The Local Government Debt Risk And Sustainability Analysis,

Contents: According to article 28 of budget law of People's Republic of China, local governments budget in accordance with the principle of pay-as-you-go and payment balance, and have no right to issue bond unless the legal authorization. In order to realize the aim of eco-social development, local governments have borrowed a large number of debts beyond the capacity of their limited financial resources. Local government debt is a double-edged sword. From the point of theory and practice, debts application can generate expected return and accelerate eco-social development. However, the expansion of debt scale will become burdensome for the local governments' fiscal crisis and economic operation safely and sustainably without the scientific prediction and strict management. So this paper will focus on the risks and sustainability of local governments' debt. On the one hand, this paper could pride new ideas for analyzing local government debt risks and sustainability, on the other hand, it can provide theoretical basis for promoting debt management and elimination effectively based on some west region A sample.The train of research thoughts and core content in the article is mainly reflected in three parts. First of all, by summarizing the theory of government debt effect and commenting the condition of domestic and international research, it redefines conceptual frame of local government debt. Secondly, from the point of the social welfare maximization, it confirms the necessity that local government debt risk may produce by using deductive inference method. Meanwhile, it calculates and decomposes the debt risk in west region A. Finally, under the frame of cycle system for local monetary economy, production mechanism and transmission effect on account of sustainability are explored and analyzed in this paper. On this basis, theoretical model of sustainability for local government debt is constructed then empirical analysis based on some west region A sample is made.According to the analyses above, the main conclusions in this thesis have been summarized as follows.(1) Because of the goal pursuit of the social welfare maximization, the scale of local government debt has been expanded year by year. Therefore, the local government debt risk comes into being consequentially. According to the analysis of the local government debt risk in west region A, the paying risk has been existed. What' the worse is that internal mechanism of local government debt risk has been existed in China.(2) From 1994 to present, there never been strict substitute relation between the local government debt and government budgetary income. Then, there is high induction that government expenditure to increment of local government debt. It shows that repayment mechanism isn't considered when local governments borrow debt. That's why the local governments pay little attention to debt risk. The capital expenditures from local government debt has promotion effect on general budget revenue through local economic variable. To analyze production mechanism and transmission effect will lay a foundation for construction of sustainability model about local government debt.(3) The cost effect of debt and benefit effect of elastic expenditure should be considered in constructing the sustainability model about local government debt. It found through empirical analysis that the actual understanding of debt is larger than the sustainable. This shows that the expected return isn't considered when local governments borrow debt. Local government debt risk will be increased consequently.In conclusion, it puts forward relevant policy suggestions, management and elimination to local governments' debt risk.