Research On The Scale Of China’s National Debt

Debt is a kind of portfolio, which a national government by virtue of its credit publicly issued to raise funds maturity and needs to repay principal and interest. Our recovery bonds issued since1981, along with the rapid development of China’s market economy and the deepening of economic reform, issue size of debt is also growing, especially since1998, China has taken additional measures to stimulate the economy so that leads to the rapid expansion of government debt. As we all know, debt is a double-edged sword, issuing bonds can have a positive impact on the economic development, as well as the negative impact.If the issue size of debt is too large, it may even lead to a debt crisis. Therefore, the study of appropriate scale of debt is very practical and useful.Government debt discussed in this article is the total amount of bonds which is issued that year. Appropriate scale of debt refers to the most satisfactory or the most reasonable boundaries of bonds in the national economy of large reference system on the debt,the boundary is not a specific or absolute value but a reasonable range. Moderate government debt is the inherent requirements that national government implement effective macroeconomic regulation to maintain the rapid development of the national economy. This paper uses a combination of theory and practice, empirical analysis and normative analysis combining research methods. we select the1981-2011years of the data and use of Eviews6.0for empirical analysis on issuance of bonds, and make our modest corresponding policies scale for scale of debt.This paper is divided into six chapters. The first chapter is introduction, which describes the background, the significance and the research on the scale of debt at home and abroad. The second chapter qualitatively describes the impetus, moderate debt make a effective role in the national economy, and excessive government debt make the negative effects. The third chapter introduces the basic theory of the scale of debt as well as the realistic measure of government bonds, which are later laid the theoretical foundation of empirical analysis.The fourth chapter and the fifth chapter are both the focus of this article. First it makes empirical analysis by using reasonable indicator of our country’s international debt scale,and investigate the ability of the national economy including the debt burden rate, the deficit ratio, the rate residents should bond and debt ratio, as well as the ability of debt solvency including dependence on debt and debt service ratio, which comes to the fact that the debt is in contradiction of relatively liberal ability of the national economy and heavy debt burden, but it does not scale as the absolute standard of whether debt scale is moderate, we should take from the actual use of bonds, the government debt repayment capacity and China’s actual conditions and other aspects into account. The debt scale is limited by objective factors, we should mainly focus on the debt capacity about the economic adjustment. We have the fact that there is a big risk due to the rapid expansion of government debt, but in recent years the country take appropriate measures so that the crisis was defused by making the Domar Model. However, the debt crisis arising from large national debt issuing scale can not be ignored. Then analyze of the main factors that influence the size of government bonds, on the basis of factor analysis, by Granger causality test, pick out the Granger cause of national debt issuing scale, and then establish VAR models and cointegration test conducted on its variable, establish cointegration equation and short-term error correction model. By analyzing the results, the most critical factors that affect the size of our national debt is GDP, deficit and debt balance, and the scale of our national debt negatively correlated with GDP. This suggests that in the long term, sustained economic growth will reduce demand for government bonds, making the reduction of debt issuance. If this trend continues, government debt will tend to state a virtuous cycle.The results show that our government debt is still controlled within a moderate range, but there is still a certain degree of risk, so we need issue bonds carefully.The sixth chapter.We make policy and recommendations to the National Debt by the conclusions as a guide:Accelerate the transformation of economic growth mode and enhancing the economic strength; Making the national debt interest payments into the budget, so that the expansion of the government debt becomes legalized; Increasing source of revenue; Restructuring financial expenditure and reducing spending.