By Zhu Hongming & Bo Yan, Research Institute of Finance, DRC

Research report No.12, 2018 (Total 5287) 2018-1-12

Abstract:This paper indicates that the previous local government debt consolidation period was from June 2010 to July 2013. The significant characteristics of the mentioned debt consolidation are that under the guidance of the banking regulatory departments, the consolidation work was focused on the local government financing platforms and loans-related local government debts. This round of debt consolidation achieved positive results, and the growth of loans-related local government debts has been effectively restrained. However, there are also some issues to be addressed, which mainly are: the growth of debt has not been effectively controlled and the debt structure has become deteriorated significantly, exerting a great negative spillover effect on financial system and real economy. The reason lies in the fact that the external environment is not sound, such as the lack of a favorable macroeconomic environment and the necessary supporting policies and reforms. Besides, it is due to the defects of the governance policy itself, such as the negligence of governance on financing demanders, the lack of counseling policy measures, and overemphasis on scale management rather than the optimization of the structure. This paper also illustrates some the inspirations drawn from previous local government debt consolidation.

Key words: local government debt, financing platform, scale of debts, debt structure, governance