China's Local Government Bond Market

September 28, 2018

Preview Citation

Format: Chicago

Waikei R Lam, and Jingsen Wang. China's Local Government Bond Market, (USA: International Monetary Fund, 2018) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Local governments play a significant role in China’s public finance and fiscal operations. The size of local government debt has grown rapidly over the past years, exceeding the stock of sovereign debt in China. How does this development compare to other countries and what policies can foster the sound development of the bond markets? This paper finds that despite its rapid growth, the local government bond market is still underdeveloped. Severe impediments—low liquidity, weak credit discipline, structural fiscal deficit in local governments—have become more visible. Reforms to develop a sound local government bond market should harmonize tax and regulations, build liquidity, and advance fiscal reforms to tighten off-budget borrowing and address intergovernmental imbalances.

Subject: Bonds, Economic sectors, Financial crises, Financial institutions, Fiscal risks, Government debt management, Public debt, Public financial management (PFM), Sovereign bonds

Keywords: Bond financing, Bond issuance, Bond market, Bonds, China, Debt risk, Fiscal risks, Government debt management, Local Government, Local government debt, Local government FV, Market hinge, Sovereign bonds, Subnational fiscal balance

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/219
Stock No:

WPIEA2018219
ISBN:

9781484378410
ISSN:

1018-5941

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