Land Market Cooling and Local Government Debt Risk:Evidence from County-Level Data
As China's economy transitions to a stage of high-quality development,preventing and resolving major risks have become an important strategic decision of the central government.In recent years,the risk of local government debt in China has experienced a continuous growth trend,so strict control is urgently needed.In the long-term process of reform and development,there is a close connection between land finance and local debt.On the one hand,land is a powerful endorsement of local government credit and an important guarantee for the smooth issuance of bonds by local governments.On the other hand,the revenue of government funds,with land transfer income as the main component,is also an important source of funding for the repayment of principal and interest of local bonds,especially special bonds.Therefore,in the long-term development process,the risk of local government debt is covered by land finance and is still within a controllable range.However,in recent years,China's land market has been continuously sluggish,and the situation of local government land finance is also not optimistic.Moreover,although the scale of the transfer revenue of the right to use state-owned land in China has been continuously increasing,its growth rate has begun to gradually decline.The cooling of the land market not only makes it difficult for land finance to continue but also affects the local government's tax revenue in the housing transaction process and even further leads to the lack of sufficient credit guarantee for local government debt issuance and the lack of sufficient funds to guarantee the repayment of principal and interest,exacerbating the accumulation of local government debt risk.Under the cooling of the land market,the risk of local government debt has taken on new characteristics and needs to be reexamined urgently.Therefore,based on the realistic background of the cooling of the land market,this study investigates the impact and internal mechanism of this new fiscal situation on the risk of local government debt.This study selects the real estate regulation policies of 2018 to represent the impact of land market cooling and constructs an empirical framework of the difference-in-differences method to identify the causal relationship between land market cooling and local government debt risk.The empirical analysis revealed that the cooling of the land market will lead to an increase in the risk of local government debt.This impact passed multiple robustness tests.The specific manifestation of local government debt risk caused by the cooling of the land market is the increase in financing costs of local government debt and the decrease in the efficiency of activating special debt balance limits.These risk factors of local government debt are not conducive to long-term stable and sustainable economic development.This study believes that the internal mechanism of the above-mentioned impacts lies in the fact that after the introduction of real estate regulation policies,regions that originally relied more on land finance will be more affected,and the cooling of the land market will be more obvious,leading to more severe restrictions on the land transfer behavior of local governments in these regions,manifested by an increase in the number of land auctions and a decrease in land transfer income.These situations result in a significant decrease in the available financial resources of local governments,leading to a greater increase in the debt ratio.The decomposition test also confirmed the above conclusion.After the cooling of the land market,the changes in the financial sector of local governments are significantly greater than those in the debt sector,which generally leads to an increase in the debt ratio.To cope with fiscal and debt pressures,local governments tend to issue bonds with longer maturities to postpone the time of repayment and increase the proportion of borrowing new and repaying old debts,intending to ease the current debt pressure.In the heterogeneity analysis section,the study found that local governments with a higher stock of urban investment bonds have a higher degree of debt ratio increase after the land market cools down;the increase in debt ratio in regions with higher fiscal revenue quality is significantly lower than that in other regions;and the central region is more affected by the impact of the policy.
Land FinanceLand Auction FlopLocal Financial PressureLocal Government Debt RiskFiscal Sustainability
NETL
NSTL
万方数据
