The Local Government Investment And Financing Platform Of Debt Risks And Countermeasures

China’s dividing taxes revolution implemented since1994led local governments disposable financial capital decreased greatly. In order to alleviate the growing contradiction between the local governments with limited disposable financial capital and the huge investment needs of the urban construction, local government investment and financing platforms emerged. Relying on local fiscal revenue as a repayment protection, local government investment and financing platforms raise funds for the construction of urban infrastructure, which circumvents legal restrictions that local governments are not allowed to issue bonds in China and makes tremendous contributions in building cities. However, in recent years, the local government investment and financing platforms’rapid growing debt scale and non-standard operation accumulate huge risks. Excessive asset-liability ratio increases the platform’s potential credit risk, and then burdens the local public finance and impacts financial market. Some of investors starting to sell bonds issued by platforms out of panic causes concerns about credit risk of the bonds of overall community.First of all, the paper describes the status of the local government investment and financing platforms and their debt risk. Secondly, it analyses the sources and negative impacts of debt risk from the perspectives of platforms themselves, institution, policies and local public finance. Thirdly, on the basis of above analysis, the paper tries to propose countermeasures to solve the debt risk of the local government investment and financing platforms from the central government, platforms and commercial banks.In a conclusion, the central government should improve the taxation system, control the debts scale to regulate local government investment and financing platforms in order to providing a good macro environment. Moreover, the local government investment and financing platforms should improve their own development by strengthening project management and widening financing channels. Besides, commercial banks should control the approval process and loans scale strictly to manage debt. Through a number of above measures, the debt scale of the platforms will be expected to be controlled within a reasonable range to achieve the purpose of the risk of debt prevented.