The analysis of the government leverage ratio

Reinhart and Rogoff used descriptive statistics to show that the leverage ratio of the public sector has a decisive impact on real economic growth. High public debt fuels worries about government default, thereby raising the yield of long-term government bonds. The executive meeting of the State Council required that the quota for local governments’ special debt in 2019 should be fully issued by September, and transferred to specific projects by October, urging local governments to take on physical workload as soon as possible. The National Bureau of Statistics also revealed that the quota for new government debt in 2020 will be issued in advance in 2019. The growth of infrastructure investment mainly depends on government support, which is an important reason why the quota of local governments’ special debt was issued in advance. The development and regulation of local government debt in China has a clear cyclical pattern, and essentially plays the role of macro-regulation.