Appraisal On Local Governmental Debt Risk In China

In China,local government debt is a debt caused by local governmen t raise moneyin order to develop local economy,construct the infrastructure and other publicaffairs.Local governmental debt is different from local government debt, the formernot only consists of the debt that government has responsibility to pay off(th at is localgovernment debt),and also the debt guaranteed by government,the debt likely requiredto give some assistance. Local governmental debt is a major source of funds for thedevelopment of local economy.The appropriate local governmental debt has im portantsignificance to promote economic development in the region, social stability,fiscalbalance and sustainable development of local finance.At the beginning of2014,National Audit Office and other Municipal Audit Bureaus have issued auditreports of local governmental debt,and the huge local governmental debt has attractedthe scholars and public· attention,which has become a hot topic of concern toeveryone.Local governmental debt risk is a major part of government debt risk,whichwill become important factors that threaten the local economy,even national securityand social stability.How to manage current local governmental debt effectively andmitigate debt risk is the issues officials should consider and resovle.The paper firstly summarizes the local governmental debt, debt risk and its causesin theory.And local governmental debt risk cause can be attributed to fourfactors:local fiscal factor,institutional factor,financial factor,economic factor.Thenselect representative indicators from these factors,use the correlation analysis methodto calculate the correlation between each factor and the local governmental debt riskand judge the degree of importance that each factor influences debt risk. According tothe results,these factors are divided into high,middle,low impact factors.While Localgovernment is managing debt,high impact factors should be included in themanagement category,but the influence on debt risk caused by other impact factorscan not be ignored.Then,starting from the early warning method of debt riskassessment,select a few representative provinces and assess their debt risk.The resultsof assessment are compared with present debt risk of these provinces, and sum uptheir experiences and deficiencies in risk management of local government debt.According to the previous theoretical and empirical studies, combined with thedeficiencies and issues on risk management of local government debt currently,put forward some constructive countermeasures on risk management of localgovernmental debt.