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Abstract

Although the investment-oriented development model for economic growth adopted by Chinese governments has generated spectacular results, the risks of debt-financed urbanisation and economic development have recently become evident in mounting local debts that are undermining the financial system, triggering concerns with respect to local governments’ indebtedness, financial stability and sovereign risk in China. In this paper, we portray the uneven spatial and temporal dynamics of local government debt in China, and examine the ways in which it is intertwined with institutional, political and economic factors. Our analysis shows that while global and national economic conditions have resulted in a dramatic increase in local government debt, particularly in the late 2000s and the early 2010s, the spatial variation of local debt accumulation in China could be partly explained by two institutional factors: land finance and inter-jurisdictional competition. We argue that the behaviour of local governments may harm the long-term future of Chinese cities.

Keywords

China inter-jurisdictional competition land finance local debt accumulation local financing platforms

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Developing by borrowing? Inter-jurisdictional competition,land finance and local debt accumulation in China

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