Research On Risk Treatment Of Henan Local Government Debt

In order to promote the economy and satisfy the local government expenditure, faced with the problem of deficient financial revenue, local government essentially loaned external sources of finance to satisfy the growing fund demand since the reform of the tax distribution system in 1994. However, according to the definite regulation of the former Budget Law, local government is forbidden to loan except the regulations of Law and State Council, therefore, all local districts have to seek ways to adopt the so-called system innovation to meet the growing fund demand and to obtain capital to construct economic society through the methods of financing platform, fund, and so on. But, with the gradual enlargement of all local government’s debts scale, these debts obtained through financing platform result a series of problems, for example, complex local government debts structure, mixed bond, ill debts management, etc. Furthermore, these debts acquired through financing platform gradually reached a peak of paying debts, these debts ventures progressively exposed which arouse the extensive attention of the country and local governments, what’s more, local debts scale reached a new highest record in history under the stimulus of the country’s 40 billion financial policy. Although the new Budget Law definitely regulated governments’ways of loaning, but the prior problem for current local government is how to respond to these local government debts ventures aroused by these historical elements.Since 2008, for the purpose of solving the financial decrease, Henan province has been positively promoting the construction of the Central China Economy District and Zhengzhou Airport Economy Zone, develop the base facilities construction in response to the country’s advocacy "Modulate structure, guarantee development", which resulted the dramatically growth of Henan government’s debts scale. But, as China economy is during the New Norma, there are two elements intangibly increased Henan government’s debts ventures, for instance, the higher demand of economy development ways and motivation and the more difficulty of traditional ways to rely on investing, consuming, and exporting to promote economy. Consequently, this article investigates the Henan province’s answer to its local government debts adventure, which expects to find out the way of balancing economy development and government debts. It firstly explains the basic definition and theory of local government debts, and then illustrates the adopted public management theory, including public product theory, institution transition theory, financial power division theory and risk management theory. It secondly analyzes the current situation of Henan province government debts, adopts icons to mark the existing ventures and ventures’ causes, which mainly conclude administrative venture, repaying venture, institution venture and scale venture. It thirdly narrates the responses of Henan current local debts ventures, and points their deficiency and causes, which include the hysteresis of laws and regulations, the lack of local government management, the deficiency of local government fund supply and the inefficiency of local government fund usage. Consequently, it finally summarizes experience and methods of American and Japan’s risk response to the loan’s release and local debts, and inspires how Henan province answers to its local government debts, which requires Henan to establish integrated loan market supervision system, manage the local government bond issue, and negotiate the examination and approval and audit supervision. The last but not the least, according to the risk response to train of thought, it offers several suggestions in response to debts development according to Henan unique development, firstly, it is essential to have a complete understanding of Henan local debts scale and build local regulations to restrict the debts scale, then, it is necessary to establish a better pre-warning system, market supervision system and repaying system, finally, it is important to perfect repaying system in a long run.