| Financial is the basis and pillar of a country's governance. Usually, the fiscal and taxation system plays a fundamental, systematic and guarantee role in the state affairs and security. The financial system embodies and carries the basic relations between government and market, government and society, the central and the local, etc. In the complex central-local relationship, the power and duty struggling, which revolves around fiscal-tax, has been the focus problem. It can be said without exaggeration that the history of Reform and Opening of China is a magnificent process of financial reform.On the relationship between the central and local, there is a complicated "cycle of power centralization-decentralization" since the founding of the state. When excessive decentralization results in economic disorder and unconducive control, the central tends to seize the power for consolidation. In contrast, facing to the economic rigidity, low liquidity and slowed social development caused by excessive centralization, the central will delegate its power to enliven the market again. In spite of all sorts of criticism, these measures enable the overall national economy rise steadily since the mid-1990s. Since the implementation of tax-distribution in 1994, the central government has regained the economic discourse while the local has to reduce its financial power.Driven by the market-oriented reform, the local governments is full of enthusiasm. But the widening gap between funds needed and available urges them to broaden the financing channels and to enhance investment capacity. However, the Budget Law has not yet delegated local governments with the power of issuing bonds. Against such background, it becomes a common practice for local governments to raise finance from various channels with local government financing vehicle (LGFV) by entrusting land assets. Through this, the local governments are forming a strong borrowing capacity.For both central and local governments, financing is a double-edged sword. On the one hand, financing enables local governments to make great contributions to Chinese economy's steady growth; on the other hand, financing also loads local governments with huge debts burdens. Therefore, under the new economic circumstance, the central government begins to place strong constraints upon local debts. Besides, to upgrade the system and ability of governance, it is trying to rebuild the fiscal relationship between the central and local governments through a variety of policy mix.From the perspective of the relationship between the central and the local, this article is trying to represent the debt-expansion of local government since 1990s, thereby understanding the institutional constraints, choice of operation and control logic along this process. In terms of theory concerned, the focus of this article is not on describing the exact amount of local government's debt and its governance path, but on the evolution and game logic behind the central-local relationship.On research method, this paper mainly uses deduction, which emphasizes facts and hypothesis, explanation and interpretation both; and observation of action, which contains different classes and preferences. To achieve some achievements in both theory and policy, this paper follows a thinking mode of diversity. It means that the author matches the facts and theories, different angles of views, history and reality as well as macro-micro thinking. Besides, this article tries to abandon the value judgment and does not carry moral judgment on occurrence and development of local debt. Inversely, we focus on history and facts, combing the logical and dynamic mechanism of central-local relations action.On the research strategy, this essay attempts to integrate financial events and social development as well as expand the generation logic of local debt into the theory. The existing research mainly concentrate on two parts. One is the analysis of the government's debt scale, much of which is done by finance or economics researchers; the other is the application analysis of debt risk, which is almost performed by the steward in the government. By doing these things above, the author hopes to enrich and expand the understanding of the issue and to explore the possibility path in an interdisciplinary vision.On the structure, the author tries to combine the reform process and the game process together so as to present a kind of dynamic structure of local debt. By using six groups of core concepts, the essay re-establishes an analytical framework of local government debt. These concepts constitute the central perspective of this article.In specific, in addition to the introduction part, this text is divided into eight chapters. The first chapter is the literature review and comments, which combs the western and home academic research and on government debt and the officials policy views of finance and economics. The second chapter is the theory foundation part. In this part, the writer analyzes four classical kinds of theories, which explain the financial behavior of local government based on the central-local relationship. They are the centralization-decentralization, competitive governments, fiscal federalism and the practice of experimental management. Then, the third chapter--financing and distribution, the game between central-local during the fiscal and taxation reform, reproduces the fiscal and taxation reform in 1993 and 2001 respectively. They are the typical cases of the local's cheating, which can show us the competition vividly. The fourth chapter, which is about lacking and borrowing money, describes the formation of tax distribution and early debt. And emphasizes on the generation of villages and towns'debt. And, in the fifth chapter, the author states the process of borrowing and earning money, which touches on the innovation of financing tools and the accumulation of local debt. Chapter six, credit-default, shows the incentive of local government debt from positive and negative angles. By this, this part explains bureaucrats'action during local debt theoretically. The part seven of land and credit, argues the two paths of debt amplification in the local. It depicts that, to get money, the local relies on land finance and government impact during urbanization?Although it has brought risks, it has made a significant contribution to China's development. And it comes to chapter eight--losing and regaining control, the new central-local pattern in debt governance. This part interprets the measures taken by the central government to restore the situation. Finally, the conclusion briefly discusses that, the driving force of China's economy--the competitive local government, is patrolling a turning point from flourishing to decline.To overcome debt risks, several efforts need to be made as follows. Firstly, change the unequal situation of finance rights and duties between the central and local. Secondly, perfect official assessment and incentive mechanism and break the GDP supremacy. Next, continuously widen the channels of the local government to finance legally, such as granting local governments rights to issuing bonds. Finally, to bring the local under the budget control, debt management and supervision mechanism as well as hard budget constraint should be exerted to local government. |
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