Research On The Problem Of Local Government Debt Risk In China

In April2013, Fitch and Moody's think that current our country local government debt scale down our country's credit rating, caused the people to the local debt risk in China is widely discussed. After the tax reform in1994, the central fiscal revenue and national fiscal revenue growth, the growth of the local fiscal revenue has not been a corresponding. But, the local governments bear the liability for the most economic and social development, leading to the local construction fund gap. Especially in recent years, tax breaks and value-added tax reform, intensify the shortage of funds. In some degree, the central government and local government financial governance asymmetry is the root cause of local government financing platform. In order to alleviate local construction funds, the central2009allows the financing platform company to raise funds in a local government, the local financing platform to get fast development. Local financing platform scale rapid expansion, however, lacks the system of financial supervision and restraint, the debt risk is highlighted. The debt risk of local financing platform involves the local government, the central government, Banks and and bond investors, interests may be affected by any carelessness will destroy the current good momentum of development of economy in our country. So, the debt risk of local government financing platform for effective supervision and prevention is an urgent and realistic problem.This article stands on three points, the financing companies of local governments, the loan banks and local governments to research debt default risk of local financing platform, and its derivative financial system risks associated with financial risk. In this paper, our financing platform for the company's financial characteristics, such as the main business, local government's financial mechanism, the Government operational mechanism, banks and other lending platform to make a comprehensive scientific study, proposed to strengthen prevention of debt risk of local financing companies. The level of debt risk of local financing platform for China's banking system directly related to the stability of local government financial security, and local governments, financial security, stability and relationship to the local and the whole country's economic development. Therefore, effective prevention and control of the debt risk of local financing platform for our safety and financial security of the financial system played a very significant role in the2008 financial crisis, China's local governments have adopted to strengthen government investment to ease the crisis, so that the local governments are all thirsty into funding, and platform debts brought about monetary sources to support local governments' implement of the central expansionary economic policies. Related financing platform sustainability, fund-raising capacity, local government investment projects all play important roles to the progress of our local financial development and economic development. And safe financial environment is necessary for the national economy steady growth.This paper analyzes the local government financing companies' scale of financing, status, characteristics, etc., followed by analysis of debt risk factors; and the debt risk management and control; including institutional innovation, risk control methods innovation, relevant specific countermeasures and suggestions.The paper is organized as follows:Chapter Introduction. The chapter took about of this paper background, significance, research methods, and overall structure of introduction. Chapter ? is about Literature Review. This chapter systematically combined the domestic and foreign government debt research papers. Chapter ? is about the theoretical foundation of the topic. The chapter discussed Western theories of government debt risk, risk management and domestic local bond risk theories, etc., dug the root of the debt risk platform, combing intrinsic mechanism for debt risk.Chapter IV, local government debt risk analysis. This chapter describes the specific local government financing platform assets, liabilities and profits structural features; and in-depth analysis of the risks of local government financing platform causes, risk types and risk pathways. Chapter V is about empirical research. The chapter researched debt risk factors according to established debt risk model; did factor analysis, panel analysis, and regression testing of debt risk of local financing. Chapter VI is about conclusions and policy recommendations. This chapter summarizes the main conclusions of the paper, and put forward relevant policy recommendations about debt risk prevention to the governments, banks and financing companies themselves.