Research On The Potential Risk And Risk Prevention Of China’s Local Government Debts

Local government debt is the product of specific historical period. Chinese Budget Law clearly stipulates that local governments are not allowed to borrow money. However, with the accelerating pace of China’s economic development, the funding requirements of the government public welfare projects and urban infrastructure construction keep increasing. Under the revenue-sharing system the local government available pecuniary resources is far from being able to meet the needs. In order to accelerate economic development, improve people’s livelihood, alleviate the contradictions in employment and for some other multi-purpose, the local government begin to borrow money in different forms and large-scale. Especially after the outbreak of the1998Southeast Asian financial crisis and the global financial crisis triggered by U.S. subprime crisis in2008, there are two peaks for local government borrowing money. The increasing scale of local government debts unfolds the drawbacks of the local government debts management and risk prevention. The risk of the local government debts also appear partly and become the outstanding problems of our country’s economic and financial spheres. The outbreak of the European debt crisis in2011, led to many discussions on the risk of local debt. In this case, the deep and careful study of the of local government debt management and risk prevention has a very important theoretical and practical significance.This article reviews the overseas and domestic research on the local government debt management and risk prevention and puts forward ideas and research framework of this study. It starts from a basic overview of the Chinese local government debts.and gives a definition of local government debts, overviews the meaning of local government debt, classification, existing size, structure and characteristics. On this basis,it focuses on the analysis and evaluation of the risk profile of local government debt. On the basis of this, it analyses the causes of local government debt,explains the formation mechanism of the local government debts. In particular, it reviews the advanced experience of foreign debt management and risk prevention in the local government,and analyses the reference significance of it. In light of the specific situations in China, it put forward some strategies and recommendations on the tax reform and budget management in the last part.