Under land financing models, the implicit debt of local governments not only triggers debt risks but also transmits these risks to financial markets. To prevent and control debt risks, the central government launched a wave of local debt governance reforms beginning in 2015. On the incentive side, it established a government bond financing model represented by local land reserve special bonds; on the regulatory side, it introduced a series of restrictive rules to curb land financing models. These governance measures, combining incentives and constraints, established a risk prevention and control mechanism for local land debt, driving the transition in land financing models from land finance to land bonds.

Using the intensity DID method, this paper examines the impact of the transition in land financing models on the prevention and control of local debt risks by analyzing the debt governance policy of the central government and the behavioral responses of local governments. The study finds that cities more significantly affected by the transition in land financing models exhibit a higher coverage ratio of land transfer revenue to land debt, indicating more effective risk prevention and control. Mechanism testing reveals the following: First, the incentive mechanism centered on the specific objectives of “borrowing, using, and repaying” land reserve bonds significantly intensifies land transfer activities, as evidenced by significant increases in land transfer revenue, area, and average price. Second, the constraint mechanism for land financing models reduces the practice of local governments injecting land into financing platforms and providing government subsidies, thus curbing the breeding of implicit debt risks. Heterogeneity analysis indicates that the impact of the transition in land financing models on reducing land debt risks is more pronounced in regions with higher marketization levels, lower fiscal transparency, and stronger governance capabilities.

The marginal contributions of this paper are as follows: First, it expands the research scope of land financing models, providing a new theoretical perspective for future research on such models. Second, it deepens research on the prevention and control of debt risks by constructing a more targeted governance analysis framework that addresses land—the root cause of implicit debt. Third, it enriches empirical research on the economic effect of land reserve bonds by evaluating their risk prevention and control efficacy from the perspective of central-local interactions.