Local Government Debt Risk Early Warning And Risk Prevention Research

In recent years, as China’s social and economic development, whether it is the needfor the social development needs or local government performance evaluation, localgovernments increase investment in urban infrastructure and public services. However,the local government funds are limited, the local government must borrow to make upfor the lack of funds. The Budget Act expressly provides that:"government budgets atall levels should make ends meet; local governments at all levels in accordance with theprinciples live within our means, break even, and does not contain deficit.""Except asotherwise provided in the law and the State Council, local governments shall not beissuing local government bonds."Budget Act provides that local governments may notissue bonds themselves, so local governments can only disguised form of debt. TheCICC report is expected to the end of2009, the local government financing platformloans (excluding bills) is about7.2trillion yuan, which added about3trillion yuan in2009net. According to the statistics of the Audit Commission, by the end of2010, thelocal government debt balance10.717491trillion yuan in the national fiscal revenueaccounted for129%, the proportion of local fiscal revenue accounted for263.91%ofthe bank loan debt balance of8.467999trillion yuan, accounting for79.01%. With therapid increase in the size of the debt of the local government, local government debtproblem also has been hot for the whole society, and local government debt is adouble-edged sword. If not handled properly, it will a serious threat to China’s economicsecurity and social stability. So how can we guard against local government debt riskhas become a common topic. We should be holding "early detection, early treatment"concept, dealing with local government debt risk during the embryonic stage. We needto build an effective local government debt risk early warning system of localgovernment debt.This article is divided into a total of five parts:The first chapter is the introduction, the exordium including literature review ofresearch background of local government debt, local government debt, the significanceof the study, the study of the basic ideas and innovation and deficiencies.The second chapter describes the theory of local government debt and its risk, andanalysis of the status quo of China’s local government debt. The third chapter is a systematic analysis of the causes of China’s local governmentdebt. The paper argues that the main causes of China’s local government debt include:the financial system is not perfect, soft budget constraints, the government treatment ofstructural imperfections and government-led economic growth methods.The fourth chapter build an effective local government debt risk early warningsystem. First, the establishment of a local government debt risk early warning indicatorsystem, and their weights assigned by AHP,then fuzzy comprehensive evaluationmethod for risk warning. The fifth chapter put forward the recommendations of the localgovernment debt risk.