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Local Government Financing Platforms in China: A Fortune or Misfortune?
Author/Editor: Yinqiu Lu, Tao Sun
Release Date: © December, 2013
ISBN : 978-1-47559-967-1
Stock #: WPIEA2013243
Stock Status: On back-order
Languages and formats available
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 risksthey are posing to the financial sector, local governments, and sovereign balance sheet. This paperargues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if thecauses of the rapid expansion of LGFPs are not addressed promptly. In this context, the paperproposes ways to avoid misfortune by: acknowledging and addressing the revenue and expendituremismatches at the local government level; establishing a comprehensive framework to regulate andsupervise local government budgets; ensuring the sustainability of the financial resources obtainedfrom the sale of land use rights; and developing local government bond markets and promotingfinancial reforms.
More publications in this series: Working Papers