On June 28, EAI held a roundtable discussion with Professor Jean Oi of Stanford University under the title of “Local Government Debt in China.” First emphasizing that because China is a strong central state, its localities should not have power to tax or ability to borrow from banks, Oi states two puzzling questions: why are local governments in China incurring debt and how are they doing so? Oi focuses on unfunded mandates, 1994 fiscal reforms, and matching funds as three institutional factors created by the Chinese central government.
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