Research On The Governance Model Of Local Government Financial Intervention In Urbanization

This paper mainly studies the development process,characteristics,function mechanism,problems and sustainability of the financial intervention urbanization governance mode from the perspective of Chinese local governments.After the taxation system reforms in the mid-1990 s,facing the fiscal dilemma and the pressure of “political tournament competition”,Chinese local governments,apart from fiscal ways,have increasingly implemented financial intervention to operating cities in order to develop local economy.As local government doesn't have the right to issue currency and use monetary policy tools,local governments have trended to intervene the allocation of financial resources and factors in an indirect way to guide capital resources to their jurisdiction,formed the typical Chinese financial intervention urbanization governance mode.This mode has the following characteristics: On the one hand,local governments have extended the budget space by land capitalization and debt financing,which mainly based on local financing platforms,to support the construction of infrastructure and basic industries to improve the "hard environment" of cities and the aggregation of various factor of productions.On the other hand,local governments have offered “credit enhancement” to target enterprises by selling the mortgageable industrial land at a low price,supplemented by financial subsidies,implicit guarantee and other preferential policies,to attract foreign capital and industrial transfer with the control ability of financial resources as bargaining chip,thus improve the “soft environment” for the concentration of resources.Improve the urban development through domestic financing and foreign investment.Among them,the local governments plays a decisive role in the allocation of urban resources and have a strong feature of developmental government.Through indirect intervention in the allocation of financial resources,local governments have achieved great success in regulating capital elements to gather in the cities by the financial intervention urbanization governance mode,which has made China achieve a world-renowned miracle of urbanization in just 20 years.In the early stage of urbanization,the allocation of urban resources is relatively disordered and inefficient,local governments can effectively improve the allocation efficiency and gain leapfrog development by regulating and intervening resource allocation with “tangible hands”.However,in the middle and laterstage of urbanization,the supply and demand,and allocation of various factors of productions in cities have gradually matured,and excessive financial intervention will have a negative effect on resource allocation,causing “local government governance failure” and affecting urban development.At present,China's economy is facing downward pressure,which is closely related to the side effects of this governance mode.At present,Local governments' financial intervention have distorted the allocation mechanism of financial,land,labor and other resources by exogenous forces,which leaded to the deviation of resources combination and aggregation from the optimal path,resulted in the loss of urban development efficiency and risk accumulation.These problems are mainly manifested in the high level of local government debt caused by excessive financing and the low quality of investment competition,which leads to the obstruction of urban industrial upgrading.The main objectives of this paper are as follows: firstly,after the the taxation system reforms,how did local governments create the miracle of China's urbanization development under the dilemma of less fiscal revenues,what role did local governments play in it,and what is the governance mode? Secondly,what are the characteristics of the local government's financial intervention urbanization governance mode and the mechanism of its influence on urbanization and economic growth? Thirdly,have there been any problems with this governance mode? Have these problems had a negative impact on urbanization and the development of national economy? Finally,regarding the sustainability and optimization of this mode in the future,what role should local governments play in the future urbanization governance to better promote the high-quality development of urbanization?Therefore,under the background of the current economic downturn and economic restructuring,how to adjust and optimize the financial intervention urbanization governance mode,so that the governance mode can continue to provide sustainable growth impetus for high-quality economic development and urbanization in China,this is one of the research significance of this paper.At the same time,both local governments and the central government's economic development are faced with the pressure of adjustment and transformation,in the critical period of economic transformation and industrial upgrading,combined with the political system and the reality of China,what role should Chinese government play in regional economic development,define the power border of “what can do” and “what can not do” of local governments,this is also one of the biggest practicalsignificance in this paper.This paper consists of seven chapters.In addition to the introduction of first chapter,the second chapter is the analysis of the concept and theory of the local government financial intervention governance mode.The third chapter is about the evolution of the urbanization governance mode from the perspective of local government,the characteristics and causes of the current financial intervention governance mode.The fourth chapter describes the optimal behavior and sustainability of the local financial intervention governance mode through the theoretical model.The fifth chapter is a realistic analysis of the problems in the local government financial intervention governance mode.Chapter six is empirical analysis,this paper constructs two empirical models to empirically investigate the sustainability of local government debt financing and the restraint of the current governance mode on industrial upgrading.Chapter seven is the conclusions and suggestions.The basic conclusions of this paper can be summarized as follows:First,the original of financial intervention urbanization governance mode of local government is the result of many factors,and its formation has its own periodicity and strong Chinese institutional characteristics.Through the review of the urbanization governance,the generate and widely use of governance mode is caused by many factors such as official examination system,fiscal decentralization reform,financial system policy adjustments,the deregulation of financing constraints central government to the local government,land system reform,this mode has rationality and inevitability.Second,financing and investment attraction are the main characteristics of financial intervention urbanization governance mode.China's urbanization process is mainly dominated by the local government.Through the intervention and allocation of capital flows and resource,through financing and investment attraction,local governments regulate capitals and resources to the most advantageous places of urban development.this governance mode is similar to the profit maximization of enterprises,China's local governments have a strong character of development-oriented government.Thirdly,both the theoretical analysis and the theoretical model prove that the financial intervention urbanization governance mode of Chinese local government has indeed played an important role in promoting China's economic growth.Through theoretical analysis,this paper describes detailedly the impact of each behavioral decision in the financial interventiongovernance mode of local governments on economic growth and urbanization.Then build a model containing government,enterprise and the financial sector,through theoretical model,this paper depicts the effects paths and results of local government financial intervention urbanization governance mode on economic growth,discusses the optimal behavior of local government,through the theoretical analysis,financial intervention urbanization governance mode of local governments has played an important role in early stage of urbanization.Fourth,the governance mode has accumulated some problems and are unsustainable in some degree.At present,the problems of this governance mode are mainly manifested in the local government debt financial risk and low quality investment competition.This is mainly due to the excessive intervention on various factor of productions have leaded to the obstruction of resource circulation and distortion of resource allocation.Excessive debt financing not only have amplified regional financial risks,but also exerted a downward pull on the healthy development of urbanization.Blindly attracting foreign investment through distorting the allocation of land resources,low price and low threshold have resulted in low-quality FDI,which produced crowding out effect on industrial upgrading.The empirical analysis in this paper proves that the existing governance mode is not sustainable from the perspective of local government debt and industrial upgrading.Fifth,the effect of local government financial intervention urbanization governance mode is significantly different in the eastern and the mid-western regions.According to the results of descriptive analysis and empirical analysis,there is significant regional heterogeneity between the effect of this governance mode in different regions.In general,the governance mode in the eastern region is effective,but it has caused problems such as high real estate prices and land prices.The governance mode adopted by mid-western regions in imitation of the eastern regions has not worked well,which has not only resulted in serious debt accumulation,but also led to problems such as overcapacity and industrial duplication.Sixth,the governance mode will still periodically exist for a long time,but the reform and optimization of the existing mode is very essential.The development of China's new urbanization strategy still needs a lot of financial support,Meanwhile China's economy faces downward pressure,so the governance mode is hard to be fully abandoned.But the readjustment and optimization for the governance mode from extensive to high quality,and more clear definition of local government's role in urbanization,is of great importance for thehigh quality urbanization and economic development in the future.