Recently, the Academic Committee of the Yinxing Economic Research Fund released the list of winners for the 7th Hong Yinxing Economics Prize (Young Scholar). The list was publicly announced for social review from September 4 to September 11, 2024.
Associate Professor Li Shuangjian of the SOE, SUFE, won the prize for his paper Local Government Debt Expansion and Bank Risk-Taking: Theoretical Simulation and Empirical Evidence, published in Economic Research Journal, Issue 5, 2022.
Core Arguments of the Paper:In recent years, high local government debt has become a “grey rhino” threatening China’s financial stability. Cutting off the transmission channel through which local government debt expansion evolves into financial risks is top priority for preventing and resolving systemic financial risks. Based on the characteristics of China’s fiscal and financial system and the operational practices of commercial banks, this paper incorporates the linkage between local governments and banks into a multi-sector dynamic stochastic general equilibrium (DSGE) model. It illustrates the impact and mechanism of local government debt expansion on bank risk-taking through theoretical analysis and numerical simulation. Subsequently, the paper adopts unbalanced panel data of 229 commercial banks in China from 2007 to 2019 to empirically test the theoretical conclusions. Empirical results show that local government debt expansion raises the level of bank risk-taking, and this finding remains valid after addressing endogeneity and conducting a series of robustness tests. Furthermore, heterogeneity analysis indicates that the effect of local government debt expansion on bank risk-taking is more pronounced among small-scale banks, non-listed banks, banks without foreign strategic investors, and local banks. Accordingly, the paper argues that against the backdrop of COVID-19 shocks and an increasingly complex external environment, rationalizing the linkage between local governments and banks and further advancing market-oriented reform of the banking sector constitute key measures to build a “firewall” between local fiscal authorities and the financial sector.
Profile of the Scholar:Li Shuangjian is an Associate Professor at the SOE, SUFE. His research focuses on macroeconomics and financial economics. He has published more than ten papers in top Chinese academic journals including Economic Research Journal, Management World, Finance & Trade Economics and Studies of International Finance. Several of his research outputs have been adopted by relevant national ministries and commissions. His works have won the Shanghai Philosophy and Social Sciences Outstanding Achievement Award on multiple occasions. He presides over the Youth Project of the National Natural Science Foundation of China and the General Program of the China Postdoctoral Science Foundation. He also participates in many research projects such as the Major Project of the National Social Science Fund of China, the Emergency Management Project and General Projects of the National Natural Science Foundation of China.
The Hong Yinxing Economics Prize was established by the Yinxing Economic Research Fund in 2016. It aims to encourage young economists to produce more innovative original research and promote the prosperity and development of economics in China. Submitted works must be rooted in disciplinary frontiers with important theoretical and practical implications; they are required to propose new research methods and original insights and make outstanding contributions, reflect the latest advances in relevant economic fields, and stay at the cutting edge of the discipline. The review committee consists of economics experts from major domestic universities and research institutions. Award-winning papers are selected after full discussion, evaluation and democratic voting by the committee.
