Land-leasing behavior, local officials’ promotions, and Chinese cities’ debt risks
Abstract
This study first analyzes how local governments’ land-leasing behaviors affect Chinese cities’ debt risk then examines the impact of officials’ promotion mechanisms on debt risk in China’s urban land bank system. The land-leasing behavior is reflected through three indicators, namely, land-leasing revenue, land-leasing scale, and land financial dependence level. Two new indicators are constructed to measure the local government’ debt risk from the perspective of debt scale and debt repayment: the debt scale risk and debt burden risk. Empirical analyses are based on the data of 281 prefecture-level cities from 2006–2015. The main findings are twofold. First, the debt scale risk is positively affected by the land-leasing revenue, and officials’ promotion pressure. The debt burden risk is positively affected by the land financial dependence and officials’ promotion pressure. Second, the officials’ promotion pressure significantly enhances the positive effect of land-leasing revenue on the debt scale risk. Local officials, who are under promotion pressure, are inclined to expand the size of urban investment bonds, which increases debt scale risk.
Keyword : land leasing, urban investment bonds, debt risk, officials’ promotion, China
How to Cite
Zhang, L., Han, R., Zhang, J., Li, L., & Zhang, D. (2021). Land-leasing behavior, local officials’ promotions, and Chinese cities’ debt risks. International Journal of Strategic Property Management, 25(6), 485–496. https://doi.org/10.3846/ijspm.2021.15654
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Cai, H. B., Fang, H. M., & Xu, L. X. (2011). Eat, drink, firms, government: an investigation of corruption from the entertainment and travel costs of Chinese firms. Journal of Law Economic, 54, 55–78. https://doi.org/10.1086/651201
Cai, Z. Y., Liu, Z. X., Zuo, S. M., & Cao, S. X. (2019). Finding a peaceful road to urbanization in China. Land Use Policy, 83, 560–563. https://doi.org/10.1016/j.landusepol.2019.02.042
Cao, J., Mao, J., & Xue, Y. (2019). Why the urban investment bonds have a sustained growth: empirical analysis based on the new caliber. Finance and Trade by the Economy, 40 (05), 5–22.
Cao, S., Lv, Y., Zheng, H., & Wang, X. (2014). Challenges facing China’s unbalanced urbanization strategy. Land Use Policy, 39, 412–415. https://doi.org/10.1016/j.landusepol.2013.12.004
Chen, C., Yao, S., Hu, P., & Lin, Y. (2017). Optimal government investment and public debt in an economic growth model. China Economic Review, 45, 257–278.
https://doi.org/10.1016/j.chieco.2016.08.005
Chen, T., & Kung, J. K. S. (2016). Do land revenue windfalls create a political resource curse? Evidence from China. Journal of Development Economics, 123, 86–106.
https://doi.org/10.1016/j.jdeveco.2016.08.005
Cheng, S., Xie, H. L., Jiang, J. F., & Chen, Q. R. (2018). Is urban land development driven by economic development or fiscal revenue stimuli in China? Land Use Policy, 77, 107–115. https://doi.org/10.1016/j.landusepol.2018.05.031
Gao, H. N. (2019). Public land leasing, public productive spending and economic growth in Chinese cities. Land Use Policy, 88, 104076. https://doi.org/10.1016/j.landusepol.2019.104076
Guo, G. (2009). China’s local political budget cycles. American Journal of Political Science, 53, 621–632.
https://doi.org/10.1111/j.1540-5907.2009.00390.x
Ho, S., & Lin, G. (2003). Emerging land markets in rural and urban China: policies and practices. China Quarterly, 175,
681–707. https://doi.org/10.1017/S0305741003000407
Homburg, S. (2014). Over accumulation, public debt and the importance of land. German Economic Review, 15(4), 411–435. https://doi.org/10.1111/geer.12053
Huang, D., & Chan, R. C. (2018). On ‘Land Finance’ in urban China: theory and practice. Habitat International, 75, 96–104. https://doi.org/10.1016/j.habitatint.2018.03.002
Huang, H. J., Xia, T., Tian, Q., Liu, T. L., Wang, T. L., & Li, D. Q. (2020). Transportation issues in developing China’s urban agglomerations. Transport Policy, 85, 1–22.
https://doi.org/10.1016/j.tranpol.2019.09.007
Li, H., & Zhou, L. A. (2015). Political turnover and economic performance: the incentive role of personnel control in China. Journal of Public Economics, 89, 1743–1762.
https://doi.org/10.1016/j.jpubeco.2004.06.009
Liu, T., & Lin, G. (2014). New geography of land commodification in Chinese cities: uneven landscape of urban land development under market reforms and globalization. Applied Geography, 51, 118–130. https://doi.org/10.1016/j.apgeog.2014.04.005
Liu, T., Cao, G. Z., Yan, Y., & Raymond, Y. W. (2016). Urban land marketization in China: central policy, local initiative, and market mechanism. Land Use Policy, 57, 265–276.
https://doi.org/10.1016/j.landusepol.2016.06.001
Lu, J., Li, B., & Li, H. (2019). The influence of land finance and public service supply on peri-urbanization: evidence from the counties in China. Habitat International, 92, 102039.
https://doi.org/10.1016/j.habitatint.2019.102039
Mao, J., & Huang, C. (2018). Local debts, regional disparity and economic growth: an empirical study based on China’s prefecture-level data. Journal of Financial Research, 455(5), 5–23 (in Chinese).
