Local Government Debt Problems And Countermeasures Study In China

In the contemporary era, due to the implementation of tax-sharing financial management system in most countries executing market economy, local government universally enjoys the rights to issue debt and bears the debt as a consequence. Since the Reform and opening up, China has begun to implement the tax-sharing financial management system in1994. Although our "Budget Law" clearly provides that local governments should not borrow money and issue its bonds, still local governments at all levels bear a large number of explicit and implicit debts because of the reality of the financial system and the relations between local governments. Those debts include both debts developed due to problems left over by history and debts newly developed under the present situations, especially with the break out of the International Financial Crisis in2008, in order to keep economic growth, ensure people’s livelihood and maintain stability, the size of the local government debt has expanded rapidly, which caused the universal attention in all directions.At present, experts and scholars have proposed some good suggestions from different angles to solve local government’s debt problems, but the studies are not deep enough. No doubt, there are many reasons that lead to local government’s debt problems, but the fundamental one lies in the lack of and defective of relevant laws and regulations, which need further modification and improvement. They are either lack of constraining force, or their supervision role is weakening, or they are obviously inconsistent with the reality. Therefore, in the premise of insisting on market economy, China should learn useful experiences from all over the world to develop and improve its relevant laws and regulations. There are laws to abide by and be strictly observed, and law breakers must be dealt with and enforcement of laws must be strict, so that local government’s debt problems can be solved fundamentally. We should further reform and improve the tax-sharing financial management system, give full play of the local government’s initiative, develop the local economy with great efforts, and strengthen local government’s financial resources to ensure its administrative and financial powers to match. Besides, we should keep the fiscal balance, distinguish clearly the financial responsibilities of local governments at all levels, and strengthen the regulatory role of budget and audit and other supervisions. We should reform and improve the tax collection system, formulate and perfect the fiscal transfer payment laws, and intensity general transfer payments; to agree with the market economy, we should modify the "Budget Law" and formulate "Public Debt Law," and endow local governments the rights to borrow money under certain conditions so as to solve the debt problems of local government and promote a sustainable and stable economic and social development.