Research On Urban Investment Bonds, Local Fiscal Capacity And Public Service Supply Effects

As a product of China 's specific historical period,the local financing platform is an important subject to improve the local government 's debt financing capacity.It is an important participatory force in the process of local government performing government functions and building local infrastructure.However,due to economic,political,management,and other factors,competition among local governments for fiscal expenditure,asymmetric fiscal relations between the central and local governments,and financing needs arising from the gap in fiscal expenditure among local governments,etc.,once caused the hidden debt risk of local governments to continue to expand.It has attracted the attention of the government and society.With the release of the relevant documents by the central government and the new "Budget Law" implemented in 2015,the government financing function of local financing platforms must be divested to manage and regulate local government debt-raising activities.At the same time,the 2017 and 2018 Central Economic Work Conferences took deleveraging and risk prevention as the focus of the next economic work.In this context,China's local financing platforms and urban investment bonds entered a new round of transformation.However,while focusing on the debt risk of urban investment bonds,it should also be noted that since the creation of urban investment bonds,it was mainly due to the financing needs of the local government's fiscal revenue and expenditure gap,which supplemented the local government's funding capacity for infrastructure construction.The pressure of local government fiscal expenditure has alleviated the positive role that China's local public service sector may play.Especially in 2020,our country is in the decisive stage of building a well-off society in an all-round way.Increasing the level of local public service supply,reducing the gap in public service supply between regions,urban and rural areas,and improving the level of national public service equalization have become national concerns.According to the theory of public economics,due to the "public" attributes of public goods compared to private products,the government bears the main responsibility for the supply of public goods,so the financial capacity of local governments has restricted the ability of local governments to provide public services to a certain extent.Against this background,is local government financing by injecting assets into local financing platforms and using the issuance of urban investment bonds to raise funds? Does it have a positive or negative effect on the level of local public service supply? What kind of mechanism does urban investment bonds and local fiscal capacity influence the level of local government public service supply? These issues are the subject of this article.Based on the issues raised above,firstly,this essay summarizes domestic and foreign literature on government actions affecting the level of public service supply and the factors that determine public service supply.Second,it reviews the evolution of local financing platforms and urban investment bonds in China since the tax-sharing reform in 1994,China's public service development process,qualitative analysis of the correlation between the development process of government debt and public service.Based on previous relevant literature and government reported data,theoretical analysis and hypotheses are proposed.When testing hypotheses,select variables to establish a fixed-effects model,use the data on urban investment debt stocks issued by local financing platforms in 30 provinces,autonomous regions,and municipalities to classify and select quantified indicators for the evaluation of public service supply.And test the effect of urban investment debt to local public service supply levels and correspond robustness tests.Finally,the intermediary effect model is used to test the mechanism of urban investment bonds affecting public service supply,and the local fiscal expenditure structure is used as an intermediary variable to explain the mechanism of urban investment bonds affecting local public service supply.The research results show that urban investment bonds issued by local investment and financing platforms have a positive effect on the level of local public service supply.The issuance of urban investment bonds can significantly improve the level of public service supply.But this effect is heterogeneous.For regions with a large balance of urban investment bonds and large numbers of urban investment platforms,the issuance of urban investment bonds has a greater impact on the level of public service supply.But for regions where the balance of urban investment bonds is small and the number of urban investment platforms is small,the issuance of urban investment bonds has a smaller impact on the level of public service supply.Meanwhile,the impact of urban investment bonds on different types of public services is different.For public infrastructure services,urban investment bonds have a stronger positive effect,while medical and educational services are relatively weak.Finally,the mechanism of adjusting the intermediary effect was used to verify the mechanism of urban investment bonds to improve local fiscal capacity,ease the pressure on local government fiscal expenditures,and promote the supply of local public services.Empirical results show that this mediation effect exists.Therefore,based on the conclusions,this article finally puts forward relevant policy recommendations.For the transformation and development of China's urban investment bonds,we must not only pay attention to the debt risk of urban investment bonds,but also affirm that urban investment bonds have improved public Contribution of service level.In the future,improving the relevant management system of urban investment bonds issuance and giving play to the role of local fiscal capacity in regulating the impact of urban investment bonds on the level of public service supply will be important for the future transformation of urban investment bonds in the public service sector and to improve the level of local public services.