Does Local Government Debt Promote China’s New Urbanization?

Abstract

Local government debt played a vital role in China’s urbanization. But its influence on the new urbanization is not clear. Based on the definition of new urbanization, the paper focuses on the characteristics of local government debt and whether local government debt can meet the needs of new urbanization. The empirical research shows that local government debt promotes the urbanization rate, infrastructure supply and public products supply. But it is not conducive to the increase of urban residents’ income, which is the important component of new urbanization. The influence of local government debt on new urbanization is different at different stages of new urbanization. The suggestion is that local government should use local government debt, private capital and foreign capital reasonably considering regional and development stage characteristics, instead of debt only to accelerate the development of new urbanization.

Keywords:

• government investment
• local government debt
• new urbanization

Notes

1 New urbanization was first put forward in “18th National Congress of the Communist Party of China” in November, 2012.

2 According to Northam’s curve, the urbanization process has three main stages: the urbanization rate below 25% is the initial stage of urbanization, the acceleration stage of urbanization is characterized by the urban population increasing from 25% to 50% or even 70%, the terminal stage of urbanization is the urban population over 70%. Northam Ray M. Urban geography[M]. New York: John Wiley & Sons, 1978:266.

3 Household registration system was carried out on the “Regulations of the People’s Republic of China on household registration”issued in Janunary,1958. Strict restrictions were executed on the population flow from the rural to the urban which caused the formation of the urban-rural dual governance of the household registration system. The reform of the household registration system was started in 1978 in China. The strictly control on population movement was gradually unfastened. In recent years, the central and local government enacted a series of policies to speed up the reform on Household registration system. Especially,

4 There are different methods for the division of the eastern, central and western regions of China. We use the division method being set forth by the National Bureau of Statistics of the People’s Republic of China. The eastern region includes 11 provinces (cities and autonomous regions) of Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan; The central region comprises eight provinces, namely Shanxi, Jilin, Heilongjiang, Neimeng, Jiangxi, Henan, Hubei and Hunan. The western region includes 12 provinces (cities and autonomous regions) of Anhui, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xin jiang.

Additional information

Funding

This research is sponsored by the Social Science Foundation of Shaanxi Province (Project Nubmer:2016D023), Soft Science Foundation of Shaanxi Province (Project Number: 2018KRM138) and Central University Project Fund (Project Number: 20180106).