The Research Of The Local Government Debt Moderate Under The New Situation

With urbanization process moving forward, in order to maintain sustainable economic development and ensure the supplies of public products and services, Local government demand for funds continues to expand. The reform of tax allocation had strengthened nation’s macroeconomic regulation capacity, meanwhile; it also weakened the ability of local government revenue whose financing was in a dilemma. For purpose of evading the prohibitive the Budget Law, most local governments had established financing platform、investment company to fill the fiscal gap. Especially after the world financial crisis of 2008, China implemented proactive fiscal policies and the Ministry of Finance being on behalf of local government for bond issuance was also approved. Since then, China’s local government to enter the crazy mode of lending, the scale of the debt has also been a growth spurt.However, with the expansion of Municipal bonds, government regulation had not changed and the risk of bonds became prominent. Moderate municipal bonds could be beneficial for economic growth and social stability, but it would trigger financial risk and economic crisis when it’s too excessive. Therefore, how to precisely predict the risk of debt and keep the debt in appropriate scale has become a critical problem for China’s local government.Firstly, the concept and risks of local government debt are briefly introduced, proposing the topic of the moderate scale of local government debts. The paper using qualitative analysis method to elaborate the present situation of City Shaoxing’s government debts which focusing on the character and risk behavior of local debt, and it also explaining the reasons for the formation of local debts from four aspects such as financial system, economic system, debt management and market risk. Then we use the KMV model to analyze the feasible quantity of local government debts in Shaoxing as an example as well as using qualitative analysis method to reckon the necessary quantity which finally determine the government debts scale of Shaoxing moderately during the next four years. At last, considering the reasons for the formation of local debts and the present situation of government debts, the paper put forward counter suggestions on solving local debt troubles by improving the risk-warning system, controlling the scale of the debts, widening the financing channels and improving the regulatory measures.