| In December 2020,the Central Economic Work Conference put forward the order: “To effectively resolve the implicit debt risks of local governments”.Discovering the causes of government debt,and adjusting the economic effects of debt is vital to maintaining the stability and high-quality development of China.However,based on the system and practical background,China's government debt has shown great differences from other countries in many aspects,such as the way of borrowing,the use of debts,and the source of repayment.The difference in government debt not only affects China's economic development,but also involves people's livelihood issues and social stability.Among them,the most important thing is the land-financed debts of local governments that have gradually grown since 2008.This type of debt originated from country owned land,is used for land,and is paid by land sales.It is an important part of the implicit debts of local governments in China,and it has a large scale.The debt has characteristics of strong concealment and high hidden dangers.Existing studies in China and abroad have done some good research and exploration on the causes and characteristics of the formation of local government debts financed by land and preventing and dissolving the risks of such debts.However,in general,they are not comprehensive and neglected the financial factors.Financial factors play an important role in promoting debt.Therefore,to resolve government debt risks,it is necessary to conduct research from the debtor—the government,but also from the creditor—financial institutions.As the main content of local government debt,land financing debt has experienced a tortuous course of "exploration-development-standardization-integration".Especially after2008,China's positive monetary policy has led to the rapid development of the financial market,which has traversed the path that other countries have traversed for hundreds of years.At the same time,the basic economic system with public ownership as the main body has made the government play more and more important role in the market economy."Finance and stateowned enterprises" are advancing together,interacting in the field of "government debt".Then,to what extent has the local government's land-financing debts been expanded by financial influences? To what extent does financial lending intervene in land financing debt? How does the financial cause of land financing debt work? How will the orderly loose monetary policy further affect the government's financing of debt? What is the economic impact of land financing debt's expansion? The answers to these key questions are obviously of great significance for us to have a deeper understanding of China's government debt and fiscal investment and financing.For this reason,based on the existing research in China and abroad,this article uses more advanced and universal methods to conduct a comprehensive and systematic study on the formation and impact of local government's land-financing debt in China.To provide scientific policy recommendations for China's reform and practice of China's land development,real estate reform,preventing debt risks,and advancing the financial "removal from the virtual to the real".There are seven chapters in this article.Follow the logic chain of "propose problems-analyze cases-theoretical analysis-empirical test-influence mechanism-solution" to conduct research on the causes and effects of China's land financing debt.The main contents of each chapter are arranged as follows:The first chapter introduces the background and objectives,methods and ideas of the subject matter selected in this article,mainly based on the actual situation of land financing debt,and elaborates the theoretical significance,practical significance and main innovations of this article.The second chapter is the literature review.First,this article sorts out the research content of foreign government debts,mainly,focus on Musgrave and Buchanan's different views on the issue of "whether the government should borrow",and reviews their different understandings of government usages and government functions.Then this chapter sorted out the economic effects of government debt,such as whether government debt squeezed out private investment,whether it promoted economic growth,etc.,and then reviewed the policy constraints of foreign fiscal theory on government debt.The second half of this chapter summarizes China's government debt research.According to the sequential development of the social phenomenon of implicit debt,it is divided into three stages: exploration period,positive monetary policy period,and flexible monetary policy period.Mainly reviewed the viewpoints of the causes of government debt of scholars: the theory of fiscal pressure and the theory of attracting capital by land.This chapter summarizes several specific cause explanations of the causes of local government debt by Chinese scholars: political factors,governor's incentive factors,etc.The second chapter finally states the DSGE framework used in recent years and the empirical frontier methods of measurement based on micro-data of local government financing platforms.The third chapter is the case study of land-financing debt.Beginning in 2019,the author of this paper conducted research on debt practice departments such as financial institutions and the Bureau of Government Finance,consulted with practical experts,and selected typical cases:the H Group Company and S Business District in City Z.First,it introduces the economic,financial,and debt situations of City Z,and explains the local financial situation after the implementation of the new "Budget Law" in recent years.Then this paper selects the stateowned developer H Group Company in City Z as a case to explain how the land financing debt is formed.Based on the research and data collected,the whole process of how the primary land developers use the government's primary land development job to raise debts,how to hand over the "prepared land" to the government,and how to carry out long-term settlement was systematically demonstrated.According to the method of case study,the five aspects of operation process,advantages,disadvantages,risks,and countermeasures are summarized,and it is found that land-financing debt has the characteristic of "borrowing the new to repay the old",which vividly demonstrates why the local government should avoid the fiscal budget constraints,by using state-owned enterprises to raise debt.Based on the case analysis in Chapter3,debts financed by local governments with land financing are a normal social phenomenon and an inevitable product of the development of Chinese society to a certain stage.We should continue to focus on the "market-oriented" reform of factors and promote debt governance with land financing by local governments.The fourth chapter is the theoretical model.This chapter refers to previous settings and uses the DSGE model to observe how the loan to value ratio(leverage)affects the local government's land financing debt.First of all,this chapter introduces the leverage shocks of house buyers,real estate developers,and the government into the DSGE model,and then uses China's macroeconomic data to estimate the key parameters of the model,and then performs variance decomposition and impulse response to draw the conclusion of this article: The debt ratio of enterprises and the debt ratio faced by local governments are the core external factors for local governments to finance debts.The conclusion of Chapter 4 points out that the debts financed by local governments through land are actually the upstream debt-raising operations around real estate debts.The local government is similar to a monopolistic supplier of production factors.It has absolute monopoly power in the primary and secondary land markets.Therefore,as the only supplier of raw materials(land),it will inevitably be affected by the leverage ratio of social industry chain.Whether the upstream can borrow money is very important.The extent depends