A Preliminary Research Of The Risk Assessment For Our Local Government’s Bankruptcy And Financial Reconstruction

With the economic and social development, the debt problem of China’s local government has become more and more dangerous. If the problem isn’t prevented actively and resolved promptly, it would result in the social and economic crisis, and endanger political stability of the country. The problem has been greatly concerned by both policy makers and scholars. However, due to many problems regarding some aspects, such as institutions and supervisions, some cities might fall into the morass of debt, even go into bankruptcy.As an important part of the country’s political system, local government has great relationship with economy and people’s livelihood, therefore it is hard to relate local government to bankruptcy in China. However, the situations have happened in the United States, Japan and many other developed countries. For local governments that face the financial difficulties, bankruptcy is an important method to protect local governments from financial crisis, to keep basic public service, and to form fiscal reconstruction programs by negotiating with creditors. Thus, the research question is proposed:when local governments face debt problems in China, do bankruptcy really occur, and can bankruptcy solve the problems like those in the western countries. It is a crucial issue in the period of reform. In order to answer the question, the thesis tries to explore the bankruptcy risk assessment mechanism of local governments and find some relevant solutions.The thesis is divided into six sections. The first section introduces background, research ideas and methods; in the second section, the meaning and general process of local governments’bankruptcy are introduced. And Orange, Detroit in the US, Yubari in Japan are adopted as research cases; the third section describes the debt crisis of China’s local government; In the fourth part, a bankruptcy risk assessment mechanism of local government is set up, and the possible default facts are explored by empirical studies; the fifth section analyzes the necessity and significance of local government’s financial bankruptcy, briefly assesses the risks of social stability, and proposes some suggestion about bankruptcy reconstruction; the last section includes conclusion and discussion.