Abstract: Local government debt risk has emerged as a central issue in China's ongoing fiscal reform,with Local Government Financing Vehicle (LGFV) bonds serving as the primary vehicle for off-balance-sheet local government financing and attracting sustained attention from both policymakers and academics.Under the dual policy mandate of “stabilizing growth” and “preventing risks”, the manner in which local governments transmit fiscal policy signals through official documents such as government work reports critically shapes market expectations about debt sustainability.Yet existing literature has focused predominantly on the objective determinants of debt risk,with limited attention to the role of policy communication in influencing market expectations,and empirical studies grounded in the Chinese context remain particularly scarce.This paper takes a fiscal policy communication perspective to systematically examine how local government fiscal policy signals affect LGFV bond credit spreads and the underlying transmission mechanisms. Using text analysis techniques,we construct a Fiscal Expansion Communication Index and a Fiscal Expansion Review Index by systematically identifying fiscal expansion keywords in local government work reports and classifying them into two categories:short-term debt-pressure signals and long-term growth-enhancing signals.Drawing on government work reports from prefecture-level-and-above cities spanning 1993 to 2023,combined with LGFV bond primary market issuance data from 2006 to 2023,we employ a two-way fixed-effects model for estimation.The robustness of our findings is confirmed through four sets of checks,including replacing the benchmark interest rate,substituting the dependent and independent variables respectively,and adjusting the clustering level of standard errors.Channel analysis uses newly issued LGFV bond volume and primary market bid-to-cover ratios as mediating variables to test the issuance scale channel and the investor expectations channel respectively,while heterogeneity analysis is conducted by grouping observations according to fiscal deficit ratios and fiscal transparency. The main findings of this paper are threefold.First,the impact of fiscal policy communication signals on LGFV bond credit spreads exhibits significant heterogeneity:short-term debt-pressure signals significantly widen credit spreads,while long-term growth-enhancing signals effectively mitigate upward pressure on credit spreads.This indicates that markets engage in nuanced,differentiated interpretation of distinct types of fiscal expansion signals rather than responding uniformly to the aggregate fiscal stance.Second,channel analysis reveals that fiscal expansion policies affect credit spreads primarily through two pathways.The first is the issuance scale channel:fiscal expansion signals increase local governments' debt financing demand,leading to a larger volume of LGFV bond issuance,which markets interpret as a signal of growing debt burdens,thereby pushing up credit spreads.The second is the investor expectations channel:fiscal expansion signals dampen investor confidence in the creditworthiness and debt repayment capacity of bond issuers,reducing investment willingness,depressing primary market bid-to-cover ratios,and driving up risk premia.These findings reveal the latent debt risk effects embedded within fiscal policy transmission mechanisms.Third,heterogeneity analysis finds that the effects of fiscal expansion vary significantly with the economic characteristics of local governments:in regions with higher fiscal deficit ratios,fiscal expansion further exacerbates market concerns about debt sustainability,leading to a significant widening of credit spreads; whereas in regions with higher fiscal transparency,reduced information asymmetry enables investors to more clearly assess policy sustainability and overall fiscal conditions,allowing fiscal expansion signals to more effectively convey policy efficacy and thus alleviating upward pressure on credit spreads.Taken together,these findings suggest that the ultimate impact of proactive fiscal policy on LGFV bond credit spreads depends on whether market expectations regarding local government debt risk can be genuinely improved. This paper makes three contributions to the literature.First,it integrates fiscal policy communication behavior into the pricing framework of LGFV bond credit spreads and reveals the inherent heterogeneity of fiscal signals,providing new theoretical and empirical foundations for domestic scholarship.Second,it enriches the understanding of the confidence effects of expansionary fiscal policy by demonstrating that market outcomes are highly sensitive to the structure of policy communication content and local fiscal credibility,reflecting the nonlinear characteristics of fiscal policy transmission mechanisms.Third,it enriches the methodological toolkit of fiscal policy research by constructing a quantifiable Fiscal Expansion Communication Index and systematically investigating the channels through which policy communication affects debt risk pricing. The findings carry important policy implications:local governments should optimize the pace of fiscal expansion and strengthen debt risk management,with regions of already-elevated fiscal deficit ratios exercising particular caution in evaluating the necessity of new expenditure projects and avoiding excessive reliance on debt financing; fiscal transparency should be substantially enhanced through regular and comprehensive disclosure of fiscal revenues,expenditures,debt balances,and repayment plans to reduce information asymmetry; and when implementing major fiscal expansion measures,local governments should proactively communicate to the market the sustainability of their policies and the arrangements for risk management,so as to guide the formation of rational market expectations and improve the overall effectiveness of fiscal policy communication.