The Research Of Chinese Local Fiscal Risk: Based On The View Of Soft Budget Constraint

Our country takes action to deal with the global financial crisis in 2008 years, which led to a sharp increase of the local debt in the next few years. This paper take it as the breakthrough point, according to the related data from 2007 to 2013 that all over the country, study the transmission mechanism of china’s local fiscal risk under soft budgie constraint, draw the following conclusions: first, the funds come from soft constrains budget includes land finance revenue, local debt income and credit funds through intervention and control of financial institutions. Through empirical test finds that, there are soft constraint budget problems of financial transfer payment funds and loans of domestic in local government fixed investment. Secondly, the transmission mechanism of china’s local fiscal risk under soft budget constraint is that: Risk does not match profit in the current fiscal decentralization system, which lead to the moral risk of local government officials, trigger the excessive investment and over borrowing impulse. And the local fiscal risk brought about by the soft budget constraint includes local deficit risk, local debt risk and local public risk. Finally, this paper evaluates the current local fiscal risk respectively from the three aspects.Based on the conclusions the paper offers following proposal: our country should improve the local tax system, speed up the overall process of local property tax. At the same time strictly defines the fiscal function and financial function boundary, enhance the risk pricing ability of financial institutions, strength the credit support to non-stage economy. Finally, the central government should increase the index that used to assessing local officials’ performance, make clear the local government liability, eliminate the situation of risk sharing.