The Research On The Impact Of Local Government Debt On Private Investment In China

Since the financial crisis in 2008,local government debt of China has been growing rapidly in scale,and its scale and growth rate reached a record high.Local government debt affects private investment from two aspects.On the one hand,from the view of the finance structure of local government debt,bank loans are the most important sources.Local government debt rising will increase the financing cost and financing difficulty of private investment by squeeze credit resources,thereby inhibiting private investment,will show the crowding out effect.On the other hand,from the investment structure of local government debt,local government debt is of China can only be used for public welfare capital projects,and local government debt is mainly used in infrastructure investment,which can improve the market investment environment and lead to private investment.The effect is expressed as crowding in effect.In order to discuss the influence mechanism and impact of local government debt on private investment in China,this paper base on the "IS-LM model" and the theory of Aschauer crowding in effect and analyzes the influence mechanism of local government debt on private investment and describes the status of local government debt and private investment in China.And then,this paper uses the panel data of 30 provinces in China from 2010 to 2015 to empirical test.The main conclusions are as follows: First,from the national level,in the sample period,the influence of local government debt on private investment is crowding in effect.Secondly from the mechanism of local government debt that affects private investment.The local government debt will crowd out private investment by squeezing out the credit resource mechanism and squeezing private investment.The local government debt will crowd in private investment by improving the market investment environment.Thirdly the empirical results of the sub region shows that there are regional differences in the impact of local government debt on private investment,and the local government debt in the western region is significantly crowd out of private investment.The local government debt in the eastern region is significantly crowd in private investment.The central area has no significant impact on private investment.This paper holds that in order to make full use of the crowding in effect in local government debt to private investment.This paper suggests that standardize local government debt investment,accelerate the division of local finance and local financial system and improve the investment environment of the central and western regions.