Research On The Cause And Management Of Financial Risk At The Grass-roots Level In China

Financial risk at the grass-roots level in China is so serious that its deficit has challenged the implementation of government's public function. Since the debt is in a covert form, financial risk at the grass-roots level has a covert nature. The lack of management over financial risk has led to the accumulation of risk. At present, financial risk at the grass-roots level is at the dangerous edge of out-of-control.With the system management theory, this paper studies, from the angle of relationship between system and environment, the cause and management of financial risk at the grass-roots level. The author defines the financial system at the grass-roots level as county and town's financial and tax departments, and considers budget management as its core function and the exterior environment refers to the local and central government departments except the financial and tax departments. The core of financial management at the grass-roots level is the design of financial system and relative legislative affairs.This research makes a summary of various forms of financial risk at the grass-roots level, such as contradiction between financial revenue and expenditure, more serious of financial expenditure, local government's insolvency, unbalance of budgeting structure, waste of financial resources and other serious aspects. Observing these problems from the angle of exterior environment, the author finds the reason lies in the government and the society, such as government's dysfunction, lag of legislative construction, too high executive cost, instability of macroeconomic policy and shortage of public service. Besides, reasons also lie in the interior of local financial system, such as disqualification of financial staff, limitation of budgeting management system, popularity of financial hidden rules and exchequer shrinkage.To a large degree, the government can change the exterior environment in an active manner. This change is what the author defines as the exterior management strategy, which includes clear public function by government at the grass-roots level, increase of revenue and control of expenditure, improvement of local financial management system and strengthening of legislative construction.Grass-roots financial system can effectively manage financial risk, and the key is the establishment of corresponding department with this function. Risk management focuses on establishment of special risk management department, stronger supervision of local financial risk and creation of risk control methods, observed from the interior of financial system at the grass-roots level.In the end, the author of this paper, having explained the causes of financial risk at the grass-roots level and suggested relative management strategies, points out the direction for further research.