Research on the Impact of Local Government Implicit Debts on Urban Economic Growth in China

Issuing government debt is an important means to ensure economic growth and maintain social stability. Based on the panel data of Chinese cities from 2011 to 2019, this paper analyzes the impact of local government implicit debts on the economic growth of Chinese cities and the internal mechanism. The research has reached the following main conclusions: Firstly, local government implicit debts have a significant inhibitory effect on the economic growth of Chinese cities, which has been verified in both the first-term model and the second-term model. Moreover, after replacing the core explanatory variables, adjusting the sample size, and conducting robustness tests such as the lag period, this inhibitory effect remains significant. Secondly, at the same debt level, cities with low GDP, non-resource-based cities and cities in non-eastern regions have more limited fiscal space when achieving maximum economic growth. These regions are confronted with more severe debt burdens and economic growth bottlenecks. Finally, both the level of financial development and fiscal transparency can significantly and negatively regulate the inhibitory effect of local government implicit debts on economic growth. Among them, the regulatory role of fiscal transparency is particularly prominent, reflecting its key role in improving government fiscal management and enhancing market trust. Based on this, this paper suggests enhancing local fiscal transparency and debt management, optimizing the financing structure of local government debts to improve financing efficiency, and implementing differentiated policies in accordance with local conditions to promote coordinated regional economic development.