The Identification And Resolution Of Hidden Liabilities Risk Of Local Government

In 2018,the Ministry of Finance,the Commission of Development and Reform and other departments issued documents NO.50 and NO.87 successively,which raised concerns about the risk of "Hidden Liabilities" of local governments.The government work report of 2019 put forward the idea of "dealing with the debt risk of local government steadily",which shows that "preventing and resolving major risks" will remain the focus of work in 2019,that is,to prevent and resolve the risk of hidden liabilities of local governments.Therefore,under the background of the reforming in the structure of supply-side,it is of great significance to deeply do the research of hidden liabilities of local governments.With the government work report of 2017-2019,we have found that in 2017 and 2018,the debt of the local governments need to be regulated,but in 2019,positive signals to help local governments to solve the problem of liabilities are released.Therefore,based on research and interviews,this paper takes local governments as the research subjects,and combs and analyses the hidden liabilities of local governments which are caused by the financing company,investment funds,PPP projects,government purchasing services and other financing activities.After analysis,we have found that most of the hidden liabilities are caused by local government's violation of rules and regulations.Therefore,the measures to resolve these problems are to further standardize the procedures of issuing debt,strengthen the accountability mechanism and improve the information disclosure mechanism.Considering that the scale of local government liabilities is under the quota,the analysis of the scale of local government hidden liabilities has a great significance for measuring the risk,so this paper starts from the investments to measure the scale of the hidden risk of local governments in Jiangsu Province.After calculating,the scale of implicit debt is about two times of the number of the public debt of Jiangsu Province.Considering the implicit debt,the index of Jiangsu Province has been changed,and we get the conclusion that the overall risk of Jiangsu Province can be controlled.Now,both local and central government attach great importance on the problem of implicit debt of local governments,and Zhenjiang has been selected as the first pilot cities to mitigate the risk of implicit debt.However,the signal that the central government will help local government is beneficial or bad for local governments to reduce the risk of implicit debt is unknown,so the problem is worth being researched.Therefore,this paper uses the difference in difference method(DID)to make empirical analysis on the hidden liabilities of local governments in Zhenjiang.We have found that under the procedure of structural deleveraging in 2018,the rate of local governments to raise money has generally declined,but the hidden liabilities risk of cities which has the central rescue signal goes up,and this bad demonstration effect will further deteriorate the financing environment and increase the risk of hidden liabilities of local governments.