On Local Government Debt Risks And Its Prevention

2013is the fifth year after the International Financial Crisis erupted, but duties and challenges in political, economic and social aspects present great pressure to every country in the world. Fatting the complicated international situation, how China’s leaders would respond and what measures they will take shall be the world focus. Among these are the debt risks which oppress local government. If lead to improper handling, the practical matter of risks will imperil economic operations as well as political development, and the more critical situation will result in social crisis. The problems of local government debts are matters of long standing, and the risks have been accumulated since2008. Because of the economic-stimulus package in2008, our central government done monetary easing which provided local governments opportunities to build Finance Platforms to raise debts, this practice involved many fateful consequences, for example, many local government would be in debt risks in the near future. However, up to this date, the scholastic circles don’t appear to have any concurrence of opinion on debt figures. The reason is that there haven’t any figures officially or nationally since The National Audit Office published Audit Announcement about Local Government Debts on June27,2011. It’s natural that all sides are doubtful about the risk problems. According to a audit announcement which are only oriented to18provincial governments and their capital governments at the corresponding level from The National Audit Office recently, local governments of these36areas had incurred about3.85trillion yuan in debt by the end of last year, expanding12.94percent compared with the year of2010. It is to be observed that9of the capital governments that have been audited have their debt rates exceeding100percent (as high as219.57percent), hence we must maintain high vigilance to the problems and local government debt risks. The fear is that there have weak risk consciousness from government to common people, because of the less cognition of local government debts and expecting a fluke that the government would never be insolvent. Therefore, how to take measures to guard against and solve local government debt risks became especially necessary and imminent.The thesis studies local government debt risks and mainly uses the method of normative research, supplemented by data and graphs analysis, and the content is mainly divided into five parts:Part Ⅰ, introduction. It briefly introduces the background and significance of the study, gives a literature review of aboard and our country’s study on local government debt risks, indicates the structure and method of the study, and also points out the innovation and deficiency.Part Ⅱ, theory of the thesis. This part mainly identifies the concepts of local government debt and local government debt risks, at the same time introduces the classification of local government debt and points out the respects local government debt risks behave in.Part Ⅲ, sets out the details of local government debt and risks of our country. Firstly, introduces the content of local government debt, and classifies the content into4parts that are based on whether they are explicit or implicit, direct or contingent. Secondly, it makes a analysis of our country’s local government debt from two different aspects, they are the scale and the the structure. Thirdly describes specific performance of local government debt risks in3points:the scale, the structure and efficiency. Finally, it states influence of risks, mainly talking about the poor aspects.Part IV, dissects the influencing factors of our country’s local government debt risks. The thesis will expound the factors from four aspects, involving macroscopical factors, mechanisms, supervision and national policies.Part V, puts forward preventing and reducing suggestions of local government debt risks. The paper will make efforts from five sides, including standardizing government action, improving the investment and financing system, tighting regulation, establishing a alarm mechanism, and pressing ahead with economic restructuring and promoting economic development.