Research On Investment Decision-making Of Local Government Of Our Country

With the deepening of economic reform, socialist market economy gradually has been established and perfected in China, urbanization gradually accelerated, urban infrastructure construction demand increasingly urgent, so local government investment in the public sector in China has gradually increased. Especially with the implementation of tax system reform "voice down, purse strings up"in1994, the local government governance scope gradually expanded, but the scope of financial rights narrowed. Facing the huge spending pressure, the chief business of the local governments at all levels were to increase fiscal revenue at the corresponding level, local governments tried to get more revenue by driving the rapid growth through investment. After the outbreak of the financial crisis in2008, our country adopted a proactive fiscal policy and started the "4trillion" rescue plan, and tried to take advantage of fixed asset investment to drive economic development, the results of these measures was the massive government investments. In2012, under the background of the economic downturn, local governments’ fiscal revenue and employment pressure were increasingly heavy. In order to accelerating the economic development, many provinces and cities took out the infrastructure investment of local government’s "killer app" again,"the local version of4trillion" investment plans started again. From June to the end of July in2012, from Shanxi to Guangdong, the total investment of major projects launched by local governments was close to the4trillion.Investment decision-making is the initial part of the government investment projects, the stand or fall of decision-making directly relates to the success or failure of the whole investment projects. The construction of local government investment project mainly concentrated in transportation, energy, utilities, etc. There is no denying the fact that the government investment in these projects can optimize economic development condition, improve local infrastructures, create more jobs, and has many other effects. But it is worth noting that the government investment is not to get economic interests as the fundamental starting point, It cannot be directly subject to market regulation, the project decision-making process will be influenced by a lot of internal and external factors, which leads to inefficient government investment project decision-making. What’s more, decision-making errors is higher, leads to more waste of resources and economic losses of the state. Perfecting the of project investment decision-making of local government is the key to reducing decision-making errors or failure rate, and it is also the important way to realize the scientific and democratization and legalization of investment decision-making of local governments.This paper, according to the contents, can be divided into five parts: introduction, relevant theoretical basis, development situation and operation characteristics of local governments’investment decision-making in our country, problems existing in the decision-making and analysis on the reason of these problems, countermeasures and suggestions to perfect investment decision-making of our local governments.Part Ⅰ:Introduction. Firstly, this part analyses of the background of the issue and the significance in the theoretical and practical circles. Secondly, it summarizes the literature of local government investment decision-making. Finally, it summarizes the research method and framework, the structure of this paper.Part Ⅱ:Relevant theoretical basis. Firstly, this section summarizes the concept of the government investment projects and government project investment decision, analyses the main principles followed in the government project investment decision. Secondly, it discusses the theoretical basis this paper involved, mainly including the public decision-making theory, the constitution economic theory, the principal-agent theory and the theory of public finance. These theories lay theoretical basis for the government project investment decision-making, and has the very strong theoretical guidance significance for improving the project investment decision-making.Part Ⅲ:Analysis on development situation and operation characteristics of local governments’investment decision-making in our country. On the one hand, this part introduces the development of project investment decision-making of local government in China as well as the achievements in terms of decision-making construction. On the other hand, combined with practical analysis, it summarizes the operation characteristics of the local government project investment decision-making in our country. In order to increase the tightness of the paper structure, it mainly introduces three features:the decision-making process taking the public welfare as the basic guide, investment decision putting accelerating the local economic and social development as the main purpose, carrying out the chief assumes overall responsibility for the decision-making.Part Ⅳ: Analysis on problems and reasons of the local governments’ investment decision-making. Based on the analysis of the status, this part analyzes some main or pressing problems of local government investment decision-making at present, trying to find the key point to perfect decision-making. Firstly, it analyzes deficiencies of the concept of local government investment decision-making. Local government officials have characteristics of "economic man", their pursuit of GDP index when making investment decision seriously lags behind the economic and social development. Secondly, there are also many defects and shortcomings in sons of the local governments’investment decision-making, such as decision-making organization, public participation, expert consultation, supervision and so on. These problems are the right reasons which make the local government investment decision-making errors be higher and "image projects","achievement projects" emerge in endlessly. So we immediately need to perfect the local government investment decision-making in our country.Part V:Countermeasures and suggestions to perfect investment decision-making of our local governments. Aiming at the problems existing in the project investment decision-making of local government, this part puts forward the corresponding countermeasures and suggestions, including introducing unfeasible evaluation system to the local government investment decision-making, improving the public participation, the expert consultation and the supervision, to establish and strengthen decision responsibility system. We can take these measures to perfect the local government investment decision-making and make the investment decision be scientific, democracy and legal.