Abstract: From the perspective of performance evaluation, this paper makes a theoretical analysis of the dynamic mechanism of local government debt expansion and establishes the model assumptions to dissect the internal mechanism of the continuous local government debt expansion. On the basis of the estimation of the debt scale of the six central provinces, this paper establishes a signal-equation regression model to conduct an empirical analysis with the data from 2001 to 2013 in the six central provinces. The results show that the incentives produced from the performance evaluation mechanism within the local government can increase the preferences of government officials to investment and financing, thus the local government debt stays in a situation of constant expanding. Meanwhile, with the increasing pressure of economic downturn brought forward by China’s economic growth mode transformation, the political incentives under the performance evaluation make local governments more willing to “borrow money”. As a quantitative indicator of performance evaluation, GDP has brought a strong expansionary effect to the scale of local government debt.

Key words: performance evaluation; scale of local government debt; dynamic mechanism; debt expansion