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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Grand Strategies for Dealing With Chinese Local Government Debts
Author(s)
Mengzhong Zhang
Youwei Qi
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DOI:10.17265/2328-2185/2017.02.002
Affiliation(s)
University of Massachusetts Boston, Boston, USA
Rutgers University-Newark, Newark, USA
ABSTRACT
Local governmental debts
in China seem to be in a more precarious position than local government debts in the USA. The scale of Chinese local government
debts far surpasses that of the USA. Further, Chinese local government
debts appear to be expanding at an alarming rate in the past decade or so. This research
focuses on grand strategies for dealing with Chinese
local government debts. There are five research questions for this paper: 1) What
is the size of the Chinese government debts? 2) Are Chinese local government debts
controllable? 3) Who or what caused the rapid increase of the Chinese local government
debts? 4) Is it possible to have individual accountability for increasing local
government debts in the future? and 5) Will it be helpful to create a local government
debt management organization in the Chinese central government? Based on the available
literature, this analysis also utilizes in death interviews with 13 government officials, policy analyst, and scholars. First,
this paper identifies the size
and categories of debts related to Chinese
local governments. Then this paper illustrates various
ways and methods of Chinese local governments to obtain leverage. After analyzing the
causes and origins of these debts, the research
demonstrates a potential local systematic risk. By contrast to its advantages and disadvantages, the paper suggests that the local governmental debts need to be constrained. It
is important to restrict debt growth in terms of issuing, buying, repurchasing, collateralizing, etc. within
a legal framework. With the consideration of political mechanisms in China, the research suggests that the central government establishes a specific organization to help normalize the local governmental debts with the function
of supervision and management. The research also believes that it will be an effective
way to control the growth of local debts if the central government can hold the
relevant top leaders/officials of local governments to be accountable for their
performances related to debt accumulation.
KEYWORDS
debt, debt size, local government, Chinese government, individual, accountability, debt management organization
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