This paper examines the impact of China’s sub-provincial fiscal reform in 2022 on the risk premium of urban construction investment bonds (UCIBs). We find that the risk premium of UCIBs issued by counties with lower fiscal self-sufficiency rates exhibits a greater decline than that of UCIBs issued by counties with higher fiscal self-sufficiency rates. This impact is particularly evident in regions with lower levels of fiscal transparency and more constrained financial resources. Our findings suggest that this reform exerts an influence on the risk premium of UCIBs by amplifying investors’ expectations of government guarantees.
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Li et al. (2025) studied this question.
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