The Influence Of Land Finance On The Credit Spread Of Chengtou Bond

Land finance generally refers to the phenomenon that the regional government regards land-related income as an important fiscal balance instrument.In recent years,the scale of China's land finance has continued to expand,and the land dependence of local government fiscal revenue is more serious.The expansion of local debt scale,corruption and rapid rise in real estate prices suggest the existence of risks.Chengtou bonds are an important part of local government debt,and are collectively referred to as the multi-type bonds of the city investment company as the issuer.City Investment Corporation relies on Chengtou bonds,credit and other tools to raise funds for projects such as infrastructure construction required by the government.There is a “hidden guarantee” mechanism behind it.When a debt default occurs,the local government will help even if there is no contractual guarantee liability.Under the influence of this mechanism,the credit spread of urban investment bonds will fluctuate with the market's estimation of the comprehensive strength of regional governments.This paper adopts methods such as literature research and empirical research to explore whether the credit spread of urban investment bonds is affected by the local government's land finance from the perspective of implicit guarantee.Firstly,on the basis of reading a large number of literatures and completing the review,this paper introduces the development and current situation of urban investment bonds and land finance,paving the way for theoretical analysis.Secondly,it analyzes the impact of implicit guarantee mechanism and land finance on implicit guarantees and establishes The basic theoretical framework of this paper.finally,the Chengtou bonds data from 2007 to 2018 is aggregated into the provincial panel and a fixed effect model is established for empirical research.The study finds that the increase in local fiscal budget revenue will significantly narrow the credit spread of Chengtou bonds,indicating that implicit guarantee mechanisms do exist.The increase in land dependence of regional governments will tend to expand the spread of Chengtou bonds.This is because the local fiscal land dependence has the characteristics of stimulating the expansion of debt scale and its own unsustainability,which will increase the government's fiscal risk,weaken the implicit guarantee ability,and then expand the spread.This paper also pays attention to the corruption and the housing price bubble caused by land finance,and studies whether there is an indirect impact on fiscal land dependence.The study found that the intensity of anti-corruption is negatively correlated with the spread.This is because corruption not only undermines economic efficiency,but also harms the interests of local governments.The improvement of anti-corruption will strengthen the self-discipline of officials,curb the occurrence of these corrupt behaviors and enhance the ability and willingness of implicit guarantee.In turn it will reduce the spread.This paper also found that The housing bubble is positively correlated with the spread.This is because the expansion of the housing bubble not only affects the value of the collateral,but also increases the risk of downturn in housing and land prices.The income is facing greater instability,weakening the implicit guarantee ability of the regional government,and then expanding the spread.This paper uses implicit guarantee mechanism to link the credit spread of urban investment bonds,land finance and its associated problems,and incorporates it into the same framework for research.At the same time,it also studies the influence of related factors such as corruption and housing prices,which is innovative;However,there are still shortcomings such as insufficient selection of variables and insufficient frontiers for variable construction.Generally speaking,under the background that the “rigid redemption” aura of urban investment bonds has gradually subsided and the land finance is not sustainable,this paper has certain theoretical and practical significance.