A Research On Risk Management Of Local Government Financing Platform In China

Since the U.S. subprime mortgage crisis in2008, in order to mitigate the adverse impact ofthe crisis on China’s economic development, China has set up a large number of localgovernment financing platform. However, local government financing platform also led togeneration of risk in the process of rapid development due to mismanagement and other reasons.In addition, due to the hidden nature, complexity and uncertainty of local government financingplatform characteristics, the risks of local government financing platform are more difficult tomanage and control than other local government debt risks, these risks not only resulted in anegative impact on local governments,but also become the constraints of the real estate industry,financial institutions, and even become great resistance of the whole macroeconomic normaloperation and development. Therefore, the study of risk management issues of local governmentfinancing platform has a very important practical significance.Based on the domestic and foreign local government debt risk management theory and thesummary of relevant management experience, this article thinks that local government financingplatform in China exists the following problems: out of control on the expansion of localgovernment financing platform, the imbalanced development of local government financingplatform, the area of investment is too centralized and over-reliance on bank credit financing. Onthe basis of the summary and analysis of relevant research literature, the paper argues that therisk of local government financing platform can be divided into local financial risk, bank creditrisk, regulatory risks caused by asymmetric information,the decision-making risk caused by thelack of corporate governance structure as well as policy risks. Basing on examining the practicalexperience of the United States, the United Kingdom, Russia, India, Brazil, South Africa,Colombia and Australia and other countries in the management of local government debt risk,combining with the current actual situation, this article from the point of view of the localgovernment and the commercial banks gives some risk prevention and control recommendations,and tries to establish a local government financing platform risk assessment index system, forusing the quantitative way to analysis accurate assessment of the risk in the financing platform,and providing a reference for the risk management of local government financing platform.