Exploration And Innovation Of Government Financing Mechanism Under The Urbanizationbackground Model

Since new urbanization strategy has become the new driver of domestic economy growth, the problem of financing pops up. According to State Development Bank, the fund needed for urbanization from 2014 to 2016 might reach 25 trillion. Different from the 4 trillion stimulus package issued during 2008 crisis which has caused the roar of CPI afterwards, this time government is trying something more controllable. On one hand, the government restrains new capital injection; on the other hand, they try to speed up the circulation of huge sinking capital which was injected into the market years ago. This brings up a tough question to the government.Even though the new urbanization strategy is coming up with a sustainable funding regime, the current financing tools and methods are actually tying up the local governments’ hands, which cannot be solved within short time.This paper did some research on the drawbacks emerged during the past financing experiences of the local government as well as the drags created on the progress of urbanization. Moreover, this paper discussed the urgency of reform on government financing regime and proposed some thoughts on regime related innovation. The key point of Smart city combining industry and the city which was emphasized by the new urbanization strategy lies in the mutual development of industry and the city. Sustainable industry development is the core to the continuous growth of tax which is the foundation of the local economic growth.The current revenue sources of local governments include both tax and land sales. If considering tax revenue as the recurring income like operating corporations, the reform on tax regime will become the highest priority in regard to the financing regime reform. Since the local government bonds are not so welcoming in bourses, there is a great opportunity for innovation to take place on the flexibility and liquidity of local bonds. However, the fast growth of land sales in the last few years has overdraft the land availability to local government in the future. The fiscal system has also been disturbed by the outrageous land selling activities in the past few years. Therefore, there is also a lot of work to do to have a better plan on the utilization of local land resources to realize long-term sustainable tax growth and to complete necessary infrastructure construction.