The Local Government Debt Risk And Public Financing

Along with the continuous deepening of the financial reform, debt of Chinese local government is not only in the obvious trend of growth, but also accumulates a huge risk, both of which affect the Chinese financial and economic security. This is due to the following facts: the local government distributes the official authority and financial authority in a non-standard way, the public investment system is inadequate, and the loan constraint to the local government is weakening. To the local governments, public financing is the main path of achieving non-equal authority, and meanwhile it forms the main source of the debt and debt risks. Further regulating the distribution between routine authority and financial authority, strengthening debt management, perfecting the public investment system, as well as preventing and reducing the risk of debt, have become important topics in further reform and development of the society.In this paper, by using financial and economic fundamental theories, a comprehensive analysis on the content, classification, characteristics, and harm of the local government debt has been given, which is closely associated with the current reality of our country. Based on this, special emphasis has been placed on the most important part—public financing. Besides, through the analysis of local government authority, applying intergovernmental fiscal relations theories, and comparing and drawing references from the experience of other countries, this paper probes into a risk-preventing system design and policy recommendations for local government debt, which is suitable for the political structure and economic development in our country at the present stage.