A Perfect Storm: COVID, Collapse of the Property Sector, and Local Government Debt in China

Local government debt skyrocketed during the last years of China's zero COVID polices and has continued to rise unabated, troubling Beijing and rattling international financial markets. 

Professor Jean Oi will share her research on the causes of this dilemma and reflect on solutions that Beijing is proposing to handle the problem.  She will show that while COVID certainly raised expenditures for local governments, it was state policies during the pandemic to enforce fiscal discipline and deleverage the real estate sector that triggered growing mountains of local government debt.

The collapse of the real estate sector shrank revenues from land transaction fees that previously filled a huge hole in annual local government budgets and serviced existing debt.   

The evaporation of land revenue during the already costly COVID lockdowns created a "perfect storm" that decimated local government budgets and ballooned local government debt, with no way out except to borrow more.  

Professor Oi will end by considering whether the solutions proposed by Beijing to handle the problem will be enough to steer through the quandary.  

Professor Jean Oi is the William Haas Professor on Chinese Politics in the department of political science and a Senior Fellow of the Freeman Spogli Institute for International Studies at Stanford University.