A Comparative Research Of Local Government Debt Management Between China,U.S,and Japan

In2009, the central government implemented a4trillion plan to stimulate the economy, which have contributed the scale of local government debt expanding rapidly and the number of local government financing platform increasing quickly. It is hard to estimate hidden debt of local government right now. All these phenomena have been being gradually paid attention by the community. Since2010, The China Banking Regulatory Commission, People’s Bank, and the Ministry of Finance have issued several relevant documents to regulate the financing problem of local financing platforms.In2011, the National Audit Office have also participated in the investigation of local government debt and released an audit report about the national local government debt. On current tax-sharing system, transfer payment policy has not been improved and local government’s fiscal revenue has been reduced relatively, so the fiscal revenue of local governments can no longer meet the needs of local development. It is necessary for local governments to borrow money to promote local economic development and the construction of public facilities, but some governments pursue achievement aggressively and blindly borrow money, which increases the debt burden of local government. On the other hand, the lack of effective supervision on the use and repayment of debt capital also increases the possibility of the local government debt crisis. Once the crisis emerges, the central government can only take responsibility of the local government debt, which ultimately will affects the entire economy of China. Therefore, it is reasonable and necessary to establish an effective local debt management system to effectively forestall the possibility of local debt crisisThis article focuses on local government debt management, a problem which need be solved immediately. It first analyzes the status quo of China’s local government debt management and existing problems, and introduce several aspects of the management of the local debt in two developed countries, United States and Japan, then compare and analysis these aspects. Next, from a quantitative point of view, the study choices Beijing and Xinjiang Province as objects of research, basing on degree of marketization since China’s reform and opening. Then, it introduces the ideas of international commonly used risk measure model-KMV, establishes a suitable model to determine the security scale of local government debt, and applies KMV model to measure the security scale and risk of these two provinces’ debt. Thorough those activities, it finds that the lack of local debt management. Finally, it studies current China local government debt management mechanisms, proposes recommendations to improve several aspects of debt management, and makes them a whole to form a systemic and comprehensive local government debt management system.