China’s Local Government Debt Risks And Defuse Path

At present, the local government debt is one of the most important risk factor ofChinese economic development, and becomes the focus of the government andscholars. At of the end of June in2013, according to the Audit Commissionpublished data, local government debt has nearly18billion. The scale has beenconsiderable, and the debt structure is imbalanced.Chinese local government bonds first appeared in1950. For the construction ofthe northeast industrial economic base, Chinese local government issues theNortheast Production and Construction Government Bonds. After that when localgovernment bonds sometimes stop, tepid. After the sovereign debt crisis in Europe,the Chinese government began actively looking for financing local government,decentralized local government debt risk, and gradually moved towards autonomyfrom the central agent to issue bonds. In August2014,"budget Law" the first majoroverhaul, giving local governments to issue bonds independently legal status, whichwill allow local government debt sunshine.In2010, local government debt is into the peak of the local debt, and spatesdefault events of local government and financing platform. The famous economistJia Kang also pointed out that if local government debt to achieve healthydevelopment, we must have trust products Foam rupture and default events occur.Chinese local government debt in the aggregate can be controlled, but there isconsiderable liquidity risk. From the local debt repayment cycle point of view,2015has entered a downward spiral of debt, but because of the local government beforeprevailing by a new leaf, so that measurements are not accurate. From theperspective of the debt burden ratio analysis, China’s government debt is still not reached the warning level, but with the economic development of local governmentdebt and the central economic policy deepening depression, it is very vague debt. Ithas considerable hidden risks. In addition, from the perspective of local governmentrevenue source, system of tax continues to reform the so that local governmentrevenues plummeted, which resulted in the phenomenon of over-reliance on landfinance, making debt more single source of unstable structures.Excessive local government implicit debt associated with the central policygoals, social mainstream values, social and moral responsibility, which makes thelocal government debt more difficult to assess the degree of risk. Generalgovernment debt indicators evaluated mainly dependence on debt, debt service ratio,the debt burden rate, budget deficit and other indicators. These indicators can onlyestimate the risk of debt and not achieve accurate understanding of local governmentdebt, thus we assume local Government debt dynamics sustainable development,using the model proposed optimal size of local government debt. In essence, thelocal government debt risk of local government financial resources and powersmismatch, two main identity and scientific management system of localgovernments to make risk further. Local government debt risk is not only a threat tomacroeconomic, also caused a serious negative impact on the banking sector andgovernment credibility.To guard against the risk of local government debt, this article will deal with itssuggestions divided into short-term, long-term mitigation measures and supportingthree parts. In the short term, government should cut the source of local governmentdebt, restructure, prepare damage, find out the scale and inhibit the growth ofmalignant debt. In the medium and long term, government need build localgovernment debt risk warning mechanism to identify and improve financing of localgovernment. To fully complete solution of local government debt risk, localgovernment should promote the reform of local government budget performance management, match the financial resources and powers of local government, draw aline between government and market and improve the transfer payment system.Currently, local governments can issue bonds independently, this article attempts toestablish local government debt risk prevention system. In addition, in order toresolve the local government debt risk, it is related to improve the local tax bodysystem, improve the financial management system, improve the cadre evaluationsystem.