Research On The Relationship Between Local Government Debt And Economic Growth Under The New Normal Economy

In 2008,the US subprime mortgage crisis added uncertainty to the world economy's embarrassing situation.In such a severe economic situation,in order to stabilize economic growth and prevent the collapse of the entire financial system,China has consistently implemented a 4 trillion investment plan to stimulate the total demand of society to stimulate economic growth.In order to accomplish the tasks assigned to the plan,the local government has to float a loan,so the government's financial burden is getting heavier.In addition,since 2012,the growth rate of China's GDP has begun to decline,and China has officially entered the new normal of medium-high growth.Under the new normal economy,the growth rate of local government fiscal revenue has decreased.As a result,the gap between fiscal revenues and expenditures of local governments has become larger and larger.The problems that have arisen have drawn the attention of the government and experts at home and abroad.Although China's local government debt may still be relatively safe,many related studies have shown that our local government debt lacks transparency.Therefore,the scale of China's local government debt is underestimated,and the debt risk is deeply embedded.Correctly understanding the relationship between local government debt expansion and economic growth will play an active role in the reform of the fiscal system and taxation system.This paper takes the relationship between local government debt and local economic growth as the research object,and conducts research from both theoretical and empirical perspectives.Theoretically,this article briefly describes the status quo,development history,the formation reasons,and the effect on the whole society of local public debt in China,so that everyone can have a more comprehensive understanding of China's local government debt problems.And based on relevant debt data,this paper expounded the ways in which local debt affects economic growth from several different perspectives.On the basis of theory,the short-board data of debts that the local governments of 30 provinces in China are responsible for repayment during 2012-2016 were selected.At the same time,control variables such as the proportion of the tertiary industry,population growth rate,and regional financial support were used to build models.Empirical studies have deeply explored the relationship between public debt of local governments and local economic growth in the new normal economy.It is concluded that the expansion of local government debt during the five-year period from 2012 to 2016 has hindered the development of the local economy and has had a negative impact on local economic growth.In addition,from a regional perspective,the expansion of China's local government debt scale has a significant negative impact on economic development in the eastern region where resources endowment are better,while the negative impact on the economic development of the midwest region where resource endowment is poorer is not significant.In order to allow government debt to play an active role in economic development and promote the steady and rapid development of China's economy,this article proposes the following policy recommendations based on the above relevant conclusions:1.The scale of China's local government debt should be controlled within a moderate scale;2.The government functions of the central government and local governments should be clear and explicit;3.Manage the scale of debts according to local conditions;4.Improve the system construction;5.Learn from the debt management experience of developed countries.