Event Recap: David D. Li analyzes dimensions, causes, and impacts of China's local government debt

DATE: 2023-10-25

                                LECTURES IN GOVERNMENT AND ECONOMICS (No. 8)

        On October 25, 2023, SAGE hosted an online lecture entitled “Local Chinese government debt: Analyzing its dimensions, causes and impacts.” This lecture was presented by David Daokui Li, Director of Tsinghua University’s Academic Center for Chinese Economic Practice and Thinking (ACCEPT) and Co-President of the Society for the Analysis of Government and Economics (SAGE). The webinar represented the eighth installment in SAGE’s Lectures in Government and Economics Series.

: Local Chinese government debt: Analyzing its dimensions, causes and impacts

Lecturer: David Daokui Li, Director of the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) at Tsinghua University and Co-President of the Society for the Analysis of Government and Economics (SAGE)

Time: October 25 (Wednesday), 20:00 – 21:30 

Introduction to the Topic:

        Local government debt made an important contribution to China's structural transformation during the period when its economy was undergoing rapid growth, but at present the enormous scale of local government debt has become a source of systemic financial risk. Since China's financial system is dominated by commercial banks, the local debt problem is closely linked to the balance sheets of these banks, which means that if this issue is not handled well, an escalation of the local debt problem may trigger systemic risks in the banking sector. In this eighth installment of 
Lectures in Government and Economics, Professor David Daokui Li will analyze the dimensions, causes and impacts of local government debt in China, among other contributing factors, while navigating the various paths available to tackle and remedy this issue. 

        Government and economics is a new branch of study in economics, and a direct catalyst for its emergence can be found in the rapid development of China's economy during the country's period of reform and opening up. In all likelihoodgovernment and economics will become a definitive model for the creation of new knowledge in economics that is at once both of universal significance and based on Chinese economic thought and practice, similar to the economic theories that crystallized alongside the emergence of capitalism after the Industrial Revolution in Great Britain. The more distant roots for government and economics can be traced back to the period following the Industrial Revolution, and most especially the post-industrial era, when the government had in fact already arisen to become an active and significant player in the economy, with more than one-third of all economic activity in a typical economy being directly or indirectly derived from the government and its functions. Thus, the role that the government plays has a direct impact on the performance of an economy. For too long, research in the discipline of economics examining the role of government has been too simplistic and unable to accurately analyze empirical reality, either assuming that the government is merely the purveyor of social welfare, wholly committed to serving everyone, or presupposing that the government is only interested in the pursuit of narrow self-interests. Through the contribution of a sizable volume of empirical studies, government and economics attempts to analyze the behavior, incentives, roles and related institutional designs of government actors. By taking the behavior of these government entities as the main subject of our research efforts, we can develop a better understanding of the government's role in the modern-day market economy, in this way providing a mechanism design to improve government behavior and incentives, all with the ultimate goal of improving the operational efficiency of the economy and societal well-being.

Speaker Bio:

        Professor David Daokui Li is a leading Chinese economist. He has been a Mansfield Freeman Chair Professor of Economics of Tsinghua University since 2006. Together with Eric S. Maskin, 2007 Nobel Laureate of Economics, he is a Co-President of the Society for the Analysis of Government and Economics (SAGE). He also served as the founding Dean of the Schwarzman College of Tsinghua University from 2014 to 2017. His research and teaching cover a wide range of economic fields, including government and economics, economic development, comparative economics, and the Chinese economy. 

        As the Director of the Center for China in the World Economy (CCWE), which has evolved to become the Academic Center for Chinese Economic Practice and Thinking (ACCEPT) of Tsinghua University, he has been active in policy discussions inside and outside China. Since 2008, he has been a member of the Chinese People's Political Consultative Conference (CPPCC). 

        David Daokui Li holds a Ph.D. in Economics from Harvard University. He obtained his B.S. from Tsinghua University in 1985 as a member of the first cohort of graduates of the School of Econo
mics and Management. 

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