A Research On The Appropriate Scale Of China's National Debt

As we all know, finance plays a prominent role in the development of economy and society. Finance is useful in allocating resources, promoting the development of economy and maintaining social stability and is good for the national economy in guaranteeing a sustained, rapid and sound development. At the same time, we know that the policy of national debt is one of the most important methods in financial policy. Therefore, it is very meaningful to pay enough attention to the research of the scale of government debt.Since the adoption of reform and opening policies, China has developed in an amazing speed. But, at the same time, the national debts of our country have been rising up rapidly, especially since the year of 2007 when China government begun to adopt the pro-active fiscal policies. This problem has aroused lots of concerns world widely. However, there has not been a consensus among these scholars on the question that how large the scale of government debt is appropriate.In order to analyze the reasonable scale of government debt, we unfold the research in the following respects.First of all, by introducing the theory of the appropriate scale of national debt and the model of the appropriate scale of national debt, we provide some monitor control index which can be used to measure the appropriate scale of national debt. These monitor control index are introduced from the following aspects, the debt capacity of national economy, the debt paying ability of government and the comprehensive debt paying ability of government.Secondly, following the first part, we deduce some monitor control indexes which are suitable to our country by using mathematical formula. Comparing these monitor control indexes to our country's actual situation, we analyze the situation of the scale of national debt at present.Thirdly, by taking qualitative approach and quantitative method, we analyze the reasons that might have influenced the appropriate scale of national debt in our country at present. By empirical analysis using the latest data, we come to a conclusion that at the present moment the most important reasons affecting the scale of national debt in our country are the residents'bank saving deposit and deficit. We also set up a VAR model and VEC model and make a further improvement of the importance of these reasons affecting the appropriate scale of national debt.In the end of this paper, in order to guarantee the healthy development of our country's national debt, we offer some advices that might help our government to improve the situation of our country's appropriate scale of national debt. The advice has been proposed from the following aspects, which is paying more attention to the implicit debt and contingent liability, making the national debt's market more perfect and adjusting the structure of national debt.