Financial Gap Pressure,Land Transfer And Local Government Debt

After more than 30 years of rapid economic growth,China's economy has gradually entered a new normal state of slow growth.While economic growth has slowed down and downward pressure has increased,increasing local government debt has always been a focus of social concern.However,there are still many disputes on the causes of the formation and rapid expansion of local government debt,especially on the relationship between the pressure of fiscal gap and local government debt.This paper combines theoretical analysis and empirical test to study the causes of the formation and rapid expansion of local government debt,and reorganizes the relationship between fiscal gap pressure and local government borrowing behavior,trying to give some explanations to the previous controversy about the relationship.By choosing the city investment debt(a typical local government debt)as the proxy variable of the local government debt,using the data of the major prefecturelevel cities in China from 2005 to 2016 and the city investment debt data,this paper finds that:(1)the increase of the local government debt is closely related to the land transfer.With the rising of land transfer price and the increase of land transfer income,the mortgage value of land,an extremely scarce factor resource collateral,will also rise.The leverage of debt financing by local governments through land mortgage will be amplified,which can expand more financing channels,leverage more financial resources and obtain more.More debt funds;(2)The pressure of fiscal gap will not only directly stimulate local governments to issue debt,but also indirectly obtain more financial resources by raising the land transfer price and income,thereby increasing the collateral value of the scarce resource factor collateral,thus increasing the scale of their borrowing debt;(3)In particular,under the dual background that local governments are facing the pressure of fiscal gap and local officials are also facing the incentive of performance appraisal mechanism,local governments rely on land mortgage financing to further increase the scale of local government debt.It is precisely because of the above-mentioned financial pressure,performance demands-land transfer-local government debt transmission mechanism,from the land transfer of this intermediate transmission channel,in the short term,we should pay close attention to the local government debt risk caused by fluctuations in land prices,especially when the real estate market is downward,buyers anticipate.The decline in housing prices caused by the change in the period led to a sharp decline in land prices.The financing method of obtaining debt funds through land mortgage will undoubtedly aggravate the sensitivity of the local economy to the fluctuation of the real estate market.Once the land price drops sharply,the mortgage value of land collateral will be greatly reduced,which will lead to the risk of local government debt repayment,and even lead to further expansion of local government debt.In the long run,in order to prevent the systemic financial risks caused by excessive borrowing by local governments,it is necessary to gradually reduce the dependence of local governments on land finance,especially to reduce the proportion of local governments' financing sources through land mortgage financing,and actively expand other channels of financial funds.