The Political Economy of Local Government Debt Expansion in China

Pan Liu , Jie Mao & Min Dai

ABSTRACT

Since the 1990s, China has strengthened the Communist Party of China’s leadership over local People’s Congresses through a dual-appointment system, under which Party secretaries also serve as chairpersons of People’s Congresses. This article argues that this system enhances Party influence over legislative decision-making while further reducing institu-tional constraints, enabling local Party secretaries to pursue career- oriented agendas such as borrowing for infrastructure to boost economic growth. Under a growth-first development paradigm, this arrangement has fueled the rapid expansion of local government debt. Overall, these findings offer a political economy explanation for the dynamics of local government debt in China, and underscore the importance of stronger legal and institutional constraints on the dual-appointment system to mitigate local fiscal risks

KEYWORDS

Local government debt; People’s Congress; Communist Party of China; embeddedness; fiscal risks