On China’s Local Government Debt Budgeting

Since30years of reform and opening up, with the deepening of economic reform, accelerate the process of industrialization and urbanization, more and more local governments to assume the functions of promoting local economic development, expansion of urban infrastructure construction, constructive financing needs soaring. But the tax decentralization is left after the local government finance system available financial resources far failed to meet the investment needs constructive, had to choose a variety of debt financing for large-scale infrastructure construction, forming a large-scale local debt objectively. Global financial crisis of2008hit the world economy, the Chinese government in this context to respond quickly, in November2008the central government launched four trillion investment plan and a series of stimulus measures to expand domestic demand, local governments in order to get more investment projects and matching funds, have borrowing debt through various means, the scale of investment has been released more than20billion. Local governments as well as competitive pressures in the lateral performance evaluation under increasing budget oriented, with the extra revenue to develop the economy of the implicit debt is also an indisputable fact; leading local government debt increasing scale, way more complex, increasingly trying to break through the strong constraints of existing legal system.April11,1993,"The State Council on resolutely stop raising funds and strengthening bonds issued by management," and September3,1993,"The State Council on the clean-up fund-raising activities and resolutely stop the chaos paid raising issues notice" stipulate, unless otherwise approved by the State Council, local governments may not mess raising any name to finance."People’s Republic of China Budget Law" Article28provides that, unless otherwise required by law and by the State Council, local governments may not issue bonds."People’s Republic of China Guarantee Law" Article8provides that, unless specifically approved by the State Council, the State agency shall not act as a surety."Loan Law" Article61provides that administrative departments at all levels and enterprises, supply and marketing cooperatives and other cooperative economic organizations and other foundations, shall deposit and loan operations and other financial services. By doing some of the laws and regulations, China is legally prohibited from limiting the level of local government borrowing and debt, deficit column, and the power to issue bonds to raise funds paid, but in practice, local governments have adopted various means to circumvent legal constraints and format established financing platform, trust, financial leasing, BT, etc. to disguise illegal fund raising financing, making the prevalence of hidden debt, and the use of debt capital whereabouts effectiveness can not be effectively regulated, resulting debt pressure doubled, once the accumulated debt risk than the capacity of local finance, debt risk is bound to progressively shifted upward, directly endanger the safety of the central government.At the end of2013, the national audit office announced as of June2013, local government debt scale of local government responsible for repayment of the debt of10.885917trillion yuan, liable for guarantee the debt of2.665577trillion yuan, may be liable must rescue the debt of4.339372trillion yuan, the local government debt amounted to already amounted to17.890866trillion yuan. Local government debt problem has become an important subject of the current focus of economic concerns and the next stage of China’s financial reform and development. However, the budget of local government debt in China is still a new thing, only in the exploratory stage, the pilot is also exploring the many problems and controversies, and learn from the experience of foreign countries are not available for direct multi urgent need to further strengthen the theory to guide practice work, which is the research background. In this paper, local government debt budget issues as the research to build the main line to guard against local government debt risk for the purpose to improve the government’s full-covered budget system as the goal, using standard analysis methods and empirical analysis, according to the "Theoretical Analysis--Situation Study--International Comparison--Budget Design--Policy Suggestion" gradually ideas unfold specific research.In this paper, the theory of local government debt budget analysis as a starting point, first to clarify the definition of the concept and structure of local government debt classification, defines the specific content of local government debt contained in the analysis of the formation mechanism of China’s local government debt, combing the budgets of local government debt management and reform of the status quo motivation, given the scope of this paper is to budget revenue and expenditure of local government debt, build the basic framework of China’s local government debt budget system, decomposition of China’s local government debt specific operating procedures of the budget, the final policy recommendations puts forward to promote the implementation of the budget of local government debt.Through the study of local government debt budget to improve intergovernmental fiscal relations powers and expenditure responsibilities match is important, help promote further development of the theory and research budgets, but also enrich and improve important aspects of public management theory. The budget is prepared in a special debt of local government debt problem solving fundamental policy, this idea is not only to expand the study of local government debt management perspective, but also conducive to a sound system of local government budgets, budget management to achieve full-covered budget management.Effective prevention and control of local government debt risk is an important task of economic work in2014. From across the country, although the local government debt risk overall control, but there are still large-scale debt financing body scattered, inefficient use of larger debt pressure, opaque debt management is not standardized. China is still in the early stages of development of the socialist market economy, the development of the national economy, improve public service capacity, improve the livelihood of the environment is still very difficult, local government debt may also was rigid growth. How to further define the relationship between government and market, approved debt scale and improve efficiency in the use of debt capital? How to widen the solvency funding sources, strengthen solvency and maintain the credibility of the government? How to improve the transparency of government information, the institutional mechanisms of local government debt borrowed funds, management, use, but also for the overall management? And ultimate control and prevention of local government debt risk, the full realization of local government functions, to promote the government’s public administration level, and so on. They have important practical significance. Innovation of this paper is mainly reflected in the following aspects:1.In the research perspective, this article will local government debt risk control and reform of the government budget to study the budget as the starting point to study the problem of local government debt, fit the practical needs of local government debt risk management. In the framework of public administration and budget management, the establishment of local government debt not only helps to reduce the budget of the local government debt risk, but also conducive to further improve the government budget system.2. In the research content, this paper using of public finance theory to explain the financial responsibility of local governments, using reasonableness and necessity of applying the theory of government functions, such as fiscal decentralization theory demonstrates the existence of local government debt, using progressive budget constraint theory demonstrates the role of the government budget, using the principal--agency theory demonstrates local government debt budget is an effective way to increase transparency of local government debt, constructs from sources of local government debt, debt management and debt budget oversight progressive theoretical framework in order to build a new system from the budget revenue and expenditure, budget levels and budget levels, as well as budgeting, execution and final composition the budget system of local government debt.3. In the policy designing, this paper thinks that local government debt into full-bore budget management is the fundamental strategy, recommend the preparation of a special budget for local government debt, and design a different budget for direct debt and liabilities, explicit and implicit debt obligations. For different sources, considering the different local government debt repayment obligations different, in the preparation of the budget debt, implicit debt is not included, which is common practice around the world. For explicit debt, which is the dominant direct debt we have prepared the budget of local government debt reflect the contents of the focus, and its dominant liabilities attached to the occurrence of a particular event, this article intends to local government financial reports and statements and notes set out to ensure that all explicit government debt are included in the line of sight.Local government debt Involves in many fields, such as budgetary issues involving political, economic and social, and, in view of my research capacity, the level of research and study time is limited, there are still many shortcomings at this article:1. By the level of foreign language study and limited vision, I am not very comprehensive domestic and foreign research data collection, the study of the situation at home and abroad, especially the latest theoretical developments still lack a comprehensive and profound grasp of the theoretical basis for the establishment of China’s local government debt budget The study also is not deep enough.2. Limited by the actual working conditions, by the lack of standardized, authoritative, comprehensive local government debt payments statistics index system and statistical data, the statistical indicators varying degrees of cross and overlap, coupled with more deletions and vulnerabilities. Thus, availability and other factors affected by the personal ability and data analysis of the data collected is difficult, even if the first-hand information and data obtained through research is very limited, the status quo of China’s local government debt and expenditure as well as investigation analysis of some practical problems of local government debt management in the budget may not be accurate and in place.3. Limited by the space and energy constraints, this article mainly search the establishment of local government debt budget system framework and budgeting as a focus of the study, while the implementation of the budget accounts and budget oversight of local government debt problem simply take over, exhaustive, should be the direction of the next phase of the study.