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Study on the Local Government's Debt of China

Since the reform and opening-up policy, China has got a dazzling achievement on economy. As a transformation country, China avoids all sorts of shocks successfully, and the lives of its people have been improved a lot along with the high-sp
Submitted On: 04-01-2010 | Views:	Article Tools:

Since the reform and opening-up policy, China has got a dazzling achievement on economy. As a transformation country, China avoids all sorts of shocks successfully, and the lives of its people have been improved a lot along with the high-speed growth of China's economy. During this process, successes and problems, prosperities and risks coexist together all the while.As a representative case of government-dominant growth of East Asian countries, China is quite different from other economies: That is, in China such a huge country with such a vast territory and such a great population, and which is also the unique unitary country , the local governments of the state play a much more important role than in other countries. Especially, in order to get a good-looking performance of growth, the local governments raise huge amounts of money by multiform debt finance. And such a large budget deficits bring on serious risks accordingly.This text is attempted to analyze the activities of China's local governments and the causes behind from the view of the function of modern government, the fiscal management system,and the behavior of authorities. We have made an empirical research on the debt problem of D city in the southwest China, and afford some advices to the reform of finance system of the government. We figured that China should push its transformation on finance system of government by allowing the local governments to issue municipal bonds.There are seven parts in this paper. First of all, we introduced the basic views of the theory of government bonds, and the studies on local government bonds in China. Then, we talked about the relations between the modern government's function and local debt, the relations between tax-division system and local debt, and the relations between the behaviors of authorities and local debt. Then, we made an empirical research on local debt by taking D city as a sample. At last, we concluded the analysis above and afford some advices on the reform in the future.

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