Analysis On The Scale And Reasons Of Local Government Debt

The European debt crisis,which began in Greece has raised global concerns about the government's debt problems.China's local government debt risk can not be ignored.Local government has always been the backbone of China's rapid economic growth,At the same time,the local government's duties didn't match with financial power,which caused that most of local governments were burdened huge amount of debt in China,that is to say,In order to promote the economic development of the region,Local governments bore huge debt actively or passively.Previous studies on local government debt has made a lot of valuable results in the aspects of basic theory,problem analysis,solutions and so on.But the institutional background of the local government debt problem is not discussed enough,the reasons for the local government debt scale expansion is also slightly superficial.So what is the current situation of local government debt in China?What are the reasons for the formation of local government debt in China?What are the factors influencing the scale of local government debt?How much influence?How to control the scale of local government debt?Around these questions,this paper makes a Theoretical research and empirical test on the scale and reasons of formation of local government debt in China based on a large number of research results at home and abroad.This study not only can enrich and perfect the theory of local government debt management in our country,and solve the problem of lacking systemic theory and weak experience in the local government debt study.It is also helpful for government departments to deepen their understanding of local government debt problems,changing ideas and regulating functions,establishing a local government debt management system to improve the level of debt management.The main contents of this paper are:First,it made an analysis on necessity and moderation of the scale of local government debt in China.Discussing the necessity of local government debt behavior from the perspective of preferential public goods and fiscal decentralization?the public goods supply of local government.Analyzing the economic effect of local government debt.Analyzing the moderation of local government debt scale from three angles of cost-income,economic growth and sustainable development.Introducing the current international indicators to measure the appropriateness of debt scale.Second,we analyzed the characteristics of local government debt in our country based on Government debt audit report and related Market Research Report,and selecting the debt burden rate and debt ratio to measure the Moderation of the local government debt size,The results showed thatalthough the risk of local government debt in China was still in the controllable range,but has accumulated a lot of risk.In order to guard against financial risks,maintain a stable economic development,local governments must control scale of debt.Third,it made a deeply analysis on the reasons for the formation and scale expansion of local government debt in China.The reasons are as follows:(1)Fiscal Decentralization.The reform of fiscal decentralization system is not perfect,which caused contradiction between the local government financial revenue and expenditure has always been increased.(2)Local officials'behavior motivation and evaluation system.In order to achieve the goals and objectives of promotion power,Officials will compete in official circles.In order to complete the assessment indicators and try to please the superior government as much as possible,local governments tend to pull the region's economic growth rate through a large amount of investment.Which lead to overheating investment and debt.In addition,Macroeconomic situationthe and disorder of government debt management and other issues has helped to raise the debt financing behavior of local government to a certain extent.Fourth,We made an empirical test on the scale of local government debt from the perspective of fiscal decentralization and local government competition.we had selected the local government bonds issued in 2009 to 2014 to represent the local government debt situation.Empirical results verified our theoretical analysis,that is,the degree of fiscal decentralization is higher,the size of local government bonds is greater;local government competition is more intense,the local government will also choose to increase the size of the bond issued.Finally,According to the above theoretical analysis and empirical test,we put forward the following policy recommendations to effectively control the size of local government debt:Deepening financial reform,improving the assessment mechanism of local officials,improving the local government debt management system,promoting the reform of local government investment and financing platform,focusing on promoting the development of local government bond market,etc.There are three main points of innovation in this paper:First,The necessity of local government debt action is discussed from the perspective of preferential public products and fiscal decentralization,public goods supply behavior of the local government as a dual agent.It points out that three theoretical standards to measure moderate scale of local government debt have certain theoretical significance,but their standard of measurement is abstract and has little guiding effect on actual operation,thus affirming the method of measuring the appropriate scale of local government debt based on the existing index system.Second,discussing the reasons for the formation and expansion of local government debt in China,pointing out that the imperfection of the fiscal decentralization system is a necessary condition for the local government debt,and the motivation and behavior of local government officials are important reasons.Third,In view of the serious shortage of local government debt data,this paper tried to study the local government debt financing behavior from the perspective of local government bonds,providing a new perspective of research,and making up for the lack of measurement and inspection of the existing theoretical research to a certain extent.