Fiscal sustainability of china’s provincial governments: A non-stationary panel data analysis

Vinh Q. T. Dang, Kenneth S. Chan, Erin P. K. So

    Research output: Chapter in book/report/conference proceedingChapterpeer-review


    Applying non-stationary panel data approach to the expenditures and revenues of China’s provincial governments for the period 1994–2013, we investigate whether there exists a long-run relationship between these two budget variables that would limit fiscal deficits and, consequently, debt, to a sustainable level. Considering the tax-sharing system instituted in 1994, we also include transfers from and to the central government in the analysis. Results from recent second-generation panel unit root and cointegration tests that account for cross-sectional dependence suggest that provinces in the central and western regions do not achieve fiscal sustainability on their own or even with central government transfers. Provinces in the more developed eastern region overall achieve fiscal sustainability in the weak form. Only the government budget in Jiangsu, Tianjin, Zhejiang, and, to a lesser extent, Shanghai is strictly sustainable on its own. These results bear important policy implications for China’s macroeconomic stability

    Original languageEnglish
    Title of host publicationChina’s Rise And Internationalization
    Subtitle of host publicationRegional And Global Challenges And Impacts
    EditorsFilip Abraham, Zhaoyong Zhang
    PublisherWorld Scientific Publishing Co. Pte Ltd
    Number of pages25
    ISBN (Electronic)9789811212239, 9789811212246
    ISBN (Print)9789811210907
    Publication statusPublished - Apr 2020

    Scopus Subject Areas

    • Economics, Econometrics and Finance(all)
    • Business, Management and Accounting(all)
    • Social Sciences(all)


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