Local Government Debt, Financing Platform and Fiscal Risk

Abstract

The excessive expansion of local financing platform as a substantive medium for local government borrowing has aggravated local government financial risks, which may induce systemic financial risks. Based on the current debt situation of the central and provincial governments, this paper uses different measurement models to calculate debt balance and default risks of the financing platforms. The results show that nearly one-third of the provinces may have potential financial risks, therefore the central government and local governments should work together and keep four kinds of balances in order to prevent and defuse risks.