From the point of view of the Big Family, it's fine if some provinces underachieve their growth targets, because other provinces overachieve. The rest is bookkeeping, especially since Beijing's debt load is minuscule and its liquid assets immense.
The current Bad China Big Debt Problem (a perennial favorite topic of the Doomed China cult) entirely neglects the fact that most provinces are holding more than adequate assets or income streams to cover debt repayment. That is certainly the case at the national level.
An exhaustive review on China's Local Government Financial Vehicles (LGFVs), with an evolutional perspective! I have three main takeaways: 1) The central government's unsuccessful attempts to phase out LGFVs intrigue me the most. This likely stems from the disconnect between the fiscal responsibilities and administrative powers of local governments. Post-tax reform, the financial burden on local administrations increased significantly, leading to a reliance on LGFVs. However, should we speculate that even without tax reforms, local governments might still have resorted to creating such financial mechanisms due to the inherent inclination to overspend? 2) The dynamics within LGFVs at different (vertical) levels are also intriguing. For instance, the distribution of resources can create competition between levels, such as between counties' and townships' LGFVs (e.g., Zunyi City and Bozhou District), whereas only one LGFV might secure funding through land finance. So, how does it coordinate among these LFGVs? 3) The interaction between different sectors (the horizontal relationship), exemplified by the "Beijing counters Beijing" phenomenon, where conflicting goals between ministries may hinder the dissolution of LGFVs. This is particularly relevant when infrastructural projects aimed at poverty alleviation are at stake, posing a challenge to policy consistency on eliminating debts from LGFVs (would be most interesting to see how they arrange).
Thank-you for this excellent overview. Another innovation you haven't mentioned was the PPP wave in 2017/18, a way of equitising things on a project level. Any idea what's happened to that?
Footnotes to content ratio is extreme 😄
Absolutely fascinating
From the point of view of the Big Family, it's fine if some provinces underachieve their growth targets, because other provinces overachieve. The rest is bookkeeping, especially since Beijing's debt load is minuscule and its liquid assets immense.
The current Bad China Big Debt Problem (a perennial favorite topic of the Doomed China cult) entirely neglects the fact that most provinces are holding more than adequate assets or income streams to cover debt repayment. That is certainly the case at the national level.
Excellent piece of work! Thank you!
An exhaustive review on China's Local Government Financial Vehicles (LGFVs), with an evolutional perspective! I have three main takeaways: 1) The central government's unsuccessful attempts to phase out LGFVs intrigue me the most. This likely stems from the disconnect between the fiscal responsibilities and administrative powers of local governments. Post-tax reform, the financial burden on local administrations increased significantly, leading to a reliance on LGFVs. However, should we speculate that even without tax reforms, local governments might still have resorted to creating such financial mechanisms due to the inherent inclination to overspend? 2) The dynamics within LGFVs at different (vertical) levels are also intriguing. For instance, the distribution of resources can create competition between levels, such as between counties' and townships' LGFVs (e.g., Zunyi City and Bozhou District), whereas only one LGFV might secure funding through land finance. So, how does it coordinate among these LFGVs? 3) The interaction between different sectors (the horizontal relationship), exemplified by the "Beijing counters Beijing" phenomenon, where conflicting goals between ministries may hinder the dissolution of LGFVs. This is particularly relevant when infrastructural projects aimed at poverty alleviation are at stake, posing a challenge to policy consistency on eliminating debts from LGFVs (would be most interesting to see how they arrange).
Thank-you for this excellent overview. Another innovation you haven't mentioned was the PPP wave in 2017/18, a way of equitising things on a project level. Any idea what's happened to that?
Great artwork!
you made reference to Keyu Jin's book The New China Playbook; curious what you thought of it; I found it disappointing.