The Moderate Scale Of Local Government Debt In China Based On Perspective Of Economic Growth

In recent years,government borrowing has become the new normal in the development of economics for China.The scale of local government debt has become bigger and bigger,thus more and more attentions have been attracted to the problem of local government debt.The problem of local government debt should be resolved,especially the large scale problem,in order to sustain steady economic growth in the new normal period.This article will study the problem in perspective of economic growth,which is different from the common perspective of debt risk.Thus,this article could expand the field of existing research on local government debt,and also has a certain reference value for prevention of debt risk and management of debt scale.Based on the analysis of the emerge,development and current situation of local government debt,this article studies the nonlinear relation between the scale of local government debt and local economic growth,and finds out notable threshold effect by doing threshold effect test with the panel data.When the debt ratio is at a low level,in the process that the debt ratio changes from low level to high level,the increasing of local government debt has some remarkable positive influence on local economic growth.But when the debt ratio reaches a certain level,the influence that local government debt acts on local economic growth becomes weaker.Then when the debt ratio reaches a quite high level,the increasing of local government debt has some remarkable negative influence on local economic growth.And in the eastern,central and western regions,there are different thresholds.Based on the result,this article derives the upper limit of scale of local government debt,and finds that there are 21 regions whose debt scale has beyond the upper limit.Thus,central government should control overall size,local government should enhance the controlling of scale of local government debt according to its own circumstances,and establish a monitor system to prevent debt risk,in order to promote steady economic growth.