Who Hates Government Debt in China? Evidence from Revealed Preferences

Controlling government debt seems to be one of the top priorities for current Chinese leaders since debt expansion and accumulation has reached an alarming level in recent years. However, this paper shows that serious contradictions exist between policy statements and revealed preferences of policy makers. These are not only an indication on whether government debt can be successfully controlled, but also a reflection on more fundamental problems in China’s political-economic system. While economic restructuring calls for financial liberalization and allocative efficiency, political stabilization requires centralization and strengthening state capacity. The difficult challenges facing the Chinese leaders in the “New Era” has put the theory of “authoritarian resilience” to the real test.