The Research On Management Of Local Government Debt Risk

The28th Clause in the Budget Act of the PRC regulates,"Budget of various local levels is formulated according to the principle of keeping expenditures within the limits of income and balance of payments, and the budget is excluded from the deficit. The local governments should not issue the municipal bond besides regulation specially made by laws and the state council". However, after the financial system reform of the system of tax distribution implemented in1994, the central government concentrates most financial resources, and the financial straits of difficulties in different degrees occur in many local governments. And after the financial crisis in2008, the central governments issues RMB200billion Yuan local governmental bonds on behalf of local governments, and meanwhile many local governments conduct the debt financing by means of accelerating the step of urban construction and establish financial platform so as to mitigating local financial difficulties. Appropriate debt financing effectively remits the contradiction between local rapid economic and social development and insufficient financing funds, all of which promote development of social undertakings, guarantee people’s livelihood, and give the decisive role on aspects including responding to the international financial risks. However, there are many defects existing in the local governmental debt management, including multipoint management and imperfect risk early warning system, and there are many huge risks existing in borrowing new debts to repaying new ones and repaying debts excessive depending on land appreciation in many areas, and high risk exists in the local governmental debts. However, if the local governmental debt risk occurs, it will cause severe influence on economic and social production, and seriously restrict the sustainable development of local economy, which will become the unstable factors of the society, seriously influencing the building of the harmonious society. For this reason, it is of great urgency and necessity on how to prevent the local governmental debt risk and reduce the debt risk to the minimum. This thesis will elaborate this topic in the following three parts based on how to prevent the local governmental debt risk with the combination of local physical truth.The first part is the introduction of theories related to local governmental debt risks. This part provides the introduction on correlation theories of the current research situation and mainstream thinking of local governmental debt risks from domestic and foreign perspectives.The second part and the third part conducts the analysis on the current situation of the debit and its influence on the local economy and society, and three reasons of the form of governmental debt are raised in this part, that is, reasons on aspects of the law, system and policies. And meanwhile, existing problems of the governmental debt in Zhifu District are analyzed with brief introduction to measures to addressing these problems adopted by the Zhifu District.The forth part further elaborates the financial distribution relation of various governments by means of improving the fiscal and tax system, reasonably dividing relation of the right of office and property among governments at all levels so as to strengthen the usage and management of debt funds and intensify the effective debt management system. With respect to how to strengthen the governmental debt management and prevent the governmental debt risks, suggestions and measures are put forward in this part.The innovative point in this thesis is to raise that preventing the governmental debt risks not only depends on conducting the structural reform and improving debt management system, the local governments should also build "sustainable value of finance", observe problems with the developmental view to accelerate local economic development and provide sufficient fund resources to repaying governmental debt through the reflection of the fruits of economic development on finance so as to reach the target of preventing the debt risks.