Abstract
Public-Private Partnerships (PPPs), as an important mean to establish a standardized local government debt financing mechanism, relieve the pressure of local government debt, resolve the fund shortage of urbanization and promote supply-side structural reform, has increasingly become the main mode and source of China's infrastructure investment and financing. It has made an important contribution to the increase of supply scale, quality and efficiency in public services and infrastructures. But with the rapid promotion and widespread, local government provided illegal guarantees of fixed income and repurchase, or beared the loss of principal, issued Local Government Financing Vehicles(LGFVs) debts, and even disguised government purchasing services, which have make the PPPs alienated into a new financing vehicles. This paper defines the concept and scope of local government implicit debt, analyzes the tool characteristics of PPPs, the necessary and sufficient conditions for debt governance function of PPPs, and the formation mechanism, manifestation and evolution path of local government implicit debt. Then several countermeasures of implicit debt governance and risk prevention strategies under PPPs are put forward, including clarifying the relationship between the government and the market, promoting PPPs debt governance through win-win cooperation, improving PPPs laws and regulations, strengthening PPPs performance management, and improving PPPs risk sharing mechanism.
Highlights
Compared with the explicit debt of local government, the implicit debt is large in scale, low in transparency, diversified in debtors and debt forms, and unsustainable sources of repayment
According to the “www.mof.gov.cn” and China Economy Information Net (CEINET), local government debt balance in China was 16.47 trillion yuan in 2017, and the ratio of debt to GDP was 36.2%, which was lower than EU warning line(60%); the ratio of debt to disposable fiscal revenue is 80.5%, which is under the international warning line(100%-120%)
The Private Partnerships (PPPs) has the function of debt governance, but itself can form new types of government implicit debts by irregularities and poor management
Summary
Compared with the explicit debt of local government, the implicit debt is large in scale, low in transparency, diversified in debtors and debt forms, and unsustainable sources of repayment It has become one of the main sources of fiscal risk in China. After 2015, some local governments formed new types of implicit debts through PPPs commitment to fixed income or repurchase, raising debts in the name of shares, disguising government purchases of services, issuing LGFVs debts and so on [3]. These debts were outside the scope of policy supervision. Based on review of the existing literatures, interpretation of laws, regulations and policies, as well as investigations and expert interviews, this paper analyzes the concept, scope and formation mechanism of local government implicit debt under PPPs, and proposes the governance path
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