The Research on the Transformation of Local Government Credit Rating in China from"Revenue Oriented Model"to"Expenditure Oriented Model"
The urgency of effectively preventing and resolving local debt risks in China highlights the importance of improving the credit rating system of local governments in China.At present,both domestic and foreign local government credit rating models are"revenue oriented".The author argues the necessity of transforming China's local government credit rating from"revenue oriented model"to"expenditure oriented model"from the perspectives of regional heterogeneity and extreme value scenarios,credit rating migration matrix,regional analysis of rating result differentiation,and statistics of issuance interest rates and spreads in different regions.Subsequently,an"expenditure oriented"local government credit rating model was constructed through quantitative analysis methods by using 500 local governments as samples.Empirical analysis from the three administrative levels of provinces,cities,and counties,as well as the four geographical regions of the eastern,central,western,and northeastern regions,shows that after the transformation from"revenue oriented model"to"expenditure oriented model"the credit rating results of local governments in the central and western regions,as well as in the northeast region,will be raised,significantly narrowing the gap with the rating results of local governments in the eastern region(based on 2022,it can save 2.721 billion yuan in financing costs).As a result,it will lead to a change in the financing structure of local governments nationwide and better leveraging the function of the bond market in allocating resources.
Local government credit ratingRevenue oriented modelExpenditure oriented modelTransformationLocal government financing structure
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