The Influence Of The Pressure Of Promotion On The Spreads Of The County Municipal Bonds

Since the exposure of the debt crisis in Dushan County,the debt problem of the county government began to attract attention of all parties.In China,it is not uncommon for county-level officials to borrow money at high financing cost.The main reason is that since the reform and opening up,there has been an official promotion mechanism with economic development as the evaluation index.Under this mechanism,the official’s achievements are linked with the economic development of the jurisdiction.The better the economic development of the jurisdiction,the easier the officials will be promoted.The officials with poor economic development in the jurisdiction not only have no hope of promotion,but also are likely to end their official career ahead of time.Faced with such a huge pressure of promotion,officials at all levels are struggling to find ways to improve the economy of their jurisdiction.Among them,infrastructure construction has an excellent effect on promoting the economic development of county-level areas,which can not only directly increase GDP and employment opportunities,but also improve the total factor productivity within the jurisdiction,thus indirectly improving the economic development of the jurisdiction.As a result,county-level officials have issued urban investment bonds to raise funds to increase infrastructure construction.On the other hand,the expansion of county-level government debt led to the expansion of county-level government debt.This paper takes the county-level city investment bonds in China from 2007 to 2020 as the research sample to investigate the impact of official promotion pressure on the interest margin of county-level city investment bonds.This paper takes the county-level city investment bonds in China from 2007 to 2020 as the research sample to investigate the impact of official promotion pressure on the interest margin of county-level city investment bonds.In the theoretical analysis,this paper analyzes the transmission path,and clarifies the mechanism of the influence of the pressure of officials promotion on the interest margin of investment and debt issuance in county-level cities.At the same time,it is also found that the average term of office of county-level officials is only 3.44 years,while the issuing period of county-level urban investment bonds is generally long,with an average issuing period of 5.24 years.When the principal of urban investment bonds is paid off,the then officials may have been transferred,and the debt paying responsibility of urban investment bonds can be transferred to the successor officials in this way.Finally,through the empirical analysis,it is found that the promotion pressure of officials has a significant positive impact on the issue spread of county-level urban investment bonds.That is to say,the higher the promotion pressure,the higher the financing cost officials are willing to accept.Through further research,it is found that the issuance period of county-level urban investment bonds will strengthen the impact of official promotion pressure on the issuance spread.This is because the longer the issuance period,the more likely the debt repayment responsibility of CIC bonds will be transferred to the successor officials,which makes it safer for officials to raise funds at higher interest rates.