The Study On The Precaution And Neutralizing Of Chinese Local Governments' Fiscal Risk

As China is in the process of transforming from the system of planned economy to that of socialist market economy, some unstable factors produced in the adjustment process make government finances full of operational risks. Chinese local governments' financial difficulties, particularly those of counties and townships are serious. The obvious contradiction between fiscal revenue and expenditure, the growing budget deficit and heavy debt burden make the task of guarding against and defusing financial risks increasingly tough.This thesis limits the scope of China's local governments to three levels: the city, county, and township. With three theories as its basis, namely, the theory of separation of powers, the theory of financial risk management, and the theory of government income distribution, this thesis introduces the successful practices of foreign countries in preventing and defusing financial risks. In this thesis, those practices are illustrated from the perspectives of the establishment of an effective financial monitoring system, strengthening debt management, clarifying relationship between the government and the establishment of local government financing system with a view to providing reference to prevent and resolve China's local financial risk.According to different perspectives, financial risks can be classified into various forms. This thesis divided it into income risk, expenditure risk, deficit and debt risk through the analysis on the producing background of financial risk in market economy. Then it discusses the causes of financial risks in local governments, namely, the lag economy development of local areas, incomplete Tax Distribution system, and substandard fiscal and taxation policy and so on. From the perspective of fiscal revenue, fiscal expenditure, government debt management and financial systems, this thesis puts forwards policies and measures preventing and resolving the financial risk. This thesis holds that, in the aspect of fiscal revenue, the local economy should be developed to increase fiscal revenue by improving economy. In the aspect of financial expenditure, it is better to optimize the structure of fiscal expenditure, reform the government's unreasonable budget system, and reduce expenditure rigidity. In the aspect of debt management, it is profound to establish early warning systems risk debt and debt repayment mechanism to circulate finance development. In the aspect of financial system, improve tax distribution financial system from all aspects. Finally, after a mass of survey and data analysis, based on the financial situation ofDalian City------the stability of overall economic situation, low degree of financial risks, thisthesis puts forward measures and proposals to guard against and defuse financial risks.