Event Details

Dr Xiaoyun Gong of Foshan University presents her latest research on the role of digital platforms in controlling local government debt risks in China

Abstract: Local government debt risks depend not only on the scale of borrowing but also on whether budgetary information can be promptly identified, scrutinized, and corrected. This study manually compiles the launch dates of online budget oversight platforms established by district- and county-level people’s congresses across China and matches them with county-level economic, government debt, and audit data. Exploiting the staggered rollout of these platforms as a quasi-natural experiment, we examine the effect of digitalized legislative oversight on local government debt risks. Two-way fixed-effects estimates show that platform implementation reduces the logarithm of outstanding county-level government debt by approximately 4.9 percent, the debt-to-GDP ratio by 1.12 percentage points, and the debt-to-fiscal-revenue ratio by 0.516. Event-study and randomization-inference results generally suggest that these findings are not driven by differential pre-reform trends or random shocks. Further analysis indicates that the reduction is concentrated in general-purpose debt. The debt-constraining effect is stronger in areas where the platforms are vertically integrated across municipal and county levels—or across provincial, municipal, and county levels—and where audit findings reveal a higher proportion of fiscal irregularities. Among counties whose outstanding debt continues to grow, platform implementation is significantly associated with tighter debt limits. Supplementary city-level evidence shows that stronger constraints on explicit government debt may coincide with increases in the issuance and outstanding balance of urban investment bonds, suggesting that digital oversight focused solely on on-budget debt may induce substitution toward alternative financing channels. Drawing on the perspectives of information asymmetry, supervisory technology, and hard budget constraints, this study provides county-level evidence for strengthening budgetary review and oversight by people’s congresses and promoting the coordinated regulation of explicit and implicit local government debt.