Research On Local Government Debt Moderate Scale Control

According to the article of“the Budget Law of the People＇s Republic of China”enacted in1994，local government budget can＇t contain deficit in accordance with theprinciple of pay-as-you-go and balance of payments，and have no right to issue bondunless they have the legal authorization．The Security Law has the same provisions oflocal government shall not provide guarantees for the loan．However，in order toachieve local economic and social development，local government often borrow largeamounts of government debt other than through the form of the issuance of bonds toovercome their own limited financial resources．In accordance with the No．35statistic result of the debt of local governmentmade by the Audit Commission in2011，as of the end of2010，local government debtbalance of10.717491trillion yuan，of which：government bears responsibility fordebt repayment reach to6.710951trillion yuan，accounting for62.62%；governmenthas security responsibilities for liabilities reach to2.336974trillion yuan, accountingfor21.80%；the amount of other related debt which the government may be haveresponsibility to rescue reach to about1.669566trillion yuan，accounting for15.58%．Government debt is a double-edged sword：on the one hand，local governmentdebt is an important tool for local government to raise funds to make up the deficitand develop economy，and its role in the economic and social development isbecoming more and more important；the other hand，the size of the local governmentdebt of our country was very huge，if we let its continued expansion beyond areasonable limit，it will cause the financial crisis to the local government and affectthe safe operation of the economy and harmonious development of society．Therefore,there will be a very important theoretical and practical significance to research thecontrol of the modest size of the local government debt．Through the research of thecontrol of the modest size of the local government debt，aims to achieve two purposes：First，we can have a clear theoretical definition of an appropriate scale forlocal government debt；Second，through an empirical analysis and evaluation of theinfluencing factors on the modest scale of the local government debt and moderateconditions based on the experience statistical data of the western city of H，we canmake policy recommendations for the control the modest scale of the localgovernment debt on this basis．Through the sorting out and learning of relevant research results on thegovernment debt scale of domestic and foreign，this paper make an analysis of theformation mechanism of the local government debt，and the modest size of the localgovernment debt is defined from the perspective of economic effects and the marginaltheory．On this basis，this paper analyzes the influencing factors of the modest scaleof the local government debt by using the experience statistical data of the westerncity of H in1994-2010and do an empirical judgment for the appropriate scale statusof local government debt in the way of selecting the relevant indicators combinedwith the previous analysis．Finally，this paper make policy recommendations for thecontrol of the modest scale of the local government debt．According to the analysesabove，the main conclusions in this thesis have been summarized as follows：（1）There is a long-term stable equilibrium relationship among the scale of debtborrowing，GDP，budget deficit，savings of urban and rural residents，debt serviceand debt ending balance in the long term．Estimates of the long-run equilibriumequation and short-term adjustment equation estimation results both show that thedebt closing balance and the savings of urban and rural residents is the mostimportant factors for the local government debt borrowing scale of western city of H，but their impact on the debt borrowing scale is different in the long term andshort-term．At the same time，GDP and debt ending balance is the Granger reason ofthe scale of debt borrowing，the deficit，urban and rural residents＇savings and debtservice are not the Granger reason of the scale of debt borrowing．（2）The paper makes an comprehensive evaluation of the status of appropriatescale to the local government debt in multi-angle and multi-level by mainly reference to the first and three types of indicators，additionally reference to the second categoryof indicators and make the key reference to the important indicators related to thefactors from the above analysis．Concluded that the scale of the local governmentdebts of the western city of H is in the moderate range，but we must note the problemthat it is growing too fast．Based on the above findings，this article puts forward policy recommendationsfor the control of the appropriate scale of local government debt through the main lineof“macro grasp：establish a correct understanding to deal with the local governmentdebt�'tackle the problem：to build long-term mechanism for the management of localgovernment debt�'improve the system：improve the institutional guarantee to resolvethe debt of local government”．...