Harvard Fairbank Center For Chinese Studies

Speaker: Jean Oi, William Haas Professor of Chinese Politics, Department of Political Science; Director, Stanford China Program, Stanford University China’s rapidly growing local government debt (LGD) is now branded a “grey rhino,” a known threat that has received little attention. Why did Beijing let LGD get so out of hand? What are the sources of LGD? There is evidence to suggest that no matter how honest and law-abiding local cadres might be, localities are likely to have local government debt. Prof. Oi will argue that LGD stems from a grand bargain between the center and the localities that were made to secure support for the 1994 fiscals reforms. This series of policy decisions institutionalized backdoor financing, creating a “win-win” solution that recentralized tax revenues to Beijing while countering the downsides of fiscal recentralization for the localities. The cost, however, was that China’s economic growth model was increasingly undergirded by mounting LGD, with little transparency and con