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China’s rapidly growing local government debt problem has long been recognized by foreign observers as a risk, but inside China, only recently was this problem called out as alarming. Why has local government debt been allowed to grow with little direct intervention from central authorities? Based on a forthcoming paper, Oi will show how a “grand bargain” the central authorities entered into with the localities allowed Beijing to take the lion’s share of tax revenues after 1994, but also allowed localities to gain new resources and power as a quid pro quo. While the bargain provided an expedient and seemingly successful strategy that worked for more than a decade to fuel rapid local state-led growth, it had significant costs that are now becoming increasingly visible. Because land finance was the core means by which localities raised revenue, Oi also will help explain why the problems with property developers like Evergrande are so important to China’s future economy.
Jean C. Oi is the William Haas Professor of Chinese Politics in the Department of Political Science and a senior fellow in the Freeman Spogli Institute for International Studies at Stanford University. She directs the China Program at the Walter H. Shorenstein Asia-Pacific Research Center and is the Lee Shau Kee Director of the Stanford Center at Peking University. Professor Oi has published extensively on China’s reforms. Recent books include Fateful Decisions: Choices That Will Shape China’s Future, co-edited with Thomas Fingar (Stanford University Press, 2020); Zouping Revisited: Adaptive Governance in a Chinese County, co-edited with Steven Goldstein (Stanford University Press, 2018); and Challenges in the Process of China’s Urbanization, co-edited with Karen Eggleston and Yiming Wang (2017). Current research is on fiscal reform and local government debt, continuing SOE reforms, and the Belt and Road Initiative.
This event is part of the 2022 Winter webinar series, The Future of China's Economy, sponsored by the APARC China Program.