The Study On Local Government Debt Risk Transmission Mechanism In China

The United States subprime mortgage crisis and the European sovereign debt crisis which broke out in succession, have caused all countries pay more and more attention to the problem of the government debt risks around the world. However, China is in the period of economic transformation, local government revenue and expenditure gap is growing rapidly with the development of economy and the deepening of the economic system reform, the scale of the debt expand promptly, which leads to local government debt risk is gradually emerging, at the same time, local government overdue debts have occurred, local economic development dependent on local government debt redundantly. In this context, if we don’t take scientific and effective measures to guard against and dissolve the local government debt, will lead to local government debt crisis and then triggering a financial crisis or even social crisis. How to monitor the formation and the conduction of local government debt risk scientifically, according to the various levels of local government debt risk’s formation and conduction conditions, how to prevent local debt risk to conduct with large range and scale timely, dynamically, effectively and connectedly, has been the subject of this study. Under the above-mentioned backgrounds, this paper put forward the Chinese local government debt risk as the research object.First of all, the article defines the core concepts such as the Chinese local government, local government debt risk, transmission mechanism and so on, on the basis of the review of existing and related literature, with the aids of the comparison of these relevant data which come from the Audit Office of China, the people’s Bank and the China Banking Regulatory Commission China, analyses the status of the emergence and development of the Chinese local government debt and the state of affairs and recognition about the Chinese local government debt risk.Then, make a qualitative identification and analysis on the elements of the Chinese local government debt risk transmission mechanism, on this basis, explain the inner mechanism about the Chinese local government debt risk transmission mechanism.Next, uses the method of game to deduct and prove the process of the Chinese local government debt risk transmission mechanism from the aspects of internal and external with the aids of the relevant data which come from the Audit Office of China, the people’s Bank and the China Banking Regulatory Commission China. The conclusions imply:the internal transmission mainly includes three kinds of situations that tax sharing fiscal system makes the government financial power and power does not match, resulting in the Chinese local government debt risk from the lower levels of government conduct to the higher levels of government conduction; higher levels of government’s administrative power in the current administrative system provides absolute advantage for local government debt risk from the higher levels of government conducts to the lower levels of government; debt risk conduction between the same level governments is usually through tax and fiscal competition to conduct; external transmission mainly includes two kinds of situation that local government debt risk through the accumulation of local debt risk of the local government financing platform, enterprise (mainly local state-owned enterprises) and the financial institutions to make forward and reverse conduction between the government and the market.Finally, from the perspective of the transmission of the Chinese local government debt risk, proposes the countermeasures and suggestions to guard against and dissolve the Chinese local government debt risk combed with the reality:to control the source of government debt risk transmission effectively; to strengthen the management about the local government debt risk transmission carrier; to limit the path of local government debt risk transmission; to establish the risk early warning system as to strengthen the monitoring of risk transmission process.