The Research Of Chinese Sub-national Government Debt Risk Control

Subnational debt is a fiscal policy instruments used for dealing with resources inter-temporal allocation as well as providing financial support for subnational governments. In recent years, owing to accelerated urbanization progress, the infrastructure construction demand and financing demand of subnational governments in our country is expanding sharply. Subnational government debt which includes subnational government bonds as well as subnational government financing platform debt provides great help for economic development, infrastructure construction and people’s livelihood improvement. However, due to the drawbacks of supervision and regulation, the scale of subnational government debt increases sharply, which brings potential default risks. In the report published by National Audit Office, up to June30th2013, the total scale of subnational government debt in China has reached17890.87billion RMB, accounting for86%of the whole government debt in China. Comparing to December31th2010, the growth rate is67%. To be specific, the scale of subnational government debt which should be paid by government is10885.91billion RMB, the scale of subnational government debt guaranteed by government is2665.58billion RMB, the scale of subnational government debt which may be rescued by government is4339.37billion RMB.Cases like European sovereign debt crisis in2008, Detroit government failures in2013and11Chaori Debt payment default in2014warn us:It is of vital importance to deal with issues concerning debt. Otherwise, it may bring chain reactions relates to political and social problems. Therefore, it is significant to analyzing the current situation of subnational government debt in China, revealing the risks of subnational government debt, learning from developed countries as well as proposing recommendations of subnational debt risk management for our country.This article starts from basic theories, explaining relevant theories of subnational debt and the risks of subnational debt. Introducing basic situational of subnational debt management in our country. Analyzing the scale and risk of subnational debt. Learning relevant experience of developed countries. Finally, proposing recommendations of subnational debt risk management for our country.