The Study On The Risk And Management Strategies Of The Investment And Financing Platform Of China’s Local Government

In order to rationalize the relationship of financial distribution between the central and local governments, the State Council decided that we implemented the tax system reform since January1,1994, which turned over most of the property rights to the central, and most of the administrative powers to the local, causing the dislocation of central and local financial authority and powers. After the outbreak of the-global financial crisis in2008, our government launched a fiscal stimulus to ease the negative impact on our economy. However, most of the fund needed to be provided by the local government themselves. Meanwhile, China’s budget law clearly stipulates that local governments may not issue local government bonds, excluding special provisions. At the same time, local fiscal revenues have fallen sharply because of the slowdown in economic growth and structural policy of tax cuts and so on, our local governments fell into financial trouble. In this context, in order to ease the pressure on local fiscal expenditure, local governments must innovate financing mode and expand the financing channels, therefore the investment and financing platforms of local government have emerged.Although the local government avoids the constraints of the relevant laws by establishing the financing platform, which plays an important role in raising funds for local governments, but with the expansion of financing scale, the problems of the platform appear. Therefore, the study on the risk and risk management of local government financing platform is particularly necessary.In this paper, we take the risk management of financing platforms of local government as the research subject, introduce the definitions of financing behavior and the operating form of the platform companies. We focus on the risk of the financing platform and the current risk management, in order to describe the deficiencies and problems of the management policy, and to put forward policy recommendations from a government point of view on these issues. The structure of the paper is as follows: the first two chapters introduce the background, significance, basic theories and literature reviews of the paper. Based on the introduction of the local government investment and financing platform of China, we analysis the operating mode and risk status of the platform in the third chapter. In the fourth chapter, we analysis the risk of the financing platform of local government concentrative, we also put forward some deficiencies existed in the current risk management. In the final chapter, we put forward several policy recommendations, according to the situation and problems of the local government investment and financing platform of China.