on the debt scale risk. Local officials, who are under promotion pressure, are inclined to expand the size of urban investment bonds, which increases debt scale risk.
Highlights
Toward the end of 2017, the outstanding balance of Chinese local governments’ debt was RMB 16.47 trillion
This research aims to analyze the impact of land-leasing behaviors and officials’ promotion mechanism on local governments’ debt risk
We analyze the effects of land-leasing revenue, land-leasing scale, and land financial dependence and officials’ promotion pressure on the urban debt risk
Summary
Toward the end of 2017, the outstanding balance of Chinese local governments’ debt was RMB 16.47 trillion. L. Zhang et al Land-leasing behavior, local officials’ promotions, and Chinese cities’ debt risks of the infrastructure construction of local governments was RMB 232.27 billion, of which the land-leasing revenue was RMB 33.75 billion, which accounted for 14.3%, land mortgage loans and urban investment bonds reached RMB 170 billion, which accounted for 72.88%. The second view is that when land-leasing revenues increase, local governments may overestimate the expected solvency, which will increase the issued scales of urban investment bonds. This study aims to find the relationship of local governments’ land-leasing behavior, local cities’ debt risk and officials’ promotion pressure. To analyze the effect of land-leasing behavior and officials’ promotion pressure on the local governments’ debt risk. This study assesses how officials’ promotion pressure impacts on local governments’ debt risk through the land-leasing behavior. The fourth section presents the empirical results, and last section is the conclusions
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