Group 1: Role of Local Debt - Local debt serves as a key policy tool in China's macroeconomic regulation, playing a significant role in stabilizing economic and social operations, expanding fiscal spending, and optimizing public resource allocation [2][5] - During the 2008 global financial crisis and the COVID-19 pandemic from 2020 to 2022, local debt was crucial in countering economic downturns by facilitating infrastructure investment [2][5] - The use of local debt has become a routine policy tool for smoothing economic fluctuations and stabilizing overall demand in China [5] Group 2: Fiscal Policy Transmission - Local debt has become the main channel for transmitting policy signals to the real economy, with bond funds flowing directly to specific projects, primarily in infrastructure sectors like transportation and water conservancy [3] - The concentration of debt funds in these areas has improved the overall economic development environment and created investment increments, effectively transmitting fiscal expansion intentions through local debt [3][4] Group 3: Structural Support and Resource Optimization - The scope of special debt has expanded from traditional infrastructure to new areas such as consumption promotion, thereby broadening the coverage of funds [4] - Local debt promotes the simultaneous optimization of resource allocation between public and private sectors, enhancing market resource allocation efficiency through government debt financing [4] Group 4: Regional Coordination and Spillover Effects - Local debt investment in infrastructure generates positive externalities, with studies indicating that a 1% increase in local government debt can boost neighboring regions' economic growth by 0.15-0.3 percentage points [6] - The spillover effects of local debt are cumulative over time, with long-term benefits significantly outweighing short-term impacts [6] Group 5: Debt Risk and Management - Local government debt risks exhibit spatial contagion characteristics, where risk events in one administrative region can trigger synchronized debt risk increases in neighboring areas [7] - The relationship between debt and assets is crucial for repayment safety, with current mechanisms for converting debt into effective assets lacking clarity [10][12] Group 6: Future Directions for Local Debt - There is a need to balance the expansion of fiscal space through local debt with the accumulation of risks, as rising government debt burdens can significantly reduce fiscal surplus rates [10][11] - A three-tiered government debt structure is proposed, with central government debt as the main component, provincial governments sharing some burden, and local governments retaining only essential municipal revenue bonds [16]