Research On The Financing Problems Of Local Government

Since "twelfth five-year" period, the reduction of land grant fee results in lower local fiscal revenue. And local fiscal balance huge began to emerge, to make ends meet financial woes. In order to maintain fiscal revenue and maintain continuity of the public expenditure scale, local government debt must be raised as the main way of making up financial resources shortage of local government. In recent years, increasing demand of China’s local government financing, gradual enrichment and development of financing system, directly led to the increase of local government debt crisis, affecting financial security.The basis of local government financing is fiscal decentralization theory, public goods theory, investment- saving theory and public choice theory. The first three theories provide rationality and necessity for the local government financing. Public choice theory suggests the conflicts of local government financing. The debt behaviors of local government not only represent the public interest, but also the pursuit of self-interest appeal motivation. This is the root cause of local government debt scale and implicit debt risk increase. At present, the local governments gradually tend to be diversified financing channels, financing scale expands unceasingly, but the loan of financing platform is still the main way, and its risk together with financing structure characteristics is significant. The too fast growth accelerates the local debt risk. The financing mechanism itself lack normative system design, the functional change of local government can’t reach the designated position, the supervision and management system is not sound, and there is lack of hard constraints in crisis management, the hidden risk of local government is more and more prominent. Municipal bond financing in the United States and bond financing in Japan will have a strong reference value on China’s local government. A new round of fiscal and tax reform has been kicked off, local governments are allowed to issue bonds by the new "budget law". To seize the current opportunity, according to the national requirements for the local debt management, adjust measures to local conditions, classify and multi-pronged, creating conditions for abolishing and stripping financing platform company without fixed income. To establish a normative local government debt financing mechanism, promote the government and social capital cooperation pattern, strengthen the supervision of the government contingent liabilities, to resolve and prevent financial risks, and promote sustainable and healthy development of national economy.The biggest innovations of this paper is to take three financing platform of local government projects in Qingdao and Chinese-German Eco-park BT project as a case, through introducing the financing ways of listed project works, detailed comparing and analyzing, to point out the risk in the financing platform loan and the advanced experience of BT project financing way. The local financial dependence on the simple way of bank loans proposed should be gradually reduced, guiding diversified financing ways and increasing the social capital financing proportion, to innovate a new way of financing with local government bond and the PPP mode.