Local Government Debt in China: Facts and Implications

Speaker：Mao Jie, Professor, Shanghai University of Finance and Economics

Host：Zhang Li, Professor, Lingnan College

Time and Date：10:00, April 17, 2026 (Friday)

Venue：Room 104, Mayingbiao Hall

Language：Chinese

Abstract：

This paper documents key facts about local government debt in China and examines their economic implications. Using data from 2006–2024, we describe the scale, composition, and evolution of both on-budget debt and off-budget financing through local government financing vehicles (LGFVs). We show that local government borrowing is predominantly used to finance investment-oriented activities, with substantial resources directed toward infrastructure and industrial development, distinguishing it from public debt in advanced economies. We further document that off-budget financing played a central role prior to the 2014 fiscal reform and remains an important component of local government funding thereafter. We then estimate the excess financing costs of LGFV borrowing relative to on-budget government bonds and find substantial efficiency losses. These patterns have important implications for fiscal sustainability and suggest that local government debt plays a central role in shaping the boundary between government and market.

Profile:

Mao Jie, Professor and doctoral supervisor at the School of Finance and Taxation, Shanghai University of Finance and Economics, member of the Expert Studio of the Ministry of Finance, expert at the Government Debt Research and Evaluation Center of the Ministry of Finance, and standing council member of the China Finance Society. Part-time researcher at the China Finance and Taxation Research Institute of Tsinghua University and the Finance and Taxation Research Institute of Renmin University of China, visiting scholar at the School of Global Policy and Strategy, University of California, San Diego. Selected as a Leading Talent in the National Talent Program (2023) and a Young Top Talent in the National Talent Program (2019), awarded the Second Prize of the National Teaching Achievement Award and the First Outstanding Young Graduate Supervisor Award Fund, and selected as a Young Teaching Master in Beijing Higher Education Institutions (2021). Mainly engaged in academic research and policy analysis in the field of finance and taxation, with research areas including government debt, intergovernmental fiscal relations, and tax system reform. Chief expert of major projects under the National Social Science Fund, and has led and completed multiple research projects including projects funded by the National Natural Science Foundation of China and the Beijing Social Science Foundation.