A Research On The Impact Of Chinese Local Government Debt On Enterprise Investment

Since the 19th National Congress of the Communist Party of China,the three critical battles against major risks,poverty and pollution have become the focus of the whole society.The 2020 and 2021 Central Economic Work Conferences respectively proposed "strengthening the work of resolving hidden local government debt risks" and "resolutely curbing the risks".The investment efficiency and redemption risks of local government debts have received widespread attention.At present,there is huge instability in the revenue structure of local governments.Some provinces show the coexistence of low economic growth and high debt.Local government debt risks and financial risks are intertwined.At the same time,the growth rate of corporate investment has slowed down significantly.Most enterprises are not only faced with the problems of difficult and expensive financing,but also the return on investment of enterprises is not as good as expected.The result is a lack of enthusiasm for business investment and a decline in the scale of investment.Therefore,studying the relationship between local government debt and corporate investment is an effective reference for evaluating the effect of local government economic stimulus policies.The report means that China’s economy has transformed from high-speed growth to high-quality development stage.This thesis organically combines local government borrowing behavior at the macro level and corporate investment decisionmaking at the micro level.From the perspective of corporate investment scale and debt structure,to study the micro performance of local government debt expansion affecting economic growth.This thesis selects the annual panel data of c SI A shares enterprises from 2012 to 2019.Specifically,based on sorting out the domestic and foreign literature,this thesis firstly analyzes the motivation of local government debt financing,local government debt expansion and local government debt from the theory of public goods and fiscal decentralization,principal-agent theory,and IS-LM theory.Secondly,it qualitatively analyzes the present situation of local government debt in China,as well as the local government debt risk and enterprise investment dilemma.Then,a two-sector model including banks as an intermediary is constructed to analyze the impact of local government debt on corporate investment from a theoretical level.This thesis further verifies the impact of local government debt expansion on corporate investment through fixed effects and GMM models,and introduces public investment,credit scale and financing costs as intermediary variables to explore the transmission channel of local government debt’s impact on corporate investment.This thesis further tests the heterogeneity from ownership,regional characteristics and enterprise scale,and puts forward relevant policy suggestions.The conclusions of this thesis are as follows:(1)Local government debt expansion crowds out corporate investment.Compared with explicit debt,local government implicit debt expansion has a more significant crowding-out effect on corporate investment,it remains consistent after changing key variables,deleting some samples and testing for endogeneity;(2)Local government debt has a greater crowding-out significant effect on small-scale and non-state-owned enterprise investment in emerging regions;(3)Although local government and implicit debt has a direct crowding-in effect on enterprise investment through public investment channels,but it has a crowding-out effect on corporate investment by increasing corporate financing costs and reducing credit resources.The net effect of local government and implicit debt on enterprise investment is crowding out.On the basis of the results,the following policy suggestions are put forward:(1)Establish and improve the debt risk management and early warning mechanism,and normalize the financing behavior of local governments;(2)Optimize the information disclosure system,improve the scientificity of credit rating and the transparency of debt management;(3)Accelerate the establishment and improvement of a modern fiscal,taxation and financial system and achieve structural deleveraging;(4)Accelerate the construction of a multi-level capital market and broaden the financing channels of the government and enterprises.