The Political Genesis of Local Government Debt in China

Professor Jean C. Oi (Stanford University)

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Abstract

China’s rapidly growing local government debt (LGD) is now branded a “grey rhino,” a known threat that has received little attention. Why did Beijing let LGD get so out of hand? What are the sources of LGD? There is evidence to suggest that no matter how honest and law-abiding local cadres might be, localities are likely to have local government debt. Prof. Oi will argue that LGD stems from a grand bargain between the center and the localities that was made to secure support for the 1994 fiscals reforms. This series of policy decisions institutionalized backdoor financing, creating a “win-win” solution that recentralized tax revenues to Beijing while countering the downsides of fiscal recentralization for the localities. The cost, however, was that China’s economic growth model was increasingly undergirded by mounting LGD, with little transparency and control by the center.

About the speaker

Jean C. Oi is the William Haas Professor of Chinese Politics in the Department of Political Science and a Senior Fellow of the Freeman Spogli Institute for International Studies (FSI) at Stanford University. She also directs the China Program at the Walter H. Shorenstein Asia-Pacific Research Center at FSI and is the founding Lee Shau Kee Director of the Stanford Center at Peking University. Oi has published extensively on political economy and the process of reform in China. Recent books include Fateful Decisions: Choices That Will Shape China's Future , co-edited with Thomas Fingar (2020); and Zouping Revisited: Adaptive Governance in a Chinese County , co-edited with Steven Goldstein (2018). Recent articles include “China’s Challenges: Now it Gets Much Harder,” co-authored with Thomas Finger, The Washington Quarterly (Spring 2020); and “After COVID-19: Rebooting Business in China,” co-authored with Jennifer Choo, Christopher Thomas, and Xue (Xander) Wu, The Diplomat (July 2020). Her current research continues to explore central-local relations, including local government debt. She is also in the early stages of a project on China’s Belt and Road Initiative.

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This webinar will take place online via Zoom. Click here to register.

Chair: Professor Steve Tsang (Director, SOAS China Institute)

Organiser: SOAS China Institute

Contact email: sci@soas.ac.uk