NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Zhuo Chen

Tsinghua University
43 Chengfu Road
Beijing, 100083
China

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Tsinghua University

NBER Working Papers and Publications

July 2017The Financing of Local Government in China: Stimulus Loan Wanes and Shadow Banking Waxes
with Zhiguo He, Chun Liu: w23598
China’s four-trillion-yuan stimulus package fueled by bank loans in 2009 has led to the rapid growth of shadow banking activities after 2012. Local governments financed the stimulus through bank loans in 2009, and resorted to non-bank debt financing after 2012 given the rollover pressure from bank debt coming due, a manifestation of the stimulus-loan-hangover effect. Cross-sectionally, provinces with greater bank loan growth in 2009 experienced more Municipal Corporate Bonds issuance during 2012-2015, together with more shadow banking activities including Entrusted loans and Wealth Management Products. We highlight the market forces behind the regulation changes on local government debt post 2012.
 
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