Local Government Competition And The Issuance Scale Of City Investment Bonds

Since China implemented the reform of the system of tax distribution in 1994,local government debt has gradually become a hot topic.With the deepening of research,scholars generally believe that China’s local government debt risk is becoming increasingly severe.Because the total amount of local government debt is not transparent,it is difficult to obtain real data.At the same time,the 1995 version of the Budget Law does not give local governments the power to issue government bonds.Researchers often use the research of urban investment bonds issued by financing platforms to replace for the study of local government debt,most of the existing literature will study the impact on the spread of city investment bond issuance or the scale of city investment bond issuance from multiple perspectives such as soft budget constraint,official promotion,and local government competition.Starting from the perspective of local government competition,this paper chooses the perspective of "turning county into district" to continue to study the scale of city investment bond issuance and analyze the impact of policy implementation on the scale of prefecture-level city investment bond issuance.This paper combines the theory of fiscal decentralization to explore the local government competition in the context of Chinese-style decentralization and the mechanism by which such competition affects the scale of urban investment bond issuance.On this basis,three theoretical hypothesis are proposed.This article conducted an empirical regression on city investment debt.The sample range is 283 prefecture-level cities in 26 provinces across the country.The sample time interval selected is from 2009 to 2015,and further analysis is carried out in conjunction with the policy of "turning county into district".In the second part of the empirical study,this article conducts a number of grouped empirical regressions to further explore the impact of the administrative level,the age of local government officials and the geographical location on the issuance scale of city investment bonds,and draws the following conclusions:(1)the sub-provincial cities and non-sub-provincial cities will be promoted by the policy,but the total amount of urban investment bonds issued by sub-provincial cities has increased more than non-sub-provincial cities.(2)Affected by the policy,the total amount of city investment bonds issued by the prefecture-level city with a younger municipal party committee secretary will increase more.(3)The policy of "turning county into district" has an overall impact on different regions,and the degree of impact is also slightly different.The order from high to low is central region,eastern region and western region.The paper also tested the impact mechanism and confirmed that the "turn county into district" caused the above-mentioned difference in the amount of city investment bonds issued.At the same time,the implementation of the policy of "turning county into district" has a significant positive correlation with the amount of a single issue of city investment bonds.Finally,the paper puts forward relevant policy suggestions from the government,city investment enterprises and investors:local governments should establish a more diversified evaluation system in promoting the reform of administrative divisions;local governments should enrich financing methods and regulate financing behavior;city investment enterprises should accelerate their transition to marketization under the guidance of the government;investors must also establish a correct concept of city investment bonds.