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Scale of National Debt influencing factors

Author: SongTao From: www.yourpaper.net Posted: 2009-04-02 08:05:17 Read:
Abstract: Factors Affecting Scale of National Debt by generalized gray relational analysis, the results showed that: from 1981 to 1993, the national debt servicing and fiscal spending is the main factor to affect the bond issue size; 1994 to 2003, the financial deficit and national debt debt service is the main factor to affect the bond issue size. To this end, the Chinese government to improve fiscal balances, reduce the fiscal deficit to control the rapid growth of the national debt issue size.
Keywords: government bonds; issue size; the generalized gray relational analysis

First, the scale of the issuance of treasury bonds influencing factors choose

The real economy, the specific factors that influence or determine the national debt scale multi-level and multi-faceted. From a macroeconomic point of view, the issue size of the national debt depends on the level of economic development of the country in a certain period of time, the higher the level of economic development, the stronger national debt affordability. As a means to make up the deficit, the national debt, naturally influenced by the financial balance of payments situation. The bond issue size also limited by the total amount of social capital, resident investors still subscribe for the main body of the national debt, household savings will affect the size of the bond issue size. View from the operation of the national debt itself, the issue of new debt to be used to repay old debts Treasuries moderate size factors determining the balance of government bonds, government bonds debt service condition. To this end, we will determine the scope of the study of the bond issue size Dt impact factors: gross domestic product (GDP) GDPt, the budget deficit FDt, fiscal revenue FIt fiscal spending FEt, household savings St, government bonds and debt service PDt on a bond Balance CBt-1.
Here the balance of government bonds with a data is taken into account using the current data, the current balance of government bonds CBt contains bond issue size Dt the naturally higher bond issue size Dt and current debt balance CBt association, is not conducive to find The most important factor in the bond issue size.

Second, the scale of the issuance of treasury bonds influencing factors generalized gray relational analysis


Data select the period 1981 to 2003. Taking into account the 1994 government bonds become the only source of funding for the country to make up for the budget deficit, in order to analyze the impact factors influence Sort change before and after 1994 the scale of the issuance of treasury bonds, the data is divided into two sections: The first was from 1981 to 1993, Sec 1994 to 2003. The balance of government bonds from the data of the Central Securities Depository and Clearing Corporation Limited.
From the calculated results shows that, from 1981 to 1993, the sort of comprehensive correlation degree of each factor and the scale of the issuance of treasury bonds: government bonds debt service 0.806> the fiscal spending 0.756> budget deficit 0.742> fiscal revenue 0.729> GDP 0.674> balance of government bonds 0.641> household savings from 0.552 in 1994 to 2003, the sort of impact on the scale of the issuance of treasury bonds of the influencing factors: the fiscal deficit 0.838> Treasury bonds debt service 0.830> fiscal revenue 0.751> fiscal spending 0.745> household savings 0.730> Treasuries balance of 0.728> 0.617 gross domestic product (GDP).
The above analysis results with the actual situation is consistent. 1981 to 1993, China's government bonds issued in the first mode, its characteristics: the national debt is mainly used for debt service, and to raise funds for construction and make up the deficit. During this period due to lower fiscal deficit to make up for the deficit to the central bank overdrafts, part of government bonds in the year to make up the deficit, mainly used for debt service and fiscal spending, the scale of the issuance of treasury bonds and government bonds debt service, financial expenditures associated with the highest degree of the scale of the issuance of treasury bonds slower growth. From 1994 to 2003, China's issuance of treasury bonds in the second mode, which is characterized by: the national debt is mainly used to make up the budget deficit and the debt service. Formation of the characteristics of the main reasons is because the Budget Act of 1994 introduced provisions of the fiscal deficit is not to the central bank overdrafts, making the budget deficit to rely on the issuance of treasury bonds to make up for the bond issue size and the budget deficit, national debt, debt service the highest correlation of the rapid growth of the scale of the issuance of treasury bonds.
Is worth noting that, from 1994 to 2003, the National Debt servicing and comprehensive correlation degree of the scale of the issuance of treasury bonds is only slightly lower than the budget deficit and the national debt issue size associated degrees Treasury debt service on the bond issue size considerable influence, the results of this analysis can be proven debt payments from the national debt income ratio. From 1994 to 2003, in addition to debt payments in 2000, the proportion of income than 37.79%, the rest of the year in more than 40%, the highest proportion of the year 1997 reached 77.45%, a greater proportion of China's annual new debt issued to repay old debts for government bonds to raise the funds to make up for financial constructive expenditure reduced proportionately to the overall revenue of the national debt is not optimistic.
From 1994 to 2003, the scale of the gross domestic product (GDP) and the issuance of treasury bonds associated minimum. The reason: this result from the need to adjust macroeconomic growth of the national debt scale can not be fully synchronized with the economic growth, more is needed to reverse regulation that economic growth is too fast expansion of the government to the super-growth rate treasury bonds issue size to absorb the social currency to the national credit borrowers compression and control investment; Conversely, when the economy is weak, private investment is less than civil savings generated folk savings remaining government by issuing bonds to absorb private savings remaining, and through government investment to maintain the stability of the rate of the total investment of the whole society or even rise, and promote economic growth. This is not to say that the Scale of National Debt can get rid of the gross domestic product (GDP) expansion indefinitely. In essence, the bond issue size and the gross domestic product (GDP) is relevant. When a country's gross domestic product (GDP) increased the community's overall ability to pay enhanced government revenue increases, state financial debt should ability can moderately increase the issue size of the national debt.

Third, the proposed

1. Control the scale of the issuance of treasury bonds from the increase in government revenue, optimize the structure of fiscal expenditure, reduce the fiscal deficit to start. Revenue side, with the 1994 China began a series of major reforms in the fiscal and taxation system, the implementation of the tax-sharing system and a new business tax, the proportion of China's fiscal revenue in GDP has been greatly improved. In 2003, the proportion of China's fiscal revenue in GDP from 12.56% in 1993, rose to 18.52%. In 2005, China increased the personal income tax threshold raised to 600 yuan from 800 yuan, although this will lead to loss of part of the tax, but helps to increase the low-income strata of disposable income, so that ordinary people get economic growth benefits thereby stimulating domestic demand and promoting consumption. At the same time, in view of high-income class is not strong sense of self-tax situation, the government is the need to strengthen the regulatory tax on high-income class, just enhance the the autonomous tax amount of the high-income class, the state revenue guarantee steady growth. Fiscal spending, excessive growth of recent years, China's administrative fees in 2003, has leapt to the second position of financial expenditure, second only to culture, education, science and health spending, the Government needs to be controlled.

2. Attention should be paid to the impact of the national debt-servicing. First, the government should pay attention to the issue of treasury bonds the balance of the term structure and the structure of varieties. China's current national debt is still three years to five years of the issuance of medium-term government bonds mainly concentrated maturities. During 2004 bonds, for example, the period in 1 year and less than 1-year Treasury bill issuance accounted for 9.17% of all domestic debt issuance period of 10 years of long-term government bonds do not. This issue of term structure will make the bond repayment period is too concentrated, especially after the implementation of the proactive fiscal policy, the large issuance of government bonds quickly into debt pressure, reduce the national debt of independent expenditures. On the species of choice in the national debt, the government may consider gradually as the main varieties of the interest-bearing bonds, government bonds the interest coverage in pending the repayment period is evenly distributed to avoid government bonds debt service is concentrated in a certain period of time which may lead to debt risk . Second, the government can draw on the national budget for investment and development finance, instead of long-term construction treasury bonds. In recent years, China's long-term construction treasury funds mainly invest in four major areas: the field of public goods, the quasi-public areas, part of the competitive areas, fully competitive fields. The project belongs to the Government's public finance investment range of the field of public goods, should the investment by the government budget. Fully competitive field projects have a better economic efficiency, the use of market financial mechanism to solve. Field of quasi-public goods, competitive field project and no good economic, market forces do not want to intervene, but the project is essential to the long-term development of the national economy, more appropriate by the development of financial alternatives. The successful completion of the bond projects has been started for the the stock bond projects under construction, in order to maintain continuity and ensure stock of construction bonds budget arrangements, construction will continue to bond funding arrangements.
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