Warning And Solution Of Debts Risk Of Chinese Local Governments

In order to cope with the Economic Crisis in2008, National Government tookmeasures of active fiscal policy and moderately loose monetary policy to hold backGDP reduce fast. Local government played an important role in adjusting economicstructure and accelerating urban infrastructure construction. But at the same time, thedominant debts and recessive debts of local government become larger day by day,for lacking of efficient supervision. The scale of debts is enormous and the capabilityof local government in repaying debts is limit, so the accumulating debts arise wildconcern.To guarantee robust performance of economics, establishing warning institutionand reinforcing debts management become more press. In the theory view, the debtsrisk of Chinese local governments relate to public finance and so on, turning intosignificant issue for local public economics. This paper expounds the current situationand problem of debts risk of local governments, and analyzes the reason and necessityof warning institution. This paper also revises conventional warning institution andestablishes more efficient warning system. Apart from establishing warning system,this paper also gives empirical analysis on public financial capability, and bringsforward validity of supervisor.There are seven chapters in the paper:The first chapter is an introduction, comprised of the background of the item,basic thoughts and methods, innovation point and difficulty.The second chapter is a literature review. This chapter intents to card theimportant and pertinent literature from home and abroad, involving government debts,the risk of public debts, management of debts of local government and basic methods.In this chapter author also reviews the literature, contributing to plenteous the forwardresearch.The third chapter is a standardization research. The research is the basis ofestablishing warning institution. Firstly illuminate the commonwealth public finance,secondly deep research on the debts of local government, in the last research on the relationship between risk of debts and financial risk.The fourth chapter is research on warning institution. In the chapter, authoramends traditional warning methods, and establishes more efficient warninginstitution. Firstly analyze the character of debts of local government, and deepresearch on the risk. Secondly give the scheme of institution and analyze the index. Inthe last, establish the amending methods.The fifth chapter is a comparative research. In the chapter, author compare thedebts and debts management of USA, Japan and OECD, and brings forward validproposal for our local governments.The sixth chapter is an empirical research. It is necessary for local government toincrease public financial capabilities to keep from debts risk. So in the chapter, authortakes good use of SVAR, panel VAR to analyze tax of local governments, and analyzethe relationship between the GDP and transfer payment.The seventh chapter is the last chapter. In the chapter, author summarize the coreconclusions of previous chapters, and gives some valuable proposals.This paper plenteous the theory of warning institution of debts risk of localgovernments, amending the traditional method and bring forward more efficientmethod. Taking good use of advanced means such as SVAR, panel VAR todemonstrate some issues.