Officials Promote Incentives And Local Government Debt Risks

Since the reform and opening-up,China has carried on the political,the financial and any other reforms in this transition period.As the main participant and direct contributor of reform and innovation,the local governments have made great contribution to the achievements of China's economy.Because the economic growth in the area has always been an important index to assess the performance of local officials,an important impetus for local governments to promote economic development is the promotion incentive,and this has indeed triggered economic growth.Under the special institutional background and incentive structure,the competition between local governments is becoming fiercer,and the incentive effect of local officials is gradually distorted.Competition has led local governments to engage in debt wars to attract capital inflows,and the bigger the debt,the greater the risk of debt.Especially after the outbreak of the international financial crisis in 2008,the rapid expansion of China's local government debt has deeply affected the healthy development of economy and the security of financial system,so how to prevent and dissolve the risk of local government debt has become an important issue.In recent years,the government audit has become a new perspective to reduce the debt risk of local governments.As an indispensable institution,it can find and correct many problems in social and economic operation in time,and play the role of immune system healthy running of national economy.In December 2013,The Central Organization Department issued a notice,which clearly put forward the local debt into the performance assessment,and strengthened the assessment and audit of the debt situation to prevent blindly borrowing in officials' tenure.The Beijing Declaration adopted by the World Audit Organization in 2014 also proposed that the government audit should aim at improving government effectiveness and promoting transparent accountability,thus safeguarding the long-term sustainability of fiscal.In practice,the Audit Commission's investigation of local government's debt is increasing,then what is the effect on the government audit's control of debt risk by standardizing the local officials to borrow money?To answer the above questions,this paper analyzes the incentive for local officials to borrow to develop the economy firstly,and then introduces the government audit to analyzes the effect path of government audit to the local government's debt risk,and introduces the control system on officials to fulfill the economic responsibility,thus providing more complete theory to support the empirical part.In the empirical analysis,this paper examines the impact of official promotion incentives on local government's debt risk,and analyzes the different influence on the eastern,central and western regions;On the basis of this,this paper empirically test if the impact of the promotion incentive on the local government's debt risk is subject to governmental audit constraints.In addition,the incentive to develop the economy is based on the fact that GDP is the key to get promoted.There will be a drastic effect if we can improve this assessment mechanism.In order to explore how to revise the assessment indicators to weaken the reverse incentive,this paper examines the impact on the conduct of officials if we reduce the proportion of GDP,while increase the proportion of environment and people's livelihood,and finally summarized the full text of the study and proposed some policy recommendations.Through theoretical analysis and empirical test,this paper draws the following conclusions.(1)The promotion incentive of local officials aggravates the risk of local government's debt.(2)Government audit is an important factor that affects the relationship between the promotion incentive of officials and local government's debt risk,the greater the audit accountability,the more restrained the officials' illegal behavior.(3)The influence of the promotion incentive on local government's debt risk has regional difference,which is more obvious in the western region with low market level and strong government intervention.(4)The personal characteristics such as age,tenure,education and work experience have an impact on the behavior of officials in debt.