Research On The Management And Control Of Local Government Debt Risk

Now the global economy is in the transforming stage from the post-recession ofeconomic crisis to the gradual recovery. In the post-financial-crisis era, the financial risk oflocal government not only covers the developing countries, but also involves developedcountries including America, Japan and European Union countries. The financial riskproblem of local government involves a wide range and has been for a long time. From theglobal economic system, neither the developed nor the developing countries haveeffectively solved the above problem. With the rapid development of economy, the socialundertakings elevate stably, the town construction and industrialization process acceleratecontinually, and the security systems (such as people’ livelihood, medical treatment,employment, etc.) improve constantly in China. In this instance, the need of constructivesecurity fund for local government grows rapidly, which objectively increases the financialrisk. To ensure the sustained and stable increase of local government economic, how toeffectively manage the local government debt (LGD) and reasonably evaluate and defusethe debt risk has become one of the focus issues for various circles of society.Basing on the current situation of LGD in China, the correlation theory is adopted todetailedly analyze the scale, constitution, borrowing form, repayment characteristics, riskassessment, early-warning mechanism and risk solving ability of the LGD. Meanwhile, thedialectical relationship between the LGD and the economic development is confirmed byabsorbing the foreign experience of LGD management. According to the objective realityof local economic development in China, the regulation of financial expenditure of localgovernment is proposed. Then the reasonable distribution institutions of fiscal power andadministrative authority are founded, the management mechanism of LGD is improved, theprevention and early warning systems of debt risk is established, and the defusing methodof supporting facilities of the LGD risk is also improved, which achieve the scientific earlywarning and the effective control of the LGD risk. So this work plays an important guiderole to regulate the management and enhance the prevention and control of LGD risk.