Study On The Impact Of Local Government’s Investment And Financing On The Coordination Of Urbanization

The uncoordinated development of urbanization in population and space hasbecome an indisputable facts in current china. Its adverse effect is coming outincreasingly. At present,the the spatial urbanization develops faster than populationurbanization, with the emerging of "empty city","ghost town","sleeping city" and otherunexpected phenomenon. China’s urbanization is dominated by the local government, inthe fiscal decentralization, local government has the right to decide, fiscal policyoriented local urbanization financing structure and the structure of fiscal expenditure.Therefore, the local government financial behavior in the process of urbanization, thedirection of development and the urbanization quality plays a decisive role. Therefore,analysis of urbanization non coordination of the root cause and its mechanism of actionis very important to study the problem, it is necessary to start from the local governmentinvestment and financing behavior.This paper, taking the local government’s investment and financing behavior inurbanization as the research object, analyses its influence on the coordination ofurbanization. Though the literature related, it can be seen that the the development ofthe population urbanization lags behind the spatial urbanization in present China. Andwe consider the local government’s pursuit of maximum economic benefits in theconstruction of urbanization, which making the investment and financing structuretwisted, as the main reason. This paper, from the perspective of "economic man",discusses the local government’s costs, benefits, budget constraints and utilities inurbanization construction. Based on the utility theory, we analyses the formationmechanism of incoordination between population and spatial urbanization underdifferent budget constraints and financial goals. Then, this paper analyzes the influencemechanism of local government’s investment and financing behaviors on theurbanization coordination in China from the following three aspects: the the localgovernment financing structure, fiscal expenditure structure and fiscal expenditure’sexternal effect.Using the provincial panel data from2001to2011, we conclude empirical studyabout the influence of local government’s investment and financing behaviors to the urbanization coordination. The main conclusions are as follows:(1)For local governments, the economic interests brought by spatial urbanization isfar greater than the population urbanization in short-term. Because of the influence offiscal decentralization and performance evaluation system, local governments pursueshort-term economic growth, prefer to promote spatial urbanization and ignore thepeople’s livelihood and welfare.(2)In the process of financing urbanization, because of the huge capital demandand the insufficient of financial tax issues, local governments heavily dependent on theland finance and local government debt, resulting in the excessive development ofspatial urbanization and slow population urbanization.(3)In the process of investing urbanization, for the soft budget constraint lackingsupervision of higher levels government and the National People’s Congress, localgovernment, purse short-term effect and economic interests, spend too much oneconomic constructions, crowding out the folk capitals in the competitive field, causingthem flow into the industry and the real estate. Economic expenditure has greatlypromoted the development of spatial urbanization, but the population urbanizationdevelops slowly for the shortage of livelihood expenditure. Finally, the unreasonablefinancing and investing structure and the fiscal expenditure’s “guiding effect” and“crowding out effect” to private capital lead to uncoordinated development ofurbanization in population and space.Based on the above analysis, we can find that by changing the local governmenturbanization orientation, unreasonable financing and investing structure, the rationaland maximum use of financial resources, combined with the fiscal system reform andthe household registration system reform, the problem of uncoordinated development ofurbanization can be effectively solved. At the same time, the research on the influenceof local government finance behaviors to urbanization, revealing its regularity andchange mechanism, helps to fully release the potential domestic demand and offerguidance and policy suggestions for the construction of “service type government”.