Research on the Sustainability of Local Implicit Debt from the Perspective of Economic Growth: Evidence from China

The sustainability of local implicit debt reflects its effect on promoting economic growth. By analyzing the sustainability of local implicit debt, valuable insights can be gained to support the high-quality economic development of relevant countries. This study, using provincial panel data from China spanning 2006 to 2020, constructs a measurement method for local implicit debt using the MIMIC model and investigates the sustainability of local implicit debt from an economic growth perspective. The results show that local implicit debt has a rising trend but strong economic tournament pressure; an imperfect financial system and stricter financial regulation will affect the scale of local implicit debt. The economic effects of small-scale local implicit debt are not significant; however, when the scale of local implicit debt exceeds CNY 123.88 billion, it can have a significant stimulating effect on regional economic growth. Local implicit debt has a significant sustainability and can significantly drive regional economic growth, with the driving effect being more pronounced in the western regions and at higher thresholds.