Abstract:
Public debt is a central topic in political and economic debates, serving as a crucial indicator of a country’s fiscal stability. Over the past two decades, the global debt-to-GDP ratio has been rising, with China providing a significant example of how public debt management impacts a nation’s economy. China’s public debt has grown rapidly, marked by critical events such as the 2008 financial crisis, the economic slowdown starting in 2013, and recent policy shifts under Xi Jinping, including the Belt and Road Initiative and the response to the COVID-19 pandemic. Local government debt has become increasingly important in this context, raising concerns about financial stability. Confronted with fiscal responsibilities that exceed their resources, local administrations have relied on urban land valuations and Local Government Financing Vehicles (LGFVs) to finance infrastructure and public investments. This growing local debt has significant implications for national fiscal stability, requiring a careful balance between promoting local development and maintaining long-term fiscal sustainability. As China’s public debt trajectory continues upward, it presents both challenges and opportunities for future economic policy-making.
