The Legal Control Of Local Government Financing Platform Debt Risks

Due to the impact of the U.S. subprime mortgage crisis in2008, the economicdevelopment of our country produce weak phenomenon, local government revenuedecreased. And china’s local governments affected by the tax reform in1994, due tofiscal revenue to reduce the funds needed for the economic development of localgovernment. China’s "Budget Law" stipulates that local governments may not issuebonds to finance, therefore, the local government had to seek other methods, throughthe form of local government financing platform by borrowing from banks, issuingcorporate bonds to raise funds. Due to local government financing platform for thegood of local economic development, so also supported by the state. Thus, since2008, the local government financing platforms have sprung up rapidly expanding.Because of local government financing platform is a new thing, created someproblems in its development process, especially the risk related debt produces in theprocess of financing, such as part of the financing platform over liabilities, financingplatform for future solvency significantly more than the normal local governmentrevenue capacity, the financing platform company governance structure is notstandard, the responsibility between local government financing platform and localgovernment is difficult to distinguish, financing platform unsound corporategovernance structure, information opaque corporate debt financing platform,financing platform collateral violation.Along with the rapid development of the local government financing platform,the academic study of its is also in full swing. Scholars from the perspective ofeconomics, finance, constitutional law on the issue of local government financingplatform generated extensive discussion, financing platform for the developmentdirection, how to avoid the risk of debt problems gives his views, Is easy to see,local government financing platform debt problems arising in the course of runningto become the primary problem of local economic development.How to ensure that the local government in the development of the economy at the same time related debt risk of local government financing platform for theprevention and control is a need to solve the problem. So, from how to control therisk of debt financing platform’s perspective, strengthen the management offinancing platform, further standardize financing platform in the law properly run，topromote local economic development and social stability is the starting point and thefoothold of this paper research.To solve the problems during the debt risk of the financing platform company,based on the use of financing platform for the financing of local government in theprocess of related problems as the starting point, identify the source of financingplatform to generate debt risk in the financing process, listed a series of problems ofits existence, find responses to address these issues from a legal perspective. In thispaper, taking questions-analysis of the problem-problem-solving approachelaborated.This paper is divided into three parts to explore:The first part defines the connotation of local government financing platform.First, from the definition of local government financing platform, points out thenature of the financing platform companies. Secondly, it analyzes the backgroundand financing platform, find a reasonable basis for the emergence financing platform.Thirdly, analysis of the legal nature of the financing platform, which is important toidentify issues related to financing platform for existence. Finally, understand thescale of its debt financing platform for the status quo through the relevant data.The second part of the study the root causes of the debt risk of localgovernment financing platform generated. This part mainly from eight aspects thespecific risk of the debt of local government financing platform. Such as regulationof financing platform imperfect laws and regulations, imperfect financing platformgovernance structure, and set up is not standard, information opaque debts, thecollateral violations, violation of local government guarantees, financing platformsolvency is not caused by high debt ratio, urban construction investment bondsdefault risk is high.The third part is the second part of the problem raised, according to the order ofquestions in turn be explained. These eight solutions of the eight corresponding phenomenon has occurred, mainly discussed from the perspective of a law, putforward a series of local government financing platform to deal with debt risk legalinitiatives.