on the downstream debt-raising ability.The fifth chapter is the quantitative empirical part.This article collects various yearbook data,CSMAR data,and Wind financial terminal data,and examines that the leverage rate of China's cities from 2008 to 2017 is a significant cause of land financing debt.This chapter first points out that there is a greater "stickiness" in local governments' land-financed debts,and there is a significant positive correlation between the debts presently borrowed and the previous debts.The empirical results of this chapter not only support the conclusions of the previous chapters that the financial leverage rate is an important reason for the formation of landfinancing debts by local governments,but also found that China's local government landfinancing debts have a self-reinforcing mechanism of "spontaneous growth".This echoes the formation of the case analysis in Chapter 3,and the data proves the significant existence of "borrowing new debt for paying the old ".The above conclusions are consolidated through robustness tests such as replacing variables.Chapter 5 finally draws policy recommendations:From a risk perspective,continued credit easing will lead to the continuous expansion of local governments' land financing debts,and years of “borrowing new debt for paying the old” will lead to the accumulation of local government credit risks and ultimately lead to debt crisis;therefore,we must control and manage China's local governments' land financing debt from the root of the leverage rate.The sixth chapter is based on the main actors' decision-making and model analysis,in order to get the economic impact of the local government's land financing debt.Including: In order to avoid defaulting on land financing debts,local governments have hard decision-making constraints on real estate policies,actively avoiding policies that lower housing prices and land prices,and voluntarily choosing economic decisions to stabilize housing prices,forming a "oneway ratchet effect" of government decisions;Land-financed debts give politicians the opportunity to achieve incentives and increase the probability of achieving political goals.The expansion of land-financed debt will soften the effectiveness of government fiscal constraints;how land-financed debt affects corporate investment decisions depends on the easing of monetary policy by the People's Bank of China.Accuracy is not the only positive and negative impact;the impact of land financing on residents depends on whether residents have a rational expectation;whether land financing debt triggers fiscal and public risks depends on the central government under the established investment policy.Choice of bank monetary policy and profit policy of financial institutions.The seventh chapter is the summary and outlook.On the basis of reviewing the conclusions of this paper,this chapter puts forward five policy recommendations.(1)Continue to promote the market-oriented reform of land elements.(2)More rationally divide the boundaries of fiscal and primary land developers' responsibilities,and establish institutional constraints.(3)More extensive use of market constraints.(4)Establish a financial dynamic risk early warning and assessment mechanism.(5)It is recommended that fiscal and financial work must strengthen coordination and cooperation,improve the coordination and coordination of the two policies.The main conclusions of this article can be summarized in the following three aspects:1.The rapid development of financial credit and the subsequent increase in the leverage of social loans is an important cause of land financing debt for local governments in China.Because the local government monopolizes the primary land development,there is a strong financial potential ability.Under the synergistic effect of multi-faceted endogenous factors and financial exogenous factors,the local government's land financing debt can accelerate the development.2.Land financing debt originates from the government's primary development needs for land.It has the advantage of not being restricted by the rigid budget of the fiscal budget,making primary land development more convenient and faster,but correspondingly there are "moral hazards" and "adverse selection" of the principal-agent relationship,The debtor has a tendency to use the local fiscal “public pool”.3.China's local government debt financing with land is relatively "sticky".There is a large proportion of debts borrowed for the primary development of land that “borrow the new to repay the old”.Past debts will expand current debts,and land-financed debts are in a stage of spontaneous growth.4.The prevention and resolution of land-financed debt risks must coordinate financial supervision,financial institutions and financial policies,and comprehensively use land market reforms,clarify the boundaries of government and enterprise powers and responsibilities,and optimize incentives to fundamentally change land-financed debt's driving factors.The main innovations of this article are summarized in the following three aspects:1.Innovation in theoretical analysis framework: DSGE model is usually used to study the impact of monetary policy and changes in supply and demand on macroeconomic variables.This research introduces government debt-raising behavior into the model framework.The new theoretical analysis framework combines finance and government debt to a certain extent.Frame analysis to achieve innovation that closely fits the background of the basic state-owned system of urban land.By analyzing the formation mechanism of government debt and the influence mechanism on the allocation of market resources,it graphically displays the visualized economic effects of government debt on my country,and provides a new theoretical basis for the effective use and control of government debt.It is a government in the field of public finance.The beneficial expansion and deepening of the debt problem.2.Innovation of research content and perspective: Existing research is largely due to data limitations.The relationship between land elements and government debt is set to simplify the study,ignoring the state-owned holding company as a "land middleman",together with "financial institutions" and "real estate developers" to participate in the economic functions of factor preparation,credit allocation,and housing production.This simplified setting has to some extent hindered the in-depth study of the process of government debt expansion.In this paper,the “land broker” represented by the “financing platform”(urban investment company)is added as a new department.On this basis,an empirical model is constructed to verify the conclusions of previous empirical research and further identify the rapid expansion of government debt.It provides a comprehensive interpretation of the internal mechanism of government debt affecting the real economy,and provides new ideas and frameworks for the guidance and design of China's government debt policy in the future.3.Innovation of research methods: The author has conducted field surveys of financial institutions and obtained relevant documents.On the basis of practice,he has summarized the phenomenon of “capitalization” of land financing debt funds,as well as the characteristic of“stickiness” in time series.In addition,the author took the opportunity to participate in the research work of the district and county-level finance bureaus in first-tier cities.Through interviews,local finance bureau budget,investment,supervision and other government investment core departments,the author obtained grassroots financial work and development and reform related project investment work.Part of the content and business operation process.Finally,the above practical experience is applied to the research of this article,and the firstorder difference GMM model and the system GMM model are used for data regression to identify the causes and characteristics of debt,which is innovative in method. |
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