The Legal Study Of Local Government’s Independent Debt Under The Background Of Investment And Financing System Reform

In recent years, financial and legal experts and scholars have generally realized that local government debt problem is one of the major financial risks Chinese government have to face. It is revealed, according to the statistical data of the Audit Commission, that the balance of the direct and indirect debt the local government saddled with reached 17.9 trillion yuan, accounting for 31% of GDP. The total amount of debt is manageable, however, some local government have faced intensly debt pressure with excessively rapid growth of debt, serious mismatch of debt maturities and poor transparency. This is the result of disguised debt issuing with less formal local financing vehicles. According to the reforms central government announced, a standardized and transparent local financial debt market is planned to be established. Meanwhile, the local government financial and repayment mechanism reform help maintaining the financial stablity. It’s imperative to establish a standardized and transparent local government financing system in three dimensions including issuance, repayment and supervision mechanism.