The Reserch Of The Local Government Debt

This paper researches on the local government debt in the process of China's transition under the background of fiscal decentralization and government behaviors. In this paper, fiscal decentralization as a logical starting point for our research, and this paper committed to explore the institutional roots of local government debt in China, the impact of fiscal decentralization and government behaviors on the financial risk of local government. Both of our researches are based on the framework of "fiscal decentralization-(local) government behavior-local government debt".The starting point of the thesis topic is that the local government debt have become the core problem of next stage China's development and reform. In recent years, in the absence of normative financing and the lacking of infrastructure funds and in order to stimulating economic growth in the region, the result of the local government through various channels to debt financing is that the local government debt accumulated in the past years. In the year of 2008, in response to the economic crisis, the central government made the policy goal-oriented for "growth, structural adjustment, promoting the people's livelihood", the debt of local government increased rapidly. At the same time, the Party and the government have pained great attention on the problems of the local government debt, clearly stated many times to strengthen local government debt management on the central documents and work report, asked that the local government debt must be included in the budget revenue and expenditure management and research to establish a standard mechanism for financing local government debt. But in the view of the local government debt management practice and the pre-study results, local government debt management is far from the actual results of the ideal as expected. This situation shows that the policy objectives of specifications and local government debt management have encountered system obstacles. Considering the debt alone cannot solve the practice problems, taking the does not reflect the Chinese local government debt problem as a whole maybe the best choice. This prompted us to jump out of the existing research framework and make us from a more macro-institutional perspective to find out the hidden local government debt in the underlying institutional causes.Based on the framework of "fiscal decentralization-(local) government behavior local government debt", this paper argues that there are three questions we must first be resolved, the first one is how the formation mechanism of fiscal decentralization with Chinese characteristics exactly is. The seconded one is what degree is such design of fiscal decentralization to the alienation of local government behavior. The third one is whether the local government behavior increased the risk of local government debt and finally converted to financial risk. Thinking on these issues made up the starting point of this research and this study has thus formed the two main lines:The first line is the theory research of "fiscal decentralization-(local) government behavior-local government debt", focuses mainly on local government debt of the formation of many institutional roots. The second line is based transition practices of local government debt in China's institutional analysis of root causes and effects, focuses mainly on the practice tests to the theory research and thus to provide a factual basis for debt management. Around these three issues and two of the main line, the structure of text to make the following arrangements:Chapter 2 is the literature review. This chapter is straightened out in the literature on the basis of to the research of local government debt and statistical, the mechanism of local government debt management, the source of local government debt and the research of government behavior and the study of local government debt. This paper uses the above the four aspects of the existing literature is mainly based on the following considerations for collation:Local government debt and its statistical meaning of local government debt is one of the most basic research question and it is the next in-depth study of local government debt issues starting point. The source of local government debt of local government debt is the core of the study and it also the most pressing issue to resolve the debt problems of local government. While the local government debt management system is the ultimate goal of resolve the debt problems. These achievements provide valuable learning for our research.Chapter 3 is the basic judgments of local government debt. This chapter is start from the characteristics of local government debt, then to explore the origin of local government debt in order to make rational judgments to the China's local government debt problems. This paper argues that the local government debt has following characteristics:The first one is that the form of local government debt is changing, the platform for local government financing of local government debt had gradually become the main form of debt. The second one is that the debt for basic expenditure gradually reduced while the debt for capital expenditures gradually increasing.The third one is that county and township levels of local government debt has been gradually resolved, while city level of local government debt increased rapidly. The fourth one is that the size of local government debt is gradually breaking the current financial capacity and economic development. Through analysis of these characteristics, we argue that excepting the relationship between central and local governments on the revenue and expenditure, the increase of local government debt is also the results of the behavior of the alienation of local government on the background of fiscal decentralization.The alienation of local government behavior is mainly reflected in the following areas, the one is the vertical fiscal imbalance between central and local government, the another one is the horizontal competition between local governments strengthened the local government for construction through the impulse. The last one is the lag of investment and financing system made the local government debt financing possible.Chapter 4 is fiscal decentralization, government behavior and local government debt-based on empirical analysis and testing judgments. On the basic characteristics of local government debt and its origins on the basis of experience to judgments, this section made an empirical test to the experience. Firstly, this section building a basic analytical framework about the fiscal decentralization, local government behavior and local government debt on the background of market conditions, transition and China'practice, then tested the three basic assumptions which mentioned on the earlier proposed, built the index system from the aspects of debt risk, fiscal decentralization and financial incentives, and finally reform the conclusion from descriptive analysis and the formation of the empirical research results.Chapter 5 is fiscal decentralization, government behavior and local government debt-based on case studies of budget constraints perspective. Choose a study from the perspective of budget constraints is because that budget constraint is one of the most important means regulate local government behavior an important in the market mechanism, the existing of the current local government debt in China as a breaking-out of the budget constraints, which makes the strength of the budget constraints of local government has become a important benchmark to the strength of debt sustainability. On local government debt data analysis, this section analyzed the budget of local government debt management from the following aspects:First, this section sort out the China's current debt of local government's budget management system in order to finding out the basic realization of local government debt and budget management theory based on the practice. Second, this section took one of city and municipal local government debt for example in order to seek a realistic way to local government debt management. Chapter 6 is research findings and policy recommendations. Finding the way to regulate and management the local government debt is the ultimate goal of this paper. In this section, we formed a few basic conclusions and suggestions to the local government debt management.