Mello, L. J. D. (2000). Fiscal decentralization and intergovernmental fiscal relations: a cross-country analysis. World Development, 28(2), 365–380. https://doi.org/10.1016/S0305-750X(99)00123-0
Mendonça, H. F., & Nunes, M. P. D. (2011). Public debt and risk premium: an analysis from an emerging economy. Journal of Economic Studies, 38(2), 203–217.
https://doi.org/10.1108/01443581111128424
Meng, R., Ning, X., Zhou, X., & Zhu, H. (2011). Do ESOPs enhance firm performance? Evidence from China’s reform experiment. Journal of Banking & Finance, 35, 1541–1551. https://doi.org/10.1016/j.jbankfin.2010.11.004
Narbón-Perpiñá, I., Arribas, I., Balaguer-Coll, M. T., & TortosaAusina, E. (2020). Explaining local governments’ cost efficiency: controllable and uncontrollable factors. Cities, 100, 1–13. https://doi.org/10.1016/j.cities.2020.102665
Pan, F. H., Zhang, F. M., & Zhu, S. J. (2017). Developing by borrowing? Inter-jurisdictional competition, land finance and local debt accumulation in China. Urban Studies, 54(4), 897–916. https://doi.org/10.1177/0042098015624838
Peppel-Srebrny, J. (2021). Not all government budget deficits are created equal: evidence from advanced economies’ sovereign bond markets. Journal of International Money and Finance, 118, 1–17. https://doi.org/10.1016/j.jimonfin.2021.102460
Popescu, A., & Turcu, C. (2017). Sovereign debt and systemic risk in the Eurozone: a macroeconomic perspective. Economic Modelling, 67, 275–284. https://doi.org/10.1016/j.econmod.2016.12.032
Qian, N. (2018). Anti-corruption effects on the credit risk of local financing vehicles and the pricing of Chengtou Bonds: evidence from a quasi-natural experiment in China. Finance Research Letters, 26, 162–168.
https://doi.org/10.1016/j.frl.2018.01.001
Selow, M. (1997). Fiscal deficits and the ‘Quall-it’ of fiscal adjustment. EU Accession and Sovereign Debt Management Seminar, 12, 15–16.
Tsui, K. Y. (2011). China’s infrastructure investment boom and local debt crisis. Eurasian Geography and Economics, 52(5), 686–711. https://doi.org/10.2747/1539-7216.52.5.686
Tu, L., & Padovani, E. (2018). A research on the debt sustainability of china’s major city governments in post-land finance era. Sustainability, 10(5), 1–21.
https://doi.org/10.3390/su10051606
Wang, J., Lin, Y. F., Glendinning, A., & Xu, Y. Q. (2018). Landuse changes and land policies evolution in China’s urbanization processes. Land Use Policy, 75, 375–387.
https://doi.org/10.1016/j.landusepol.2018.04.011
Wang, J., Luo, L., & Guo, Q. (2015). Does local government intervention damage credit market efficiency? Journal of Financial Research, 4, 99–114 (in Chinese).
Wang, Y., & Hui, E. C. (2017). Are local governments maximizing land revenue? Evidence from China. China Economic Review, 43, 196–215. https://doi.org/10.1016/j.chieco.2017.02.005
Wen, H., Chu, L., Zhang, J., & Xiao, Y. (2018). Competitive intensity, developer expectation, and land price: evidence from Hangzhou, China. Journal of Urban Planning and Development, 144(4), 04018040.
https://doi.org/10.1061/(ASCE)UP.1943-5444.0000490
Wu, Q., Li, Y. L., & Yan, S. Q. (2015). The incentives of China’s urban land finance. Land Use Policy, 42, 432–442.
https://doi.org/10.1016/j.landusepol.2014.08.015
Wu, Y. Z., Luo, J. J., Zhang, X. L., & Skitmore, M. (2016a). Urban growth dilemmas and solutions in China: looking forward to 2030. Habitat International, 56, 42–51.
https://doi.org/10.1016/j.habitatint.2016.04.004
Wu, Y., Li, X., & Lin, G. (2016b). Reproducing the city of the spectacle: mega-events, local debts, and infrastructure-led urbanization in China. Cities, 53, 51–60. https://doi.org/10.1016/j.cities.2016.01.004
Xu, N. N. (2019). What gave rise to China’s land finance? Land Use Policy, 87, 104015.
https://doi.org/10.1016/j.landusepol.2019.05.034
Zhang, J., Fan, J., & Mo, J. (2017). Government the intervention, land market, and the urban development: evidence from Chinese cities. Economic Inquiry, 55(1), 115–136.
https://doi.org/10.1111/ecin.12353
Zhang, J., Zhang, D., Huang, L., Wen, H., Zhao, G., & Zhan, D. (2019a). Spatial distribution and influential factors of industrial land productivity in China’s rapid urbanization. Journal of Cleaner Production, 234, 1287–1295. https://doi.org/10.1016/j.jclepro.2019.06.287
Zhang, J., Zhang, D., Zhao, G., Zeng, H., & Wen, H. (2019b). Land supply and urbanization strategy in the Yangtze River Delta region, China. Growth and Change, 50(4), 1338–1355. https://doi.org/10.1111/grow.12331
Zheng, H., Wang, X., & Cao, S. (2014). The land finance model jeopardizes China’s sustainable development. Habitat International, 44, 130–136.
https://doi.org/10.1016/j.habitatint.2014.05.008