Problems And Countermeasures Of China’s Local Government Debt Management

As China’s socialist market economy system, other corresponding system makes the appropriate changes. The foundation of revenue-sharing government financial management system in1994marks fundamental transformation on financial management. In this transformation the responsibilities of government has been divided between central government and the local government. This division of the central and local government finances a significant impact on local government, tax revenue of local government accounts for a small proportion, and growth much slowly, but related governmental responsibilities has gradually concentrated to local governments. Difficulties of local government on finance were caused by irrational division of financial authority and powers of financial. In recent years, the central mission of taking economic construction was strengthening, and local government focus on economic development under this incentive. Local government finance system was shocked by financial difficulties and the original impulse of economic development. Although the current law expressly prohibits local government borrowing, local government borrow a lot through the disguise to meet their own needs and the debt develop sharply, in the context of impulse to economic development and easing fiscal and monetary policy.Economic theory on Local government debt shows that the local government funds from debt, if reasonable used, can help local government to achieve its public administration functions. But this based on the proper management of local government debt, and there are still large gaps on our debt management in local government, for a series of management system is not established. At the request of the subject and background, this paper devoted to a depth research on China’s local government debt management.Firstly, China’s basic situation of local government debt was described, and a brief statement of the evolution of China’s local government debt and the possible impact of shallow reasons was put forward as a relevant background. Theoretical and practical significance of this paper was stated on this basis.To conduct relevant research, related literature was collected and classified and summarized from multiple perspectives and a conception," local government debt is not only an economic issue, but also management issues" was proposed. And then the center problem of this research-local government debt management from the governance prospect, was established. The establishment of this guiding ideology provides a basic idea.Concepts and related research and theory is another starting point. This paper defined several closely related concepts, included debt, local government, local government debt, local government debt management. Also the effects of government debt issue the market failure and public goods theory, moral hazard and principal-agent theory, the government failure theory with the constraints of public power and the new public management theory was reviewed. By defining the relevant concepts and explanations for the authority theory after the analysis can beginA core part of this article is the analysis of the status and causes of China’s local government debt. China’s local government debt management achievements and shortcomings and the reasons for lack of a comprehensive were deeply analyzed from three areas:laws, institutions and regulatory agencies.Foreign management experience can provide a variety of debt management ideas for our local governments. The fourth part of this paper summarized practices from foreign local government debt management. In order to correspond with the analysis of China’s current situation, summary of foreign experience and analysis of inspiration was carried out in three areas:laws, institutions and regulatory agencies.The final purpose of comprehensive and detailed analysis all-above is to provide guidance on debt management of China’s local governments. Suggestions were proposed on logical theory as the cornerstone and realities of China as a reality basis and the foreign experience as a reference and three levels of suggestions-laws, institutions and regulatory agencies recommendations, with supported reform proposals included.