The Research On The Scale Moderation Of China’s Local Government Debt

In1994, the implementation of incomplete reform of tax allocation of the central government, made unequal allocation of the powers and financial rights between the central government and local government. It eventually led some local governments to financial difficulties. In order to maintain development, local governments need to broaden the source of funds and increase the intensity of debt financing. The launch of the4-trillion economic stimulus plans also directly or indirectly prompted local governments to increase the intensity of external financing, in order to maintain local fiscal balance and accelerate the development of local economy.The rapid expansion of local government debt scale with out-dated debt management styles, leads to growing local debt problem. But what kind of debt scale is the appropriate scale? And what is the margin of safety of local government debt scale? This article first reviews the related literature data of the research with local government debt problem by domestic and foreign scholars. Then, the article introduces the causes and the present situation of local government debt. Based on this, I construct the scale suitability model of local government debt, to monitor and control the scale of local government debt. Meanwhile, in this article, through the analysis of government debt measure, we find out the variable of the government debt scale. At the same time, through multiple channels, I collect the local government debt scale data and other relevant economic data of City C for the year of2006to201. Based upon this, through the panel data analysis, I establish regression model for the City C, and predict and analyze the future liabilities for the City C. In addition, this article establishes the local government debt scale suitability test model, and tests the prediction result of City. Through the empirical analysis, I find that the scale of City C local government debt has been into the scope of severe warning area, and close to the peak of severe warning area. The result must bring the local government of City C and even the central government into great attention to the debt scale of City C. Finally, taking City C as an example, I give different suggestions for the local governments in different warning areas to control and manage the debt scale, so as to guard against the risk of local government debt.