Abstract：Economic growth and housing prices wield significant influence on the scale of local government debt. The findings of our study are as follows: economic growth has significant negative effect on the scale of local government debt scale, has increased fiscal surplus of local governments, improved their capacity to sustain debt, and reduced debt scale; housing prices have significant positive impact on the scale of local government debt as local governments get loans through land mortgage and issue quasi-municipal bond on the basis of land transfer revenues; high housing prices certainly lead to high land prices; the higher the land prices, the easier for the government to get debt income, which indirectly leads to bigger debt. Besides, situations vary greatly in different regions, which may be related to the market development, and ability to attract elements in different regions. Thus, it is suggested that the local government should be cautious to leverage to promote economic development, and avoid rapid debt expansion. At the same time, we need to fully understand the positive feedback between housing prices and debt scale, and prevent and control debt crisis which may be triggered by the bubbles in real estate market. Local governments should arrange new debts according to the practical purpose of regional debts, and cannot blindly copy the experience of other regions, and certainly not take a “one size fits all” approach.
2016, Vol. 33 
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