The Research On Regulation Of Local Government Debt Risk

Local government debt risk is the concentrated reflection of local government financial risk. In China the budget act stipulates local government budgets should be set at various levels in accordance with the principle of balance, not contain deficit, except as otherwise stipulated by law and the state council, local governments may not issue local bonds. But in order to meet the local construction and economy development, after 1994 tax reform on financial points, many local governments have a lot of direct debts, invisible debts, and potential debts. Plus its motivation on investment, for some local government, the debt amount and structure is more than its repayment level, so the local governments face a series of phenomenon, such as financial difficulties, owing wages, deficit scale expanded, actual debt burden heavier and so on. Together with the backward management mechanism and methods of local government debt management organization, in many places the new debt capital is mainly used for the repayment of existing debts, and because some invested project can't generate the profit and cash flow as expected, the economic benefit and efficiency of capital utilization is low, local government debt have entered into the vicious circle of ego inflation, which is a potential risk of the long-term healthy development of economies in China.After the financial crisis in 2009, the central government proposed a "4 trillion" plan, in which the central government invest 1.18 trillion, and the remaining capital be invested by local government. In this kind of form, the central government replaces the local government to issue local bonds and local governments develop financing platform, but it is far beyond the range of local government financial resources. So it is of great importance to correctly assess the debt level and repayment ability of local government, and keep the local government debt in the reasonable level. Once the local government debt level spreads beyond the reasonable level and develops out of control, it will generate serious consequences. The spread and development of local debts will severely restrict the sustainable development of the local economy, increasing gap between the urban and rural areas, and trigger various social conflicts. Currently the structural risk in financial field has been increasingly aggravated by the deterioration of local government debt and finance level. Therefore, strengthening the local government debt risk management has become inevitable for social stability and national economic security, and it is of great importance to seek an effective way to fully utilize the local government debt and have a good control of the local government debt risk.On the basis of research on debt risk theory in domestic and abroad local government, this article analyzes the China local government debt status and its risk performance, and tries to find the reasons for the forming of local government debts risk, which is mainly in three aspects, including the current financial system, government financial function orientation and government debt management system Through comparison of different development type for local and national debt regulatory practice, this article proposed the beneficial implications to our local government debt regulatory. Based on the principle of simple, the article chose and built a index system, and designed a supervision system of assessment framework for the local government debt risk assessment. Finally this article provided referential Suggestions on how to prevent and control the local government debt risk.