Local Government Real Estate-Related Debt: A Systemic Risk Assessment

DOI

10.2991/978-94-6239-787-3_25How to use a DOI?

Keywords

Local Government Debt; Real Estate; Systemic Risk; Land Finance; Local Government Financing Vehicle

Abstract

This study provides a comprehensive assessment of the systemic risk potential inherent in China’s local government debt exposure to the real estate sector. Through systematic analysis of debt magnitude, composition, and transmission pathways, the findings indicate that aggregate risk levels remain manageable, with a government debt-to-GDP ratio of 68.7% as of year-end 2024. However, significant structural vulnerabilities persist. Empirical analysis demonstrates a strong positive correlation between regional economic fundamentals and property valuations, with developed coastal regions exhibiting greater resilience than inland areas under heightened debt-servicing pressures. The study identifies four primary transmission channels through which property market downturns may affect the financial system: deterioration of land-based fiscal revenues, weakening of local government fiscal health, Local Government Financing Vehicle (LGFV) obligation defaults, and banking sector credit contraction. The analysis of policy measures implemented through early 2025 suggests that the short-term probability of systemic risk remains limited, though structural reforms are necessary to reduce reliance on land-based revenue generation.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Peijie Hong
PY  - 2026
DA  - 2026/09/29
TI  - Local Government Real Estate-Related Debt: A Systemic Risk Assessment
BT  - Proceedings of the 2026 4th International Conference on Management Innovation and Economy Development (MIED 2026)
PB  - Atlantis Press
SP  - 234
EP  - 244
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-787-3_25
DO  - 10.2991/978-94-6239-787-3_25
ID  - Hong2026
ER  -