Research On China’s Fiscal Sustainability

The vagaries of the international economic situation and domestic economic growth continued to slow down, under the new situation, it is necessary to conduct a comprehensive assessment of the sustainability of China’s financial, to provide reference data and policy recommendations to the post-crisis era of our government’s fiscal revenue and expenditure decisions.First, we use annual data of1952-2010China’s fiscal revenue and expenditure, and use the application of Johansen co-integration test method to analyze China’s national fiscal revenue and expenditure situation, the test results show that our national finances are sustainable and significant a higher level sustainable. However, from the point of view of the overall debt burden, bond issuance and the balance of government bonds at a high level, the national debt risk is becoming increasingly apparent, the future debt service pressure of the national debt would be heavier.Second, we use annual data of1952-2010years, China’s31provinces’ local fiscal revenue and expenditure, and use the application of panel co-integration tests theory to analyze the financial sustainability of our local government, test results show that our local government’s finance is not sustainable. In addition, the local government debt stock is huge and rapidly growth. Local government debt balance in the controllable range, but the ratio of new debt has exceeded warning line, the local government there is a potential debt risk. But at this stage, the revenue structure of local financial imbalances and over-reliance on land revenues, and in extreme economic circumstances, some local governments has the possibility of default.Finally, we calculated the optimal ratio of the state financial expenditure on the social security financial expenditure, the results showed that, meet the conditions of the natural efficiency of government spending, social security and fiscal expenditure accounted for the optimal proportion of the total state financial expenditure was15.51%. At present, the level of China’s financial investment in social security was low. Years1995-2010the average proportion of the financial social security financial expenditure was8.72%.Low financial investment, although not threatening to the Chinese financial sustainability, but restricted the development and improvement of China’s social security system.