The Influence Of Local Government Debt On Private Investment And Its Mechanism Analysis

Since the "4 trillion Yuan" plan in 2008,local governments have used borrowed investment to fuel economic growth.As the scale of local government debt continues to expand and the downward pressure on the economy continues to increase,the economic efficiency and risks of local government investment and financing have drawn much attention.The effect of local government debt on private investment is an important aspect of the economic efficiency and debt risk of local government investment and financing.Since 2020,China has faced great challenges in coping with a complex international situation,grim economic situation and preventing systemic financial risks.In December 2022,the Central Economic Conference proposed that the economic work in 2023 should continue to implement a proactive fiscal policy and a prudent monetary policy,maintain the necessary intensity of fiscal expenditure,ensure fiscal sustainability and debt risks under control,and encourage and support the growth of the private economy and private enterprises.In this context,the study of this paper is helpful to evaluate the effectiveness of fiscal policies.At the same time,it has important practical significance to promote the implementation of the work of "stabilizing growth,stabilizing employment and stabilizing prices" and prevent the risk of local government debt.Firstly,this paper collected annual reports of all financing platforms that have issued bonds in more than 260 municipal administrative regions,and used Python software to process the debt data of financing platforms.Based on this,the data of local government debt is obtained by combining with the bonds issued by local governments,which ensures the objectivity and reliability of the research.On this basis,the paper makes a theoretical analysis of the relationship between local government debt and private investment and its influencing mechanism,and selects provinces and municipalities directly under the central government from 2008 to 2019 as research objects to empirically test the effect of local government debt on private investment and its influencing mechanism.Furthermore,a more comprehensive and in-depth analysis is made on the relationship between private sector industry heterogeneity and local government debt fund source channel differences.The results show that:(1)Local government debt crowding out private investment in general,and this crowding out effect is achieved through the direct transmission of capital competition and the indirect transmission of government investment.(2)Further,debt has asymmetric effects on real estate investment and non-real estate private sector investment.The overall crowding out effect of local government debt on private investment is caused by its strong crowding out effect on the real estate industry.The main reason is that the funds released by the active fiscal policy are distributed between the real estate industry and the infrastructure industry,but do not really flow into the real economy.Local governments have more financing advantages in the financial market.Local government debt has a significant crowding effect on non-real estate private investment,but this crowding effect is weak.Specifically,local government debt has a strong crowding out effect on real estate investment;The effect on industrial private sector investment dominated by manufacturing industry is not obvious;The crowding effect on agricultural investment is significant;The impact on different types of service investment is different.(3)From the perspective of debt financing channels,compared with non-open market debt,local government financing through open market has weaker crowding out effect on real estate investment and overall private investment,and public debt is conducive to non-real estate private sector investment.Non-public debt of local governments distorts regional resource allocation and is a key risk factor threatening financial market stability.Based on the above research conclusions,this paper puts forward the following three policy suggestions: first,strengthen financial support for the real economy;Second,we will use local government debt more efficiently.Third,we will continue to improve the structure of local government debt.