Research On The Issue Of Fiscal Risks At County And Village Level

Many countries pay much attention to prudent principle of finance when they are confronted with financial problems in the government, as public finance plays an unsubstitutible role with the funds mainly collected from taxpayers with respect to economic stabilization, resource allocation and social equity. Much concern has been given to the fiscal risk and fiscal risk has been a fashionable topic in the world. Risks, especially hidden risks, usually giving a sudden shock to public finance, influence long-term stability of public finance, on the ground that there are increasing volume and volatility of private capital flows, uncertainty about future events, asymmetric information as well as limited ability of government to precisely estimate the risks brought out by private sectors.As China is in the process of transforming from the system of planned economy to that of marketing socialism, the reform in the system is also a process of interest adjustment during which a great many unstable factors are to be given rise to and will result in somewhat social chaos. As to the government, it undertakes the responsibility of stabilization, social justice and equity in the society. Therefore according to its responsibility the government and public finance will be under heavy burden and great pressure when the instability of society is hidden or social chaos occurs. Finance at county and village level being basic in the fiscal system of public finance, financial condition at county and village level is crucial to the whole system as well as to the stability of society and economy. The deficit including book deficit and hidden deficit are now in serious condition. And the ratio of county and village with deficit to the whole is high and at the same time the debt burden is heavy, which threat the stability of finance at grass-root level. Different from other levels, the finance at county and village level is facing more problems of village, peasant, and agriculture. The ability of governments at county and village level to cope with fiscal risks is contained by such factors as financial condition of government and overstaffed organization and so on.The essay tries to analyze what cause the fiscal risks in terms with three aspects of fiscal risks at county and village level, such as opportunism of government, heavy debtsand liabilities and bad management of public revenues and expenditures. Later it comes up with suggestions towards preventing and eliminating fiscal risks. The structure of the paper is following:Part 1 is the introduction of this paper, simply giving the background and purpose of the paper and comments on existing research results. In this paper the author offers her own ideas about the categories of fiscal risks, laying good foundation for the analysis on manifestations of and reasons for fiscal risks.Part 2 briefly introduces the general theories of fiscal risks, focusing on the manifestations of fiscal risks, respectively from the point view of central government and sub national governments. It estimates the risks undertaken by central government and the reasons for being confronted by central governments with increasing uncertainty and risks. As to the theory of sub national fiscal risks, the brief description of the characteristics and manifestations of fiscal risks at sub national level is given in accordance with the reality in China. Several important issues and concepts are also discussed in this part where more attention has been given to what contribute to the risk hiding in China.Part 3 examines in detail the manifestations of fiscal risks at county and village level. Besides the similarities to the general characteristics of fiscal risks in sub national governments, the features of fiscal risks at county and village level are discussed in this part. After the analysis it is summarized that there are three types of fiscal risks at county and village level: opportunism risk of government, liabilities and obligations of government, and bad management of revenues and expenditures...