Li, Zhenfa; (2024) State-led (de-)financialisation of the city: Local government bonds in China. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

The financialisation of the city is understood as transforming the built environment into financial assets. This thesis investigates the roles of the state, the market, and their relations in the process, the financial risks associated with the process, and the influence by the process on economic development, from the perspectives of economic geography, political economy, and urban governance. The empirical focus is local government bonds (LGBs) for infrastructure finance in China. This thesis uses mixed methods including constructing a city-level database of LGB issuance and conducting semi-structured interviews with local officials, investors, underwriters, and financial intermediaries in LGBs in Beijing, Lianyungang, and Chengde with varied contexts. First, for the role of multi-scalar governments, the central government decided the deployment of bonds and prioritised policy objectives of risk control and growth imperative. The local government actively found other sources for infrastructure finance in addition to LGBs. LGBs reflected state de-financialisation compared to the earlier period of local government financing platforms, as the local state’s financial logics of maximising value extraction from the built environment were restricted. Second, for state–market relations, underwriters and investors did LGB business mostly because they could acquire other government resources, i.e., local fiscal funds, that were key to profit making. Financial intermediaries sometimes gave over-optimistic assessments to make projects that could not generate enough income to pay investors financed by LGBs, so that they could please the local government who pursued more projects. Nonetheless, they also believed the assessments revealed the practical situation of LGB issuance because the government would not let default happen. Third, though as a de-risking tool, LGBs brought up three new sources of financial risks including excessive bond issuance, infractions committed by the local government during quota applications, and ineffective and over-optimistic assessments given by financial intermediaries. Finally, the use of local government financing platforms and LGBs promoted economic growth, while these two methods had varied effects in different historical periods and geographical contexts.

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