Land Generative Mechanism Under The Support Of Local Debt Risk Research

After the reform of tax sharing system, the sub-nationalgovernments do not have enough financial powers to fulfill itsfunctions. The financial condition of sub-national government is notgood, which mainly rely on the central government’s transferpayment and tax return to maintain the balance of revenue andexpenditure, without any revenue to public investment. But with thecontinuous development of the real estate, mechanism of land makingmoney becomes the important pillar of local government finance. At2011, investigation of National Audit Office revealed that the scale oflocal government debt makes me to do research on the local debtcrisis.This paper is based on the history of the debt of the sub-nationalgovernments, which prefer investment by debts. Then I will summarythe research on sub-national government debt both at home andabroad, and get the conclusion of this paper: The deep-level reasonsof sub-national governments’ debts are local government performanceappraisal system and financial support of the results. At the same time,the bank has promoted the process of it. Because of theimplementation of centralized political system, thus the analysis ofthe debt risk of sub-national governments should relate with ourcentral government’s debt, and undertake quantitative analysis, whichreveal the whole local debt risk is controllable, but local short-termrisk is high. Along with the central government taking the most strictmacro-control on the real estate industry in history, which makes landbusiness model is not sustainable. The sub-national governments’revenues and land income is instability, the central government shares the risks.In this paper, by the establishment of land under the support ofsub-national governments’ debt model study found that achievementevaluation system and land making money make Joint action. Bymaking the political system reform, financial system reform, financialsystem reform, land money mechanism reform, will suppress thelocal government debt investment impulse and advance financialsupport effectively, so that the marginal cost and marginal revenue ofsub-national governments’ debt is equal, achieving the goal of localresidents’ welfare maximization.