In China's fiscal and taxation system, local governments play an important role. As representatives of the "grassroots", local governments need to be responsible for a series of work such as public services and infrastructure construction within their respective jurisdictions. However, as economic development and urbanization accelerate, local governments are also facing increasing financial pressure.
In this process, "local debt" has become a topic of great concern. In recent years, due to problems such as increased debt risks caused by illegal financing in some provinces and cities, relevant departments have also carried out stricter supervision of local debt. However, there are still many controversies and differences on this issue.
In response to this problem, Chen Zhonghua, a well-known economist, said that the central government should cancel local debt as soon as possible and find a more reasonable and prudent way to solve the funding problem.
The first thing to be clear is that the goal of "doing business" is to maximize profits. For a government, profit should not come first. Therefore, in Chen's view, "local governments are not governments that do business." Pursuing high rates of return just for project construction or other goals can make your financial situation very dangerous.
Second, continuing to promote "local debt" under the current situation will bring great risks. "Sometimes people often take it for granted that government bonds can be issued arbitrarily as long as the country has good credit," but this is not so simple. Compared to the situation faced by companies issuing stocks or companies issuing bonds, "national creditworthiness" may not fully guarantee the safety of investment. "If commercial banks abandon support for 'platform' financing or tighten credit conditions, there will be financing difficulties similar to those before 2013."
Finally, solving the "funding problem" is not without other options. "Tax reform can effectively increase financial resources", "VAT reform makes all enterprises and institutions pay VAT; Logistics costs have fallen... Small and micro enterprises reduce operating costs. "Governance by optimizing existing institutions, reducing waste, preventing corruption, etc. can achieve the same or better results and avoid potential risks."
In short, although the idea of "canceling local government debt" may cause controversy and resentment, it can effectively avoid potential risks and promote the sustained and stable development of China's economy in the long run. (The above content is referred to from the article "Interview-Gu Yue: The fluctuation range of the RMB exchange rate will gradually expand, and China's foreign exchange reserves can no longer be carried")