"Cambridge Gazette: Politico-Economic Commentaries" No.5 (January 5, 2011)

Examining China's Local Government Fiscal Dynamics: With a Special Emphasis on Local Investment Companies (LICs)

  • Jun Kurihara
  • Research Director
    Jun Kurihara
  • [Expertise]
    U.S. Information and Network

 China's buoyant economy has long riveted the attention of the world. A closer look at China's economic dynamism would lead to an awareness of a greater role played not by the central government but by local governments. Local governments have recently proliferated their own investment companies (LICs) (Róngzī Píngtái/融资平台) to finance their urban development projects. In the meantime the burgeoning of the assets and liabilities of these LICs has cast a dark cloud of doubt over their financial health. This short essay tries to examine recent developments, the origin and financial health of LICs. In addition, the essay discusses the question of an ends-and-means disagreement, i.e., a policy dissonance between local governments' fiscal efforts including LICs and the achievement of China's national goal, i.e., a "Harmonious Society (Héxié Shèhuì/和谐社会)," or precisely speaking, a "Building a Well-off Society in an All-round Way (Quánmiàn Jiànshè Xiǎokāng Shèhuì/全面建设小康社会)."..........

“Cambridge Gazette: Politico-Economic Commentaries” No.5 (January 5, 2011)PDF:396.7 KB

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