Regional Corruption?Financial Deepening And Local Government Debt In China

Since the new century,China's economy has developed rapidly.At the beginning of 2010,it has surpassed Japan and became the world's second-largest economy entity.With the rapid development of China's economy,the scale of local government debt in our country has also expanded at a rapid rate.Local government debt is a “double-edged sword”.On the one hand,it alleviates the predicament of local government and state-owned enterprise financing constraints,on the other hand,excessive expansion of local government debt scale will affect the health and stability of public finances,even cause debt crisis,which in turn led to the financial crisis.In particular,after the global financial crisis in 2008,the European debt crisis made governments and scholars in various countries realize that the outbreak of debt risks will have serious consequences.The current situation of the surge in local government debt has also attracted the attention of all parties.Therefore,it is more important to strengthen the research on the factors affecting the local government debt in China.Officials are the main body of government behavior.The behavior of officials will influence the decision-making and execution of public affairs,and thus have a major impact on the development path,trend,and structure of the local economy.As it involves the mastery and allocation of resources,it will accompany by a high possibility of corruption.Local government debt is the result of the government's allocating resources and guiding local economic development.Corruption is likely to affect the scale of local government debt.In addition,the debt arises from the demand for funds,and the government debt is huge,and the government ‘s financing and using cannot be separated from the financial market,so our local government debt will also be affected in the process of financial development and deepening.Therefore,it is necessary to consider the influence of regional corruption and financial deepening to influence the expansion of the scale of local government debt.This provides a novel perspective for us to better prevent and control the occurrence of debt risk and rationally resolve the predicament of local government debt.In order to better analyze the impact of regional corruption and financial deepening on our local government debt,we need to analyze the current situation of China's local government debt.China's local government debt has appeared late,but it has grown rapidly.Grasping the status quo of China's local government debt has profound implications for more comprehensive understanding of the factors that affect local government debt.The analysis of the status quo shows that the debt of local governments in China is distributed among the three levels of government in the provinces and counties;the main debts are concentrated in financing platform companies,government departments and institutions,which together exceed 60% of the total;bank loans account for more than half of the sources of debt.Followed is bond financing,but much less than bank loans;municipal construction and transportation facilities construction is the main destination of local government debt expenditures.The article focuses on the mechanism of the impact on local government debt from two aspects of regional corruption and financial deepening.The crowding-out effect of corruption on private investment is obvious.It reduces local government tax revenues,increases its financial pressures,and promotes the expansion of local government debt.It also undermines the rule of law environment,which is detrimental to the development of the economy and the improvement of the system,resulting in insufficient taxation to protect public demand,and the local government debt will increase.Officials will seek to increase corruption opportunities and increase fiscal expenditures to meet their desires,expand the scale of fiscal expenditure,and thus expand the scale of local government debt.The more developed areas of financial deepening,the more local capital accumulation and total capital formation will enable the banking institutions to provide more convenience for the development of local governments,and stimulate local governments to provide incentives for “innovative” financing to make local governments maximize the funding,ease the constraints of local government financing difficulties,leading to continued large-scale expansion of local government debt.On the basis of the theory,this paper organizes the panel data of all provinces(excluding Tibet)in our country from 2008 to 2015 to conduct regression analysis.The regression results show that under the control of urbanization rate,urban population density,fiscal decentralization and Foreign direct investment and other variables,both the financial deepening and regional corruption have a significant impact on the expansion of local government debt.By transforming variables Law and the instrumental variable method and make robustness and endogeneity test,the results show significant,it indicates that the empirical results are robust.Finally,based on the empirical conclusions,we put forward relevant policy suggestions: first,adjusting the tax system to increase local financial resources;second,developing the local bond market,making rational use of market binding;third,improving financial system and guiding financial market development.