| With China’s economic development entering a new normal,"risk prevention" has become the top priority in macro-control.The report to the 19 th national congress of the communist party of China put preventing and defusing major risks at the top of the list,one of the keys is to prevent and defuse the risk of local government debt.At present,the total scale of direct explicit debts of local governments in China remains within the normal range,and risks are effectively controlled,yet the implicit debt scale is expanding,the risk is very prominent,which has seriously affected the sustainability of local fiscal.In this context,this paper explores the root causes of local government implicit debt in China from a more macro institutional perspective,and it is necessary to put forward effective countermeasures.This paper holds,the root cause of the current implicit debt problem of local governments can be summarized into three aspects: First of all,fiscal system incentive,that is to say,the allocation of public power and responsibility between central and local governments is not scientific and reasonable,the administrative power and expenditure responsibility undertaken by local governments are not symmetrical with their financial power and resources;Secondly,financial system incentive,Banks and other financial institutions have the illusion of financial subsidy and are more inclined to government credit cooperation projects;Thirdly,political system incentive,namely the GDP-oriented performance appraisal system and the soft budget constraint.The implicit debt risks of local governments are mainly manifested in the short-term fiscal liquidity risk,the long-term fiscal sustainability risk and the financial risk,market risk and so on that cause.According to the formation mechanism of local government implicit debt,its risk management must be attentive to both short and long-range,addressed both symptoms and root causes,multi-pronged,comprehensive management.Specific countermeasures should focus on setting up and perfecting information disclosure mechanism about local governments’ implicit debt to ensure that relevant departments and the whole society enhance effective supervision and regulation over local governments’ implicit debt;Promoting the transformation of financing platforms and the financing of special bonds steadily to meet the dual needs of investmentgrowth and dissolving risk;Stricting review mechanism to correct and prevent the alienation of PPP projects;Weakening the pressure mechanism and optimizing dynamic mechanism for local governments to borrow money through the arrangement of intergovernmental duties and authorities and the reform of government performance appraisal system;Improving inter-governmental tax division and fiscal transfer payment system to strengthen the local tax system and the financial base of local government;Improving the macro-prudential management system,strengthening financial supervision over local government debt and the co-transmission and concurrence of fiscal and financial risks. |
