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SMU SOE Seminar Series (May 22, 2025): Flood Risks and the Chinese Local Government Debt Crisis: Climate Shocks, Borrowing Behavior, and Fiscal Stress

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TOPIC:

FLOOD RISKS AND THE CHINESE LOCAL GOVERNMENT DEBT CRISIS: CLIMATE SHOCKS, BORROWING BEHAVIOR, AND FISCAL STRESS

ABSTRACT

This study examines how climate risks, particularly floods, exacerbate China’s local government debt crisis. Using a staggered difference-in-differences approach, we find that floods lead to a 44.5% increase in municipal corporate bond (MCB) issuance as local governments seek emergency funding. However, heightened investor risk aversion results in an 8.23% rise in issuance costs. Our findings highlight how climate shocks amplify fiscal stress by increasing both borrowing needs and financing costs. By bridging climate finance and municipal debt literature, this study underscores the urgent need for integrated fiscal and environmental policies to enhance financial resilience in climate-vulnerable economies. 

Keywords: Climate Risk, Floods, Local Government Financing, Municipal Corporate Bonds, China.

Click here to view the CV.
Click here to view the paper.

PRESENTER

Yongheng Deng
Wisconsin School of Business

RESEARCH FIELDS

Urban
Real Estate Economics 

DATE:

22 May 2025 (Thursday)

TIME:

4:00pm - 5:30pm

VENUE:

Meeting Room 5.1, Level 5
School of Economics
Singapore Management University
90 Stamford Road
Singapore 178903

 
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