| Local government is an important subject to carry out the pillar and fundamental role of fiscal in national governance,and the process of local government governance is also a dynamic process in which finance plays a role.Therefore,it has an important significance and function in the fiscal sustainability of local government.Since the 18 th National Congress of the Communist Party of China(CPC),China’s economy has gradually entered a new stage of development,during which its economic growth has been slowed down,its economy has transformed into pursuing high-quality economic development and its economic system reform has entered the uncharted waters.China’s economy has obtained steady development achievement;however,it is also confronted with an increasingly complex international development environment,which has put forward new requirements and expectations for the comprehensive governance capacity of Chinese governments at all levels.Under the current circumstances of deepening reform and preventing systemic risks at home,complicated international environment and local wars threatening world peace,“seeking progress while maintaining stability”has become the general keynote of China’s economic and social development during the 14 th Five-Year Plan period.In the Report of the 20 th National Congress of the Communist Party of China(CPC)released in October 16 th,2022,more emphasis is placed on the resilience and security level of economic development.The achievement of China’s long-run economic stability,social stability and harmony requires local governments’ fiscal capacity to create an overall healthy and stable development situation,which demonstrates the significance of local financial sustainability.It can be predicted that in the current and certain periods of the future,government governance should play an active role in constantly improving the level of local fiscal sustainability and promoting the steady and healthy development of local economy and society during China’s economic and social development.The importance of local fiscal sustainability has become more and more prominent as the multiple risks in China’s local economic development overlap,especially when the local government’s governance capacity is constantly being severely tested under the persistent impact of COVID-19.This paper is based on studying the impact of local government governance reforms in China from a multidimensional perspective on the sustainability of local fiscal in China.First,this paper analyzes local government governance at the theoretical level on the basis of the history of China’s economic system reform since the reform and opening up and the characteristics of local economic and social development.This paper argues that local government governance,classified by governance content and characteristics,includes more drastic reform acts in addition to the governance acts in local governments’ daily management.Each local government-led reform act is a driving force for local government governance,and a large part of the impetus for the modernization of local government governance comes from such irregular "bursts-ofgasoline" reform acts.Based on this,this paper classifies and explains the reform acts of local government governance from three aspects,namely,local government’s centralized governance reform,local government’s decentralized governance reform and local government’s budgetary governance reform,and argues how these three aspects form a system of local government governance reform perspective,and presents a theoretical discussion about how these three aspects affect local fiscal sustainability.Second,this paper investigates the impact of the centralized governance reform act of local government governance reform on the local governments’ fiscal sustainability.Taking the measure of withdrawing counties and establishing districts as a typical example of centralized governance reform act since the implementation of the tax sharing system,this paper conducts a quasi-natural experiment of county withdrawal and district establishment by applying a double difference model and analyze its impact on the fiscal sustainability of prefecture-level municipalities.In addition,this paper takes the quasi-natural experiment of the development zone establishment policy as a slow-type centralized governance,which is different from the sharp-type centralized governance reform of county withdrawal,and then analyzes the effect of the development zone establishment policy on the fiscal sustainability of prefecture-level municipalities and counties.It is concluded that the centralized governance’s reform act,to a certain extent,promotes the development of regional economic base,provides opportunities for local governments to increase investment to boost economic growth and offers financial security for local fiscal sustainability.On the contrary,it may also bring about negative impacts on local fiscal sustainability,such as increasing the scale of local fiscal expenditures,which may provide a "hotbed" for the expansion of local government debt,and therefore may also be detrimental to the development of fiscal sustainability by increasing expenditure risks and debt risks.Third,this paper examines the impact of decentralized governance reform acts of local government governance reform on local fiscal sustainability.This part analyzes the reform of directly administered counties and the reform of expanding the counties’ power so as to strengthen them as the typical acts of decentralized governance reform,and considers them as fiscal decentralization and economic decentralization respectively according to their reform contents and characteristics.This part focuses on analyzing the impact of two types of decentralized governance reforms on fiscal sustainability of counties by using the differential method of quasi-natural experiments in the comparative analysis.The positive effect of economic decentralization on countylevel fiscal sustainability is found to be more significant in the empirical analysis;the positive effect of economic decentralization on local fiscal balance and the security capacity of economic base is found to be more significant in the mechanism analysis,while the positive effect of fiscal decentralization alone is relatively poor.In the analysis of reform timing,it is found that the positive effect on local fiscal sustainability is maximized when economic decentralization is carried out first followed by fiscal decentralization,or when both reforms are carried out simultaneously.Fourth,this paper analyzes the impact of budgetary governance reforms in local government governance reform on local fiscal sustainability.This part takes the“opening of the front door” reform of local government debt with the implementation of the new Budget Law in 2015 and the “closing of the back door” reform of implicit debt explicitation started in 2017 as a typical act of budget governance reform,and applies the intensive double difference method used in a quasi-natural experiment to conduct an empirical analysis.The analysis reveals that “opening of the front door” has a positive effect on the fiscal sustainability of local municipalities and plays a role in fiscal consolidation,while “closing of the back door” has a positive effect on the fiscal sustainability of local municipalities by controlling the scale of local government debt.The “closing of the back door” reform is based on the “opening of the front door”reform,so these two reforms’ policy effects overlap and exert a positive effect on the fiscal sustainability of local municipalities.In addition,the heterogeneity test demonstrates that different incentives for local governments to raise debt and the debt regulatory environment bring about heterogeneity to the effects of hard debt budget constraints on local fiscal sustainability.Finally,based on the findings of previous theoretical and empirical analyses,this paper analyzes the optimization path of local fiscal sustainability from the perspective of local government governance,which is argued mainly from the following aspects:local government economic governance,local fiscal system,government debt governance and government budget performance management.It explores how to improve local fiscal sustainability from specific practices,such as daily initiatives and reform measures of local government governance,and how to protect the healthy and sustainable local fiscal development.Through the above analysis,this paper mainly analyzes the impact effects of governance reforms on the sustainability of municipal and county-level fiscals from the perspective of reforms in local government governance.These findings,on the one hand,provides an analysis of the policy effects of various reforms in the process of local government governance in China,which is conducive to the continuous optimization and improvement in the promotion of subsequent reforms;on the other hand,they provide valuable policy suggestions for the construction of local fiscal sustainability in China,mainly for the municipal and county-level government fiscal.At the same time,this paper also enriches research perspectives and instructive ideas for the study of local fiscal in China based on the characteristic facts of local government governance in China,and lays a foundation for further in-depth research on local fiscal sustainability. |